One of the toughest challenges we face on a daily basis is the ability to verify income of an insurance agency for sale. Insurance Agency Owners have a good idea how much each carrier pays them monthly but lack the paper trail buyers need. We have various posts on this very topic and it’s important for sellers to organize their accounting in order to sell their insurance agency.
In order for a buyer to obtain a loan or part with hundreds of thousands of dollars of their own money, they’ll need to verify the agency’s income during the due diligence process. This can be accomplished in a few different ways. The first way is via 1099. Carriers send them at the beginning of each year and they should be kept together in a safe place.
The other way to verify income is with the commission statements themselves. Many buyers prefer the actual statement over the 1099 because a statement has more information. Even if you or your CPA enter them monthly into a software program, buyers will want to reconcile the numbers against the actual statement.
Some sellers will balk at the idea of producing this much paperwork and in many cases never sell their agency. In California, 7 out of every 10 businesses listed for sale never sell. If you want to be one of the 3 that completes a sale, get organized. Not only will it help potential buyers see the value of your insurance agency but it’ll help you see it as well.
The first impression a buyer gets from your agency is the condition of your accounting. If your accounting is in poor condition they’ll assume the rest of your operation is and you won’t sell for the price you expect.
We offer services to help you gather statements, bills and other financial criteria. We put it in spreadsheet form and create an income and expense statement, Executive Summary and Valuation for your agency. By doing this, the first impression to a potential buyer is a good one and they feel better about investing in your agency. This information also helps you make an informative decision when determining the asking price.
Selling an insurance agency is often a once in a lifetime experience. Contact us to help you find buyers that fit your particular agency so you can go on to your next venture; or sip cold drinks on a white sandy beach.