All About Agency Due Diligence

Agency due diligence means that you’ve taken the necessary steps to understand what you’re acquiring in an agency acquisition. Any time you purchase an existing business, you’re not only acquiring  the good:

  • Goodwill
  • Lines of Business
  • Revenues
  • Talent
  • Technology

You’re also acquiring liabilities and obligations like:

  • Debts/Overhead
  • Retirement packages
  • Outdated systems
  • Employee compensation
  • Any liens, fines or ongoing litigations

All of this and more goes into the agency valuation both on the open market and specifically to you. Agency due diligence impacts your ability to get financing, attract investors and grow as a company once the deal is done.

Having all of the information organized and available helps the sale go more smoothly.

Every agency and acquisition is different. It’s not possible to provide exhaustive lists of everything you need to do due diligence. But here’s what to consider to ensure you discovered what you need to know.

What Due Diligence Is Necessary on the Business Side?

  • Acquire data on existing subscribers/clients, lines of business, number of years with the company, commission volume and annual fees
  • Gather and consider and strategic partnerships, contracts and subscriber services specifically related to the subscribers.
  • Get meeting minutes for board meetings and committees available over past 10 years. Review these. You may be surprised how revealing they are. They’ll prepare you for a full evaluation of the agency.
  • Get the stock certificate book and stock register
  • Obtain inventory of any real estate ownership, leases, etc.

What Due Diligence Is Necessary on the Financial Side?

  • Provide and acquire all financial statements for past 3 years and year so far
  • Curate capital expenditure plans (budget, cash flow, liquidity, revenues streams, general ledger etc.)
  • Know the working capital requirements to support this business. Failing to do so could lead to a huge mistake.
  • Review and evaluate whether the fiduciary and premium accounts are balanced with assets equal to or exceeding liability
  • Review accounts receivable and collectability
  • Get a summary of all insurance contracts
  • Acquire copies of federal and state tax returns or the past 5 years and payroll over the past 3

What Are My Legal Due Diligence Obligations?

  • Acquire copies of bylaws, letters of incorporation, etc.
  • Establish current shareholders along with voting agreement, officers, directors, etc.
  • Get a list of all stockholders
  • Establish good standing in the current markets
  • Review any patents, copyrights or intellectual licenses
  • Evaluate any pending litigations, arbitrations or judgments.

What Must I Review Related to Technology Infrastructure?

It’s essential that you understand the IT systems within the company. Are they outdated and must be replaced? Can they be integrated with your own? What are the costs involved to do so?

How does this impact the value of the agency?

What Must I Consider Regarding the Insurance Products Themselves?

How will the products and lines of business complement your own? Are any in direct competition? How will you address this?

Are you confident that you either have the understanding and in-house skill to manage these different products? Or does the company being acquired have reliable knowledge and skill of value to you?

How are the products performing? What are the loss ratios? Are all of the products viable? Or will you be consolidating,

What Responsibilities Do I Have in Human Resources & Employee Benefits?

As a business leader, you know that some people within an organization are not easily replaced. The quality and morale of the people within the agency matters. You also know that there may be dead weight that needs to be let go.

Get a copy of the organizational chart along with:

  • How long they’ve been with the company
  • Expertise
  • Salary
  • Job Title
  • Status
  • Independent contracts
  • Etc

Evaluate the human resources, compensation and benefits packages that you’re inheriting with the agency.

What Do I Need to Know About Executive Compensation & Performance

As you know, the executive compensation structure can be complicated. Make sure you understand it along with that executive’s contribution to the organization. You or your top execs will be working closely with these individuals.

Know what you are working with.

When in Doubt Get Expert Assistance with Agency Due Diligence

Don’t make a multi-million dollar mistake. Do your agency due diligence. Don’t try to navigate the complexities of due diligence alone. I would be happy to learn more about your own agency and/or the one you plan to acquire. Knowledge is power. I can help you acquire and analyze what you need to know.

Together we can make the right decisions. Call to schedule a consultation.


