How an Agency Brokerage Consultant Helps You Navigate the Commercial Loan Process

commercial loan process

Whether you’ve already located an agency to acquire or are still on the look out for the perfect acquisition opportunity, you need financing before you can seal the deal. Navigating the commercial loan process can be tedious and often discouraging process. When your deal hangs in the balance, you can’t afford a misstep.

Here’s how an agency brokerage consultant will help you navigate the commercial loan process.

See Things Through the Lender’s Eyes

The first step to navigating the commercial loan process is learning to see it through the lender’s eyes. What are they looking for? What would make them see your acquisition as a good credit risk? What red flags might sway their decisions?

In the insurance industry, you’re hyper-focused on identifying and mitigating risk. Your lender is too.

An agency brokerage consultant will help you identify what lenders are looking for, and looking at. They understand what lenders need to see from you. Chances are that your acquisition is exactly what they want to finance, but if you don’t know what they’re looking for, it’s hard to demonstrate that.

An agency brokerage consultant will present your acquisition in the best light to lenders. They’ll demonstrate that you’re exactly what they’re looking for in borrowers.

Evaluate Your Position

A consultant will do this by assisting you in objectively evaluating your position. Most lenders will be looking at 3 primary areas to determine if you’re their ideal borrower.

Cash Flow

A brokerage consultant will help you crunch the numbers to determine the cash flow in your proposed investment. They’ll look at:

  • What the current cashflow is
  • How it will weather a transition
  • How you can turn liabilities into assets

Solid Experience

A commercial lender will only consider you a good credit risk if they believe that you have the experience within your organization to acquire, integrate and manage the company you plan to acquire.

As you well know, all insurance is not the same. Companies may have different target demographics and populations with different needs. Of course, this may be why you want to acquire. You’re looking to expand and grow vertically in addition to horizontally. But in order to do this, you need to demonstrate to the lender that your in-house skill is up for the challenge.

An agency brokerage consultant can help you evaluate your in-house capabilities to put your best foot forward in the lending process.

Powerful Credit Profile

Your company will additionally be under increased scrutiny. The lender will want to see everything. A consultant will help you gather your necessary documents and get your ducks in a row so that you can secure that loan.

Determine What Type of Lender Aligns with Circumstances & Goals

It may be tempting to cast your seeds broadly, applying with multiple commercial loan companies. But this is a waste of time and money. Instead, optimize the process.

Some lenders will have a higher level experience with certain types of companies. Because of this greater level of experience, they’re better able to evaluate risk and see the opportunities you see.

We’ll help you streamline the process by seeking financing from companies who understand what you do and are most likely to lend you money at the best terms.

Finalize Terms To Complete the Commercial Loan Process

When it’s time to finalize terms with a lender you must know where you stand, what your options are and what makes sense to you.

In addition to the potential in the investment itself, a consultant will evaluate:

  • Your current asset holdings
  • Your available collateral, in instances where you qualify solely for an asset-based loan
  • A reasonable payment schedule for you. They may be able to negotiate more favorable terms in exchange for a shorter-term loan.

A great brokerage consultant will help you evaluate where you stand and then work help you get terms that make the most sense for you.

Complete the Acquisition with an Agency Brokerage Consultant

Once your agency brokerage consultant has helped you navigate the treacherous commercial loan process, it’s time to complete the acquisition and begin managing your new company. The road ahead won’t be easy. But by working with an agency brokerage consultant you can be assured that you’ve laid a strong foundation for your success.

As agency brokerage consultants, we know the insurance mergers and acquisitions process inside and out. We can help you achieve great results. To learn more, contact us today.

What is the Purpose of an Agency Valuation?

agency valuation

Regardless of whether you plan to buy or sell an agency, getting an agency valuation is a smart financial move. When you know what your agency’s worth now, you can make more data-driven decisions about your company. You can take advantage of opportunities and you can better position yourself in the market.

Let’s look at the purpose of an agency valuation.

Understanding the Total is Greater than the Sum of Its Parts

Some agency owners may think they know the agency valuation on an ongoing basis by evaluating their profit margins but, as you know, this will only give you a piece of the story. Common methods like applying revenue multipliers can give you a ballpark for reference, but this isn’t a number that anyone should be “taking to the bank” or making major decisions on.

The value of an agency is more than the sum of its parts. If you’re considering buying or selling agency, you need to make sure you have a true agency valuation. Two businesses with very similar revenues can have very different values in the real world.

