The biggest challenge we face on a daily basis is the ability to verify the income of an agency in order to list it for sale. Insurance Agency Owners have a good idea how much each carrier pays them each month, 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 it.
In order for a buyer to obtain a loan or part with hundreds of thousands of dollars of their own money, they need to verify your income. 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 this income is with the commission statements themselves. Even if your CPA or you enter them monthly into a software program, buyers will want to reconcile the numbers against the actual statement. Sellers can rarely produce 3 years worth of commission statements although some do. Some sellers will balk at the idea of producing this much paperwork and unfortunately it costs them money and in many cases they’ll never sell their agency. Some buyers only request the last full year plus the YTD, it depends on the buyer.
In California, 7 out of every 10 businesses listed for sale, never sell. If you want to be one of the 3 that can sell their business, 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’re going to assume the rest of your operation is and you won’t sell for the price you expect.
One of the services we offer is to help you gather statements, bills and other criteria required from buyers. We put them in spreadsheet form and create an income and expense statement for your agency. This way the first impression to a potential buyer is a good one and they feel better about investing in your business. This information also helps you make an informative decision when determining the asking price when listing the business for sale.
Selling an insurance agency is often a once in a lifetime experience, contact us to help you make it a good one. We can 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.