When Not to Buy an Insurance Agency

So, you’re thinking about the possibilities of owning an insurance agency. Before you make the final decision gather as much information on the prospective purchase and leave nothing to chance. Take advantage of due diligence and hire a professional – it’s a lawful discovery process for collecting information about a company and its owner. Determining the worthiness of the insurance agency is vital to your future business obligations.

Generally, the first thing that catches your eye is the price – it’s affordable. If the asking price is lower than you anticipated, proceed with caution. There may be underlying conditions responsible for the low market price. You need to know how the price was established. If an independent appraiser generated the report, ask for a copy of the report, along with the supporting documents. Be sure an industry expert and a legal representative review all of the information.

Why is the Business for Sale?

It’s important to find out why the agency is for sale. If the agency is well established, the owner may be interested in retiring and looking to fund another business in a new location. There’s another option. Since most independent agencies are owner dependent business models, the owner may have passed away, and the family is looking to dissolve the organization.

Take the time to evaluate both situations, be sure there are no hidden costs or risks of acquiring outstanding legal actions or creditor debts. Starting a business is tough – starting one with a sizable deficit is a good reason not to make an offer to purchase.

Industry Branding and Reputation

All businesses go through rough phases. Surviving agencies have a clear trail of growth aligned with profit accomplished by building a solid reputation. If the agency has failed to satisfy its clientele for whatever reason – it’s reputation may be tarnished.

It’s not impossible to turn things around financially, and marketing campaigns can help to recover from a bad reputation or poor management. Although it may not be easy, promoting and introducing the new management can be effective – time-consuming and costly. Can you afford it? If not – this is not the agency to buy.

Location, Location, Location

Are there business obligations tied to a lease or property? Ask your legal advisor to check the terms and conditions. If the previous agency closed, liabilities could be expensive. Make it a point to meet the landlord and walk the premises. Be aware of the potential obligations – past due rent or property damages.

Get a survey of the real estate and the surrounding environments. A great business in the wrong neighborhood is just a recipe for disaster. Even if it passes all of the checkpoints, you need a location that attracts your customer, whether it’s located in a dense residential area or in the middle of bustling commerce. If it doesn’t match the business plan and your core values – it may not be the agency to buy.

Deal Negotiations

There’s a difference in the cost of buying an insurance agency operating from a physical structure with staff and daily obligations, compared to buying the book of business. The newly purchased agency needs to have the resources for continuing operations during and after the purchase transaction. The lending sources should be in place and the available cash on hand.

If you are working with specialized lenders, they have their own set of requirements. Take advantage of the industry contacts and shared resources for completing the transaction process in a reasonable time. Even more valuable to a buyer is their knowledge of the agency being purchased. The information allows you to make the right investment based on good business practices, making the decision to buy or not to buy with no regrets.

The good news, by working with an experienced industry professional they will help search for a qualified purchase. Keep in mind; the business analysis allows you to see beneath the surface revealing potential conflicts. The results of the findings can predict and decrypt the possibilities of future profits or loss. No matter how much you want to buy this insurance agency, if the numbers don’t fit – don’t buy it.

How to Gauge the Health of an Agency Before Buying

Internal and external economic factors contribute to the health of most organizations. Other elements playing a major role in the insurance market include commerce risks. When you consider all of the possible components affecting the well-being of an insurance agency – it still comes down to profit.

Look at the last three years’ business statements; balance sheets, income statements, cash flow statement, and the tax returns. Each of the documents tells the story of how the agency manages its business financially. They also reveal problems the company has faced over the past year.

Start with the income statements and taxes – the gross sales and the agency’s net earnings.  Was the increase in sales growth due to an increase in sales volume or higher priced products?  Were there changes in product demand volumes, did the agency expand services or product types or was it a market cycle?

Now take a step back and do your due diligence. Ask yourself, what were the variances between the past three years and what caused the shifts?  You’re looking for market comparisons, competitive challenges, and the market segment share.

Historical Performance

Past years’ performance and financial reports are the best tools for gauging the health of an insurance agency.  The information provides itemized insight of the business and helps to determine if the future projections are possible.

What’s the agency’s book value (fair market value) and how likely are you to reach your future forecasts?  The agency’s book value contains a client list, files, and prospect relationships. These are considered assets linked to generating future sales.  Keep in mind, a certain percent of these assets are not guarantees of business.