Agency valuation includes things like:

  • What lines of business the agency is in
  • Loss ratios within the company
  • Insuree acquisition costs
  • Retention levels
  • Cash flow

Getting a Value for the Intangibles

Getting a true agency valuation means that you measure the aspects of the agency that are hard to quantify. Just because you can’t easily measure these things, doesn’t mean you shouldn’t. Many of these intangibles can have a big impact on the value of your agency or an agency that you’re considering buying.

Some of the intangibles include:

  • History of growth in various markets
  • Potential for expansion into new markets
  • How your LOBs might complement another agency’s LOBs
  • Operational efficiencies
  • Investments in employee brand and education
  • Morale & Turnover
  • Management Experience
  • Niche specialties
  • Market trends and variables

Making Smarter Decisions About Buying and Selling

What’s your agency really worth the current market place? What’s it worth to a particular buyer? Should you buy another agency? Does the price they want for it align with what it’s really worth?

Agency valuation will help you answer these questions in very quantifiable ways. When you have a clearer fair market value, you can make the right decision for you and your agency.

Establishing Firmer Ground on Which to Negotiate with a Buyer or Seller

When you have a more thorough agency valuation, you will be in prime position when you sit down at the negotiating table. Rather than just having a loosely contrived valuation in your tool belt, you have a proper valuation of your agency or the value of an agency you plan to acquire.

With this value in hand, you can ensure that you’re getting the best deal and you’ll know when it’s a no-go and time to walk away.

Showing You in the Best Light to Lenders and Investors

When you need to raise capital or get a commercial loan, you need a real agency valuation to demonstrate that you and/or the acquisition is a good credit risk. You do this by appropriately evaluating both your market value an fair market value.

Lenders and investors need to see that you understand what you’re doing and have the in-house skills needed to help them earn the right return on their investment.

A thorough agency valuation gives lenders and investors get a better picture of the opportunity that you’re presenting to them.

Just in Case

Having a current agency valuation prepares you for the “just in case”.

Sometimes you never really planned to sell, but a fleeting opportunity arises. You’re ready. Other times the unthinkable happens: divorce, death or partner, lawsuit, major legislation shift.

In these cases, having a business valuation ready, will allow you to act fast to seize opportunities or mitigate damages.

Getting an Agency Valuation

Getting an accurate agency valuation will give you a better understanding of where you stand. With it, you can make more data-driven decisions for the future of your company.

But arriving at an accurate agency valuation requires significant skill and experience in the insurance agency valuation market. Working with an agency brokerage consultant is the smart choice. If you’d like to learn more about how we can help you obtain an agency valuation, contact us today.

What to Expect From a Due Diligence Process

due diligence process

The process of buying and selling an agency has so many steps involved that people can almost be forgiven if and when steps are skipped along the way. However, any mistake during the process can have real, lasting consequences that could have been avoided if there was just a little more planning. The due diligence process is a chance to address these issues before they take root, but it needs to be handled very carefully. Many agencies find that it makes far more sense to seek outside help than to do it on their own.

It’s Not Simple

Due diligence refers to the work a buyer has to do before they decide to acquire another company, and it can be fraught with complications. A buyer may be interested in acquiring a rival insurance agency before realizing that their client base isn’t really as high as it seems. Or they may sign the final documents only to find out that the acquired company is involved in a lengthy legal battle. The operational and financial details of a company aren’t always correct, and companies may try to hide some of their past mistakes in the darkest possible corners they can find (without outright lying.) If companies aren’t able to analyze the information accurately and find out exactly what lies behind the numbers, they could end up in extremely hot water.

What Is Reviewed?

All of the financial matters are reviewed, including bank statements, payroll information, and tax returns. In addition, due diligence will also carefully go over the management processes, employee productivity, and carrier reports of the agency in question. Contracts are scrutinized so the buyer can be assured there are no potential conflicts. Adjusted earnings are carefully calculated so there are as few surprises as possible should the transition occur. The biggest problems are usually found in the financial holdings, and it’s not unusual for records to contain some fairly egregious errors. Pro forma statements may be wildly optimistic, premiums may get mixed up in the wrong categories, or financial transfers may not always make it to the right accounts.

How Long Does It Take?

