As we’ve mentioned many times in the past, some weeks we receive 20-30 calls from individuals looking to purchase Insurance Agencies in California. Unfortunately, many of these buyers don’t do business in California. In order for them to purchase an agency, they’ll need to obtain licenses, appointments, E&O Coverage, business licenses, loans; the list goes on and on.
This is extremely challenging in California when you consider how difficult it is to obtain quality direct appointments. When someone wants to buy a Safeco Agency, they should have a Safeco appointment. If someone wants to buy a Mercury, Travelers, Allied or other agency with a large portion of the book in a few carriers – the buyer should have the appointment(s) BEFORE you consider them a viable candidate.
While these individuals may be willing to pay a premium for your agency, you’re setting yourself up for a big disappointment by accepting their over loaded contingent offer. When you sell an insurance agency there are several actions that have to be accomplished. Everything from buyer and seller getting along to due diligence to financing; again, the list goes on and on.
Here’s a typical transaction:
- Show agency information to prospective buyer
- Conduct several Q&A sessions with buyer regarding operation, book, office, lease and staff.
- Negotiate Letter of intent and open escrow
- Complete Due Diligence
- Obtain financing (if necessary)
- Negotiate and finalize purchase agreement, assist post sale with integration.
Additional items for inexperienced or non-appointed buyers
- Obtain agency appointments
- Obtain E&O
- Extended Training
If you’ve done any research on selling your insurance agency you know it’s not easy to do. 7 out of 10 businesses for sale in California never sell. Why would you add 5-10 MORE items that have to go right in order to successfully close a deal? The process of obtaining appointments, financing, E&O and everything else can be a 60-90 day process. At the end of the 60-90 days, there’s a chance your agency won’t sell because the buyer can’t get an appointment or licensing is held up, or they need more time for training than you’re willing to invest.
It’s a good idea to let someone prescreen buyers for your agency. It allows you to continue running your agency to ensure that if it becomes a 6 month process, your revenues haven’t declined because all of your attention was spent running the agency, not prescreening, meeting, talking, emailing and entertaining prospective buyers.
If you’d like help selling your insurance agency in California or any other state contact us.