Overall the agency’s health is substantiated by the income and market performance.  Check out the office and personnel – a good working environment is essential to an organization’s health. The formula for building a solid trade reputation is comprised without the retention of agency personnel, up-to-date technology, and a developed marketing culture.

Risks Factors

Every business has some risk. How you manage the uncertainty makes the difference between prosperity and constant struggle. Cash flow is without doubt, a significant aggravate affecting the agency’s growth and net worth – in most cases, there’s a solution.

One area of risk is uncollected receivables. It will stunt the growth and generate the need for costly funding that cuts into the profit margins. Financial reports should convey indicators of turnover rates, credit policies and terms of aging receivables. If the agency finds itself short of cash – traditionally, it means the agency’s money is tied up in receivables and inventory.

Working Capital

Working capital is the amount of available cash to operate the agency and meet the day-to-day business obligations. Professionally, the term refers to current assets minus current liabilities. Sufficient capital keeps the doors open and the business flowing. How much working capital does a company need on its balance sheet?

Using this formula, a healthy company with a positive working capital can pay off its current liabilities and still have remaining current assets. A prospective agency for purchase has a constant rate at all sales levels over the past three years.

Earnings & Net Worth

The company’s ratios of gross profit to net sales provide a good comparison of the agency’s health in the market segment.  The proportion of net income to net worth gives you an idea of the return on investment. Make sure the profit calculations are reported before and after taxes. Next, look at the agency’s expenses as they are now – you already know these can change under new management.

Buying an insurance agency involves a lot of review and analysis. Take the time to look at the infrastructure and its financial health – the more diligent you are, the more likely you are to see a profit.


Determining the agency’s business profitability is critical. Many times, owners place an emotional value on the business – let’s face it – you can’t bank emotion or use it for collateral.  Stick to the old fashion method of profit principles. Work with a professional on this purchase – they know the industry and the agency’s position in the current market.

What Exactly is a Merger?


Mergers are business tools used for joining resources to develop a larger share of the market by offering consolidated services or expansions into new territories. Given that the insurance industry has several types of products, it’s normal for an independent agent to join forces with another agent or agency. At the end of the transaction, a single entity owns the assets, liabilities and the company obligations contained within the merger agreement.

Mergers and Acquisitions (M & A) is a term used interchangeably. They share similar activities associated with this business transaction. But, the course of a merger action has its own attributes in creating the remaining entity. Small businesses with limited resources often, face challenges linked to growing their market share. Merging with another agency is a strategy to scale up operations, share liabilities and improve profitability.

Types of Merger

Mergers can take place between Limited Liabilities Partnerships (LLC), domestic and foreign entities or individuals and Corporations. The merger style you choose depends on the plan and method of sharing resources and experiences for both parties to increase the revenues and profits.

  • Horizontal merger — two entities (competitors) selling similar products, join forces to strengthen the company’s presence in the market by eliminating a competitor. This strategy has proven to work well for combining an existing market share, offering operational efficiency to the new entity.
  • Vertical merger — two companies with different products that complement each other — unite services. The approach reduces the operational costs, diversifies the product and service implementing a product market expansion by adding another form of insurance coverage.
  • Conglomeration — two or more businesses that have nothing in common with the business market or positioned in different geographic locations. The business units come together to form a single entity. The tactic gains a competitive edge in the designated markets.


Managing the merger besides the due diligence guidelines are industry regulations along with the enforcement of legal protocols. Meeting with an industry professional before moving forward is recommended. They will prepare and educate you on every step. The other party has just as much at stake in this merger when merging companies are the same size in customer base or operation scale. Don’t be surprised, when they engage due diligence of their own.

You need to understand the obligations of this transaction, contingent liabilities, litigation risks and the proper handling of intellectual property. Working with professional intermediaries and business consultants, saves you time, money and frustration in finding the right entity, collecting the due diligence verifications and the confidence of signing on the dotted line.

Besides your advisor team, there’s another overseer in this merger process. The U.S. Government has established statues under the Antitrust laws referred to as competition laws. Since we live in an open market economy, this law protects the consumers and ensures good business practices on fair competition.