Buyers usually get several weeks to get all of their ducks in a row, but it’s rare that companies have the type of manpower needed to devote to the due diligence process. It’s unlikely that anyone near the top of the company will be able to spearhead the process, which is exactly how certain matters are overlooked. When you hire someone else to come in and help, you get the benefit of a specialist who has no other tasks on their menu besides helping you make the strongest decision about whether or not to buy. It also makes the seller happy because there are no delays in the process, and it takes a lot of stress off those who have other things on their plate.

What Skills Does It Take?

You can expect due diligence to require someone who’s extremely attentive to detail. This is not simply a matter of knowing the insurance business inside and out. There’s little doubt that anyone in the position of buying an agency will understand the jargon and the minutiae that all industries develop over time. This is far more about discovering the potential quirks that specific businesses have that will ultimately impact profits. What makes a company unique may be good or bad, but it takes someone who’s both trained and committed to finding the truth — especially when it could be buried underneath a mountain of irrelevant data.

The Problem Is Solvable

If you choose Agency Brokerage Consultants, you can trust us to handle the workload that the due diligence process entails. We work with general insurance agencies, as well as those who operate within a specific niche (e.g., casualty, property, etc.) Once we have the answers in hand, clients get a full report about everything they need to know. We provide proof for any statement we make, and we give our honest opinions based on many years of experience in due diligence. Our reports are regularly used in the negotiation process, which can potentially save companies up to six figures when it comes to how much they actually pay.

Tips for Dealing with Debt

dealing with debt

Sometimes it makes sense to spend more in the short-term for the eventual long-term benefits. No matter how nerve-wracking it may be to financially splurge for the future benefit of your company, agencies won’t get anywhere unless they can handle a little risk. If your investment isn’t quite going the way you planned though, you should have a few tools in your belt for dealing with debt.

Rework Your Budget

This should always be the first thing to do when your company accumulates unmanageable debt. Any unnecessary expenses should be cut, so you can start putting more money toward the never-ending bills. Start getting a little more conscientious about everything from company lunches to paper clips and supplies. Talk to the people in your agency so they have an idea of what exactly the company is up against. The more hands you have on deck, the more likely it is that you’ll be able to pull through together.

Handle the Big Bills First

This doesn’t necessarily mean the bills with the biggest bottom lines either. The ones you need to concentrate on are the ones that have extremely high-interest rates. While it may seem to be a better strategy to spread your money out amongst all the bills, you’re ultimately going to waste more money if you’re only ever paying off interest. Go over your bills, and start making some calculations about what it would mean to give far more attention to certain collectors over others. It should be obvious that you’ll save more over time if you carefully prioritize everything you owe. This doesn’t mean completely ignoring your other bills, but it may mean redistributing your money in a noticeable way.

Start Talking

Telling someone that you can’t pay a bill is never going to be a fun task, but may help more than you think. It’s easy to think that the companies you owe are full of automatons who don’t care, but you have to remember that those you owe are people just like you. Yes, they’re concerned with profit, but they also understand that it often makes more sense to work with clients rather than boxing them into a corner. Do your homework, come up with a specific proposal that may help you get your debt paid off faster, and then run it by a decision maker. At the very least, it’ll spark a conversation between you.

Protect Your Credit

One of the most important things about your business is your reputation. Prioritizing bills is fine (and necessary), but you should always keep your credit score in the back of your mind if you choose this strategy. If it comes to it, you may want to consolidate your debt. This usually means putting up some type of collateral to assure the debt consolidation company that you’ll be able to pay everything back in full. The plus side to doing this is that you may be able to work out a lower monthly payment, and you won’t have to worry about which company to pay first.

Talk to Someone Who Knows

One of the things you may have noticed about all of these suggestions is that it’s going to take a real investment on the company’s part to get right. Agency Brokerage Consultants has been working with insurance agencies of all sizes, and we’re proud to provide financial counseling to everyone — not just those in the middle of a boom. It’s our job to save you the two biggest resources you can possibly have in your business: money and time. We’ve seen too many agency owners fail to see opportunities available to them to save their business. It’s why we’ve developed a thorough process to uncover a plan that’s tailored to address your specific needs, so you get the counseling you need to thrive.

Talk to us today to find out more about what we do. We start by gathering the numbers together so we can see the big picture of how your finances are handled. Once we know we can help, we commit to exploring every possible avenue to getting your agency out of debt (and keeping it that way!)

Why Use an Intermediary to Sell Your Agency?

