Over the past 15 years, we’ve all heard reasons why you should sell an insurance agency. Lower commissions, higher capital gains taxes, increasing overhead and the big bad internet. Independent Agents have heard dozens of reasons to sell their agencies, but if it’s so important to sell now, why is it such a good idea to buy?
When selling an agency, the profile of qualified buyers, with funding, are agencies with scale and size. If you own an agency with less than one million in revenue, your best bet for a smooth sale are larger agencies. Start-ups that need financing add a lot of negotiating, due diligence and more time than needed to sell for the best price. Many of these agencies have sound strategies for acquiring books and count on acquisitions for growth.
So when is the best time to sell an insurance agency? That’s an open ended question, but what as agency owners; the best way to sell your agency is on your own terms. What do I mean by that?
When you have to sell due to finances, health, losing a carrier appointment or other cause out of your control, the ability to run negotiations and maximize the return on your asset is compromised. By selling on your own terms, you run the negotiation and avoid being “nickeled and dimed” by an experienced agency buyer. Remember, most buyers experience buying insurance agencies more than once whereas 85% of sellers only experience it once. Here are the best times to sell:
- When you’re growing (An agency in uptrend is always worth more than one that’s stagnant or shrinking)
- Your loss ratios dramatically improve and you’re close to retiring.
- You have a new passion to pursue and are no longer in love with your agency
- You realize that your children, siblings, producers, or someone else you envisioned buying the agency is not interested in perpetuating or buying from you.
- You’re simply ready to take some chips off the table.
Selling your insurance agency should be something you’re excited about and being prepared to sell the agency can make it fun.
Remember, most buyers have purchased agencies in the past and have experience kicking the tires on dozens of deals. Being a great insurance agent doesn’t mean you know how to sell a business. Sometimes, it’s difficult to have frank discussions with potential buyers and negotiate effectively because you don’t want to seem anxious or uninterested and have to walk that fine line of nor appearing difficult to work with.
Hiring an intermediary with experience selling insurance agencies that understands the Independent Agency System is an extremely valuable member of your team along with your CPA and in some cases, your attorney. Even with the fee to sell the agency, you will net you more money than you would if you sold the agency alone.
Finding qualified buyers with cash is important as opposed to dealing with buyers that are dependent on a bank loan. Often times, your deal moves much slower and end up making concessions for the financing, “just to get the deal done”. Hire someone that can help you navigate the market, bring you offers and do the heavy lifting so you can ride off into the sunset with peace of mind and continue running your business during the transaction.
Contact Ganis Consulting by email or phone for a free consultation if you’re selling your insurance agency or considering selling within the next 12 months. We don’t charge any fees until an agency is sold similar to the arrangement you have with a Realtor selling your home.