Structuring the Deal

At the end of the merge the two business entities will form a single enterprise. The surviving company takes title to all the assets, liabilities and rights as the other entity no longer exist. Constructing the right structure requires a team to review the financial terms, legal aspects and secure the surviving entity’s claim. Sometimes, the surviving company creates a subsidiary (triangle structure) as a protection against the other entity’s liabilities.

Most mergers proceed in a similar form although some have specific conditions and objectives linked to assets or rights depending on the parties involved in the transaction.

  • One of those conditions is the change of control consent. This in one advantage for small business mergers, since they have fewer shareholders needing to agree with the business transaction.
  • If stocks are involved, under state laws, opposing stockholders of the merging entity have the power to exercise an appraisal right to receive “fair value”.

Once the structure has been defined, the new entity has legal issues to resolve as part of the due diligence process.


Merging two businesses is exciting, and the process can get complicated. The future of the business is riding on a smooth transaction, keeping the brand accountable and customer satisfaction intact. Negotiating a good deal results from preparation and planning with the guidance of an experienced industry advisor.

3 Things to Know When Buying an Insurance Agency

Whether you’re just starting out or looking to expand an existing insurance agency – you need to talk with an industry professional. Aside from having the desire, drive and passion, you need to understand the risks, financial obligations and the time commitment involved with this investment.

There are several benefits to buying an insurance agency that’s established. There are a few precautions, which is where due diligence plays a critical role in the transfer of ownership.


An experienced insurance broker will walk you through the entire process with a list of conditions and deterrents.  More important, because they are active in the industry, they know the neighborhood chatter and will give you a detailed overview of the health and the market share of the agency.

Know the Target Buy

The entity’s size, mix of insurance products and the market demographics are keys to buying the right agency. Be honest about the reason you’re looking to buy.  Share the information with the business advisor, whether it’s an infusion of capital for growth, an under-producing investment with high yield potentials or an established and steady revenue producer. The more they know the better equipped they are to find the right agency, besides all the financial aspects and legalities for choosing between a captive carrier agency or an independent agent.

If you’re experienced in the industry, your own instinct will play a critical role when measured against these considerations. Whether you thought about rolling this agency into another business unit or buying it out completely, you need to know it’s risk level. Think about buying an agency in the community where you are established. It gives you some leverage as a known source, making the transition of ownership easier for the business operations and the customer market.

Due Diligence

Due diligence for buying an insurance agency encompasses aspects of the agency’s past and current business history. It serves as a vital business function of determining the worthiness of the agency. It’s done by collecting information about an entity or an independent agent as a lawful discovery process. It contributes to developing the final terms and conditions of the transaction agreement.

Let your business advisor take the lead on the due diligence. Assessing the value of an agency is difficult, but necessary.  It starts with a review of the seller’s financials and several years of the agency’s pro forma and tax returns. They’re looking to reveal the strength and condition of internal operations and the agency’s economic health. Each of these statements tell a story about the agency you are looking to buy.

  • How they managed money (profit and loss statements)
  • Management and industry practices (disputes)
  • Earned respect in the trade

Today, the competition between face to face and online marketing continues to ramp-up. Can the agency you’re buying shift with the changing tides of technology? As a business investment—is it profitable?

Financing the Deal

Finding the right funding to fit the transaction and the future growth of the business is essential to closing this deal. It’s important for the buyer to know their own financial limitations. This information helps in choosing the form of funding that works best.

A buyer’s first thoughts are to secure a traditional commercial loan or SBA financing based on the agency’s worth and the buyer’s financial circumstances. A financial advisor can share information on special lending products with customized terms and conditions that work for the buyer and the seller. They also have knowledge of the alternative methods — some with high interest associated with high risk or asset-based loans tied to business advances (collateral).

Always consult with an industry professional who specializes in agency financing. Take advantage of their connections, industry knowledge and proven methods of putting all the pieces together for a successful transaction.

  • They know the local agencies available for sale.
  • They work with recognized funding companies.