When you’re faced with the prospect of selling your agency on your own, you may think you don’t want anyone else involved. After all, who knows your business better than you do? But choosing to do it all by yourself (or with just a few key players at the agency) doesn’t merely create extra work for you and the staff. When you’re emotionally wrapped up in your business (no matter how much you may want to sell), it can ultimately lead to bad decisions during a very critical time. See how using an intermediary can take the pressure off of you, and ensure the transition goes as smoothly as possible.

Specialized Knowledge

You know your company inside and out, and the entrepreneurial spirit naturally runs through your blood. But how much do you really know about the details of selling off a company? How well do you understand the negotiation process before you agree on final terms? No matter how skilled you are in normal business transactions, selling an agency is an entirely different ballgame. Intermediaries live and breathe the art of the sale, and you can turn their knowledge into your gain.

Clearer Expectations

There’s what you think your company is worth, what an assessor says that it’s worth, and what a buyer is willing to pay for it. Sometimes these numbers match up, but not always. An intermediary has the experience to help you understand the real market value of your business. Mergers and acquisitions firms use their own professional past plus their databases to get a larger picture of how your business is relevant to the public and to its competitors. Whether or not you over- or underestimated the value of your business, it helps to have a firm footing in reality before you take another step forward.

Better Preparation

Unfortunately, it’s common for agencies that sell on their own to be completely unaware of how they’ll handle the details of the actual sale. A solid exit strategy will help immensely, but it won’t solve all of your problems. Agencies not only point out where the firm can do more to prepare, but they can also give practical advice as to how this can be done. An intermediary may not know your business personally, but they do understand the industry. They can look at everything from your staff size to your revenue before laying out how it can all be used to get the highest possible dollar value for your business.

Objective Services

An intermediary isn’t only going to make decisions based on the bottom line. They’ll ask the right questions that go far beyond finances. Whether you have certain demands about how the staff is treated by the buyer or how business will be handled with your existing clients, an intermediary is there to ensure that your plans go according to plan. However, they’ll also be searching for ways to increase the value of the sale whenever possible. Sometimes owners have a tendency to be too involved in daily operations, and even just a few stray objective observations can reveal potential problems that need to be addressed.

Financial Details

Lenders know what they want, but agencies often aren’t aware of this. When a buyer is offering the exact price you want, an intermediary can help you make any adjustments you need to ensure the deal goes through to the buyer. You can’t control what the other parties do, but you can structure your exit strategy to ensure compliance. The reaction of the lenders is often a good way to gauge exactly how much money you’ll take home. An intermediary can help you figure out how to handle your infrastructure for the benefit of all parties involved.

Tips Before You Hire

Contacting an intermediary and asking for a valuation is generally the first step, and it’s a critical time to assess their skills and dedication. Look for someone responsive and experienced, but also look for intermediaries who have a solid understanding of how the industry and the market work together. They’ll be the ones finding buyers and facilitating the details, so you need professionals who can do the job right!

Why Having an Exit Strategy is Vital

Choosing to sell a company is never going to be an easy decision. Can you get more? Do you want to cede control? Will the buyer do what they say they’re going to do? These questions are the underlying reason why it helps to have an exit strategy in place. Here’s why you need to at least sketch out a plan as soon as you can — preferably the moment you get your business off the ground.

A Clear Path Ahead

The focus of your business is allowed to change or pivot as you see fit, but a hazy focus can also kill a company quickly. Whatever your goals are, be honest about them to yourself and your employees. Are you hoping to be bought by a certain company? Will you be using the money to secure your family’s future? Do you truly understand what it will mean to let another company take over? Answering these questions in detail makes it easier for you to see what’s down the road of course, but it can also make it easier for you in the short-term as well.

Multidimensional by Nature

When you start the company, you likely have a certain idea of how you want to come across to the public, and another idea of how you want to come across to other businesses in your industry. All of the channels you use, the points of contact, and the major decisions you make should stem from the original idea. Marrying the original idea to the end goal will make your vision that much clearer though. It can even make your brand profiling and media strategies run a lot smoother once everyone is on the same page and working toward the same eventual outcome.

Testimonial Warnings

Those who own businesses state that not having an exit strategy can ultimately create a lot of extra work. Neglecting it will lessen your chances of success, lengthen the transition period should you choose to sell, and typically net you less money for your company. Startups today may end up selling just 12 months after they open their doors. Even if it takes your company several years to sell, it helps to understand how you want everything to look once you do.