This is about developing the business and protecting your interests. Getting professional guidance will help buy the right agency and determine the best financial options for the transaction. Remember, industry professionals stay up-to-date on the market changes, industry regulations and the legal exchange of disclosures as part of the process.

4 Tips for Managing Debt

managing debt

Managing debt for any business is an essential part of growing it. Creating a thriving business with sufficient cash flow that becomes an asset is critical to controlling the company’s debt. The biggest challenge for most owners is managing the debt so that it works for the business rather than against it.

As a critical component to the business, owners need to participate in the business strategically and operationally. Eager to increase the bottom-line profits, independent insurance agencies focus on growing sales. Internally good management practices impact the business with a positive cash flow for managing debt. Externally, business approaches aligned with the insurance industry guidelines help to differentiate your company from the competition.

Tip #1 Know Your Cash Flow

In today’s market tracking the cash flow reveals the financial health of the business. Knowing the daily cash flow and whether or not it’s capable of supporting the business over the next six months is a progressive course of action. The information allows you to manage the potential debt today, while planning for tomorrow’s possibilities.

There’s another aspect of management associated with debt and cash flow – it’s knowing exactly where your money is being spent.  Unseen spending is a distraction that reduces profitability. Poor planning or decisions based on “what if or maybe “will always trigger debt.

As a service company selling the insurance policy and accumulating receivables is only part of a profitable transaction. Remember, receivables are paper records, not accessible cash- yet.

  • Sales and profit margins, generate cash.
  • Management executes payables and expenses.

Tip #2 Financial Reconciliation

Not all business owners have an interest in accounting, although they should. Some look at the bank balances without considering the actual cash balance. The bank balance reports debt paid. There is no accountability of transactions waiting to be cleared. It’s important to understand, bank balances are reconciled, cash balances are managed.

  • Not all debt is negative. It’s poor debt management that prompts the trouble.
  • Distinguishing good debt from bad debt is an acquired skill.

Debt management includes making sure business plans, expenses and operational functions are working together at-all-times. It allows the owner to focus on growing the business forward with fewer distractions. Follow-up with routine cash analysis to verify sufficient daily cash balances and you prevent catastrophes from happening along the way.

Tip #3 Cash Profit Solutions

Bottom-line, business growth or profits won’t happen without cash or debt. The consistent cash infusion from receivables or financial funding fuels the daily operations, maintaining staff, inventory and taxes. After all the expenses have been deducted from the incoming revenue, what’s left is profit – setting the foundation for building a solid future.

When cash gets tight, the response is usually to cut costs or increase sales. These are viable solutions to managing debt with two consequences. Cutting costs should not affect performance related to product quality or customer service.  Second, increased profits need to offset the added business expenses linked to more sales.

  • Successful companies survive with profits and have learned the art of consciously leveraging debt.

Tip #4 Capital Resources

When it comes to business, the classic rule of thumb is to have a relationship with a financier before you need it.  The relationship should be with an industry expert – they comprehend the business environment and the industry challenges.  They also become an advocate for your business, helping you to develop business practices that work in your favor.

To grow the business, you need cash. And to get the cash, you need a clear trail of managing debt. It’s a vicious circle, but it’s a challenge that you can overcome with the right partner.

Consider securing a short-term loan or debt consolidation. Choose between revolving credit lines or equity loans with negotiable interest rates. Depending on the size of the debt, a long-term loan may work, allowing the business to amortize the expense over a specified term.

  • As a business expense, this is a tax deduction.


No business operates without debt. Flourishing businesses manage debt and use it as a stepping stone to build the next generation of business. Learning to manage business debt, increases the potential for future profits, ownership equity and access to working capital.

What Does Your Buying Process Look Like?

buying process

Annual revenues generated in the insurance industry are over 100 billion dollars annually. The expected growth from now to 2023 is approximately three percent each year. The key indicators confirm a healthy economy, making it a good time to expand your business through an acquisition. The possibilities are readily available – so are the risks and challenges of the buying process.

Acquiring another insurance agency makes sense, strategically. You gain access to another region or market segment with an established following and revenue. At the same time, you eliminate a competitor and expand your own brand recognition.

Sounds simple doesn’t it? The process of buying an existing business comes with financial demands. You need to plan for a seamless transition between the two entities. The plan’s purpose is to identify any potential problems before you encounter them. The benefit of having a plan is to save time, frustration and money based on solid facts for making good business decisions.

Before the buying process begins, you need to select an expert broker in mergers and acquisitions of insurance agencies. They do the initial fact-finding of identifying agencies with a strong sales history. They also look at existing assets like patents or copyrights that compliment your company’s skills and talent.

Model Profile

Getting the team assembled includes engaging a broker, legal advisor and business assessor to figure out how much you can afford to buy. Next, define a profile of the agency you want to buy. Will it be the complete package defined by size, personnel, revenue, location and services? Or are you interested in only in the book of business without the infrastructure? The more information you have helps to narrow down the choices.

The full package includes the history of the potential agency and its owner’s connection to the business, staff and clients. These are features that could affect the future growth for you. Keep in mind, when you buy an existing company you purchase its history.

Buying the book of business contains customer information and data that’s broken into business categories and market segments. In either case, there may be unknown situations carrying a tremendous liability. An expert team assures a complete assessment to uncover and disclose.

Financial Deals

You already know, buying an existing agency is going to be expensive. You need to calculate the cost and develop the financial terms that work best for you. By working with an industry financial broker all of these tasks can be accomplished.

In most acquisitions, the seller wants a percent of cash up front with payment arrangements over time plus interest. Another form of an acquisition is to acquire at least 51 percent of ownership of its paid-up share capital. Share capital is the amount of issued capital paid by the shareholders.

You’ll find most funding companies are happy to coordinate the transaction with an existing company that has a known revenue history and provides instant growth for the buyer’s company.

Calculating a Worthy Price

Remember the old saying — buyer beware- sellers will always express the business value in terms of emotional attachment. Buying a business is like buying real estate, buyers are interested in profits. Seller’s revenues are evidence of production and not a true value of the company’s market assessment or its net worth.

Do your due diligence to make sure the value of the agency’s historical performance, risk factors, tangible net worth and working capital are authenticated. Look at the agency’s profit margins, retention of staff, errors and omission reports, sales defined by market segments, financial management and its book status.

Get It in Writing

You found the existing agency, you met with the bankers, determined a true value price and negotiated the offer. It’s time to get the details in writing with all the terms and conditions. Before signing on the dotted line, be sure your business attorney has reviewed the sales agreement and that you understand the commitment you are about to purchase.


Acquisitions can accumulate a significant financial debt. Managed well, it can generate more revenue and profits for the company. This investment has the potential of increasing the value of the company, magnifying the returns in terms of equity.

The Most Critical Stage of Buying an Insurance Agency

buying an insurance agency

What is the most critical stage of when buying an insurance agency? Is it obtaining financing? Is it finding the right agency to buy? Is it making sure your own books are in order?

While there are indeed many important stages in the agency buying process, by far the most important stage is getting a proper valuation on the agency. Everything else hinges on this.

Let’s explore why the valuation is so important and what should be considered to reach the right valuation.

Why Is the Valuation So Important?

Without a well-researched and comprehensive valuation, one or both parties with have difficulty reaching an agreeable price. Negotiations can drag out indefinitely, wasting your time and money.

If an imbalance exists because of value disagreements, it becomes a shadow over all negotiations. One party may feel they are selling the agency that they worked to build for too little. As the buyer, you are naturally apprehensive about paying too much for that agency.

A more synergistic 3rd party valuation can eliminate this tug-o-war for a more seamless agency acquisition process. With an objective agency valuation, both parties will know when the agreed upon price is right.

The seller doesn’t feel that he/she has left money on the table. The buyer feels confident that he/she’s not sabotaged the future of the acquired agency or his/her own company by paying too much.

What Determines an Insurance Agency’s Valuation

Here’s how not to value an agency — three or four times earnings, 10 times profits or any other arbitrary numbers. These methods seem simple enough. It’s basic math. Numbers don’t lie but they do disregard the complexities of the insurance business.