Easy as 1, 2, 3

Exit strategies won’t necessarily take away from the more pressing matters that your company faces on a daily basis. When you approach the strategy the same way you might approach a new marketing idea or budget, you’ll find a lot of similarities. The key is to think about the situation from a variety of angles. The original questions about what you want are crucial, but you’ll want to look at your strategy through the eyes of a shareholder, the seller, or an investor too. Once you have all those ideas in your mind, start laying down the groundwork that will eventually become a plan in case of evacuation. Strategies can be as simple as wanting to sell the business for a million dollars within 5 years.

Potent and Profitable

The biggest reason why you should consider having an exit strategy is that it may do more to make money than literally any other decision you make. This is the time to get cash for everything you’ve worked to create. In fact, a well executed plan could net your company 50% more of its original valuation. To maximize your profits, start doing a little research into those you think may ultimately want to buy, or let someone else give you a hand. Certain parties may only work with a few types of exit strategies, and a lack of cohesion can take down even the most successful of businesses.

Final Thoughts

Experts and strategists say that it’s not enough to build a great product or service. You need to understand how your business fits into the market, and what exactly you’re bringing to the table. Exit strategies made at the start of the business can make the staff and management team feel far more powerful because everyone is on the same page. It can even be a motivating factor to get more people to believe in what the company is doing, and where it’s going.

Fair Value vs. Fair Market Value of Your Agency

Deciding on a valuation, whether it’s a business, real estate or intellectual property, can be a challenge. You know that there’s an inherent and objective value in the marketplace, but other — less tangibles — can weigh in on the determination of value. Understanding the difference between fair market value and fair value will both help you get a fair price for your agency and help the process of finding a buyer and sealing the deal that much more seamless.

Let’s explore the difference between the two.

Fair Market Value

Fair market value is the price at which a buyer who wants to buy and seller who wants to sell would make a deal if the there are no factors compelling the purchase or sale, respectively. In the case of fair market value, it’s assumed that both parties are well-informed and able to make an objective decision.

Fair market value is the most widely used in the financial accounting world to determine the value of a business and is also accepted by the IRS as a representation of the value of your business. Fair market value is what you could expect on an unrestricted market.

It doesn’t consider any strategic value in buying or selling at a given price or by a given time. For example, whether or not the buyer can realize greater ROI in the company than its current owner wouldn’t be a factor. The buyer’s desire to buy because of the company’s ability to complement the buyer’s own company’s lines of business wouldn’t be considered. The seller’s need to sell because of market trends, litigation, liabilities, death or retirement of a majority shareholder would not be disregarded in fair market value. Any of these would represent a compulsion to buy or sell beyond the fair market value.

Fair market value would include the following as laid out in IRS Revenue Ruling 59-60:

  • Type of business
  • History of the business
  • Stocks
  • Financial statements to review liabilities, liquidity, revenues, etc.
  • Earnings potential
  • Goodwill and other intangible assets

Fair Value

Fair value is the price at which you you can sell an asset (or transfer a liability) in an orderly fashion. It does take into consideration the risk, strategies, advantages and disadvantages of both the buyer and the seller.

By contrast, we could say that fair market value is a value created in a vacuum with no external strategic consideration while fair value considers not only the value of the company itself, but also the value to one or both parties of buying or selling by a given date. Fair market value is the more objective price while fair value is a price that makes the most sense given the current situation and between a certain buyer and a certain seller.

Fair value has been ascending in popularity over the past two plus decades because it attempts to take valuation out of the theoretical and into the real world. It is accepted within GAAP (generally accepted accounting principles). As with anything in the world of accounting documentation of these intangibles and how you factor them into the fair value is key. Fair value is not a haphazardly obtained number.

How Fair Value Is Used

Fair value is often used when shareholders disagree about the value of the company. These disagreements arise from varying perceptions about the strategic value of selling the business by a certain time and for a certain price. In these cases, shareholders would first review the more objective fair market value and then add to or subtract from that valuation to account for strategic variables. With consideration for majority and minority share — and perhaps with external counsel advice on hand — these shareholders would agree upon a fair value.

If they already have a buyer, then they would take this value to the negotiating table. If they’ve not yet placed the company on the market, then they would make the company available in the marketplace at this price.

Determining the Value of Your Company

For more information on obtaining an insurance agency valuation, check out our easy to follow yet thorough agency valuation video. If you need assistance determining the value and successfully selling your insurance agency, please give us a call: (321) 255-1309. We look forward to learning more about your company and helping you sell your company at a value that makes sense for you.