Many factors go into an agencies valuation. Some factors are easier to quantify than others. Some can be more elusive like the knowledge and skill of the acquired agency’s middle leadership or the pressure on the seller to sell because of a divorce settlement, health or nearing retirement.

Here are the main things to look at to get a valuation.

Historical Financial Data

Obtaining an insurance agency valuation includes an in-depth look at the financial data both in the most recent year and year over year. The successes and failures of an insurance agency can be viewed through these financials. These help determine to health and future of this agency.

Comparison to Peers

We can now more clearly compare the agency’s standing to its peers during the same time periods and currently. How is this agency competing in the dynamic and ever-changing insurance marketplace? How are they adapting? Are they keeping pace with their peers or exceeding?

Qualitative Attributes Assessment

During a qualitative attributes assessment, we’re looking at the human resources, systems, and technologies within the company? Are these quality assets to be acquired or will departments need complete overhauls due to outdated or mismanaged systems.

The hiring process is obviously an arduous and expensive one. If the talent is already there, that’s of great value to you as a buyer.

Additionally, the qualitative assessment includes at look revenue trends and the diverse mix of:

  • Carriers
  • LOBs
  • Producers
  • Demographics
  • Vendor relationships
  • Reputation
  • Market Reach
  • And more

Future Projections

What was their five-year plan? What were the expectations in terms of revenues, marketing expansion, etc? We want to know not only where they are going but if those projections are well-founded.

Other Considerations

Each agency is unique. While a valuation endeavors to obtain the most objective valuation, we would do a disservice to both the seller and buyer if we didn’t consider any outlying or extenuating circumstances. These might include pending lawsuits, divorce settlements, niche specialties and other variables.

Comparable Sales

Once we understand the above factors, we can begin comparing these agencies to similar agencies that have sold in similar circumstances. These “comps” give us a solid number to work with as we further refine that number based upon differentiating factors.

Buying an Insurance Agency

Let’s talk about your plans to buy an insurance agency. We have the experience and skill to help you find the right agency and get the right valuation. We work with you every step of the way to ensure a seamless agency buying experience. It’s easy to get started and begin exploring your options. Contact us today.

3 Things to Know When Selling an Insurance Agency

selling an insurance agency

If you’re considering selling your insurance agency, there could be a number of reasons that prompted you to pursue this route—perhaps you’re ready to retire, or maybe you’ve simply decided to look into other endeavors that will benefit your professional being. In any event, there’s a lot to think about when you’ve made it this far.

Here are three things you should know when you’re considering selling your insurance agency:

1. Can You Answer the Five Main Questions?

In life, just as in business, there are five main questions that typically dictate the outcome of your next move. As they relate to selling an insurance agency, you should be able to answer the following questions:

  • Who are you trying to sell your business to? Depending on the market structure and your particular desires, you might be interested in selling your insurance agency to a family member, friend, employee, or competitor. The answer to this question may dictate the steps you take moving forward.
  • What are you selling? Will your book of business belong to the future owner? Perhaps you’ll be taking that with you or selling it to someone else. Are you selling stock along with your brand? This will cause a differential in cost. When you’re selling an insurance agency, you’re selling many components that come with the whole business. It’s important to consider the entirety of the puzzle.
  • When are you selling? Ideally, this isn’t a last-minute decision. Proper sales take planning to procure the right situation.
  • Where do you do business? Are you a single-shop firm with one location? Do you have multiple stores that will be affected? The answer to this question impacts your company’s overall value.
  • Why are you selling? Are you losing money? Do you want to retire? Are you interested in pursuing other activities? There is no wrong answer, but the truth is important.

2. Do You Know How Much Your Business is Worth?

Valuation is often a tough element to conquer. It’s not uncommon for business owners to think their businesses are worth more than the market demands. It’s important to realistically evaluate your income, expenses, profits, and losses before you decide to sell your insurance agency.

In most cases, you won’t be able to evaluate your agency’s worth on your own. This is where valuation professionals shine. Through interviews and due diligence on your financials and the surrounding market, agency sellers will be able to determine your firm’s true value, ushering in new possibilities for higher sales when warranted.

3. Have You Defined Your Terms?

You want to get the best possible scenario, which means you need to have your terms defined well before you begin to enter into a deal. In a perfect world, you’ll be presented with as much cash as possible upon the sale transaction, partnered with a fixed price that doesn’t leave room for market churn along the way. Of course, buyers want the complete opposite—they’re trying to put down as little as possible and pay over time, based on the percentage of premiums as they renew.

This is seldom a battle that can be won alone. You need a team who understands the importance of assets, based on the retention of business, long before you come to final terms. Everything is negotiable, but it’s important to understand your company’s value before you bring your business to the table.

It’s not uncommon for agency owners to stay onboard for a few years during the transitional phases to ensure everything is where it needs to be. If you’re not in a hurry to leave, consider staying on as a consulting partner (part-time or full-time) so you can see your sales transaction through.

There are a lot of complicated details involved with the sale of insurance agencies, and it’s certainly not something you want to do without the assistance of skilled professionals by your side. Our team at Agency Brokerage Consultants are insurance agency merger and acquisition specialists. Our goal is to help you make the most of your sale so you can rest assured that you made the best possible move for you and your business. Reach out to one of our sell-side advisors so we can put you on the path to sales success!

Why Use a Consultant to Manage Your Debt While Selling?

Having any kind of debt while you’re in business can be a little nerve-wracking, even if the business is swinging from strength to strength. But it can be downright terrifying to manage if you’re in the middle of selling your agency. Part of handling this process should include asking for help from a consultant who specializes in agency sales. The right professional can make it possible to not only structure and rework your debt but also to alleviate the stress of combing through the numbers and answering countless questions about all incoming and outgoing funds.

Fixing the Budget

Whether you’re looking for capital or trying to work out a way to transfer your assets, a consultant can help you determine where you should be directing the money and how to make it happen in the middle of a sales transition. Part of why a consultant works so well in these types of chaotic situations is because they don’t have a personal connection to the agency. They can spot unnecessary expenses or overlooked opportunities that could kill two birds with one stone. Agency Brokerage Consultants has been servicing agencies for a long time, and we know that no one is immune from being too close to a problem. From owners to accountants, there’s usually more that can be done when it comes to managing debt.

A Systematic Approach

Managing debt is going to mean looking at the deficiency from every angle. It’s why a good consultant will take a systematic approach before recommending a solution. By starting with the basic financial information (e.g., monthly income, fixed expenses) before working their way down to salaries and trust account management, a clear picture can emerge about how the agency accepts and spends money. From paying down high-interest debt to consolidation strategies, the goal is always to ensure every cent is being spent or saved as wisely as possible. This will expedite the sales process while smoothing out any inefficiencies at the same time.

Protection of Credit

Regardless of how much your agency is being sold for, you still don’t want to hurt your credit during the sales process. Agency Brokerage Consultants has worked with sellers under a number of different circumstances, which makes us a go-to resource to keep your credit as stellar as possible at every stage of the sales process. We know that a client who’s ready to retire will have very different financial needs than someone who’s getting ready to start their next venture. By customizing our strategies for each client, we make it possible for them to hand over their agency with full confidence to move onto whatever’s next!

Clear Communication

A buyer is going to want to work with a company whose finances are as straight-forward as possible. If they can’t figure out why money from trust accounts keeps getting mixed up with operating accounts, it’s a red flag that someone isn’t paying attention at the agency. Messy debt or discrepancies between projected and actual assets can make a buyer nervous enough to pull out of the deal at the last minute. Not only will this be a huge inconvenience to the seller, it can push back a seller’s timeline by months. To avoid this fate, Agency Brokerage Consultants makes it easy for buyers to understand how the money is being managed, who’s doing the work, and when the reporting happens.

Taking the Plunge

Agency Brokerage Consultants has seen insurance agencies fall into too many traps when it comes to buying and selling, which is why we’re a beacon in the darkness for clients in the middle of a sale. Calling us today is an excellent way to share the details of your debt and get answers to your specific questions. While we may not know your daily processes, we do understand insurance agencies on a global scale. We’re able to put that knowledge to work by anticipating the most common problems during a transition, and then actively working to prevent any potential confusion.