Knowing the Market Value of Your Insurance Agency

The market value of a company is as much wrapped up in the current revenue as it is in past success and future projections. There are so many factors to take into account that the numbers are easy to doubt. For example, two firms may bring in the same amount of revenue, but one may be slowly building momentum while the other one has steadily lost income or accumulated debt. Leaders may value a company at much higher than its worth, while outside companies ballpark their valuations far lower than an agency would like. Agencies need to go the extra mile when it comes to determining their value, or they may lose more than they bargained for.

Know the Goals

Whether you need to get an ESOP report for the stakeholders in the firm, you’re attempting to get a loan for expansion, or there’s a corporate dissolution, the value of the firm allows people to make the best decisions during a transition. Problems generally arise when evaluators either leave out certain information or discount its value, or .they include irrelevant information that confuses the reader. Strategic value, fair value, and liquidation values all have different requirements to factor in. Investors or companies may only care about one part of the business rather than the full enterprise.

Additional Considerations

Once you know why you need it, which parts of the company need to be evaluated, and who will be reading the report, analysts will have a better idea of exactly what everyone on both sides of the equation will want to see. The market value may be as much determined by the purpose of an agency as it is by its assets. For example, your identity theft insurance may be on the rise while home insurance sales are on the decline. Most agencies need to know their market value because the businesses will eventually be sold on the market. In this case, hopeful buyers will want to understand what their future will look.

Getting Help

Determining exactly how to handle a valuation is fraught with complications. While you may understand that a buyer is looking for different information than a bank, it can be difficult to pin down exactly what the receiver of the report will want to see (and how they want to see it.) One of the best ways to check on value is to look at what other comparable agencies have been sold for in the past. After all, a number on a piece of paper is worthless unless there are people willing to pay for it. Agency Brokerage Consultants has all the figures stored in a proprietary database, and we can help you decide the other data necessary to arrive at a realistic valuation.

Doing the Legwork

Getting the information together isn’t easy, and the stress of finding and organizing multiple documents can make it easy to just rely on the pure value of commissions. This is a shortcut that we strongly suggest you skip though. It may take time, but it’s absolutely worth it to do the legwork. Even thorough analysts may have a difficult time agreeing on an exact number due to the sheer scope of a business. Simply using the bottom line can discount the potential of the agency, and cause it to be sold for far under what it’s worth. It also ignores risk factors that may cause the purchaser to far overpay. While each business is different, leaders generally need to get business reports together plus all financial information, including bank statements, commission information, and tax returns.

State of the Report

Good market valuations won’t just give a final number, but will give a full state of the company. By putting financial and staff information in context, readers will start to get a sense of just what the company has to offer its potential customers and buyers. Agency Brokerage Consultants has perfected our method of valuing smaller to medium-sized insurance companies. It’s our job to ensure total compliance so each valuation gives the full picture to the interested parties. We analyze the situation as much as we analyze the numbers, so you can be sure you’re getting the right answers.

How to Retain Insurance Clients After a Merger

Keeping accounts after a merger can be a daunting task to agents and management alike, but it’s not impossible. What’s more, high retention rates are the key to financial success after the dust has settled and a new routine has been established. The number of the clients that follow the firm is directly tied into profits, and a strong incentive for both the seller and the buyer to make the transition with as little disruption to their accounts as possible. Find out more about what’s normal during a merger, and how you can maximize retention.

Normal Turnover

Every year on average, about 15% of the staff and 5% of the clients in a firm will leave: don’t expect the numbers to fall in the event of a merger. Management’s goals should be to keep the numbers even, and not to chase after every person who has decided to move on. The most challenging time will be right after the transition of course, when employees are unsure of how they’ll fit into the new organization. Should employees leave though, clients may find themselves confronted with rational fears about meeting a new agent and being forced to deal with a new power structure.

Addressing Concerns

Some clients will be able to go with the flow, cheerfully keeping their account and adapting to any new protocol adjustments. Others will raise their concerns, expecting detailed answers that prove they’re still highly valued as a respected client. Some will simply leave despite anyone’s reassurances, fearful they’ll be swallowed up in the chaos as everyone tries to work out who’s who and what’s what. And finally, there will be some clients who think that they can handle the change, only to find out that the disparity between one company and the next is too great to handle. Assuming the acquiring firm doesn’t significantly raise prices for existing clients, it’s typically culture changes that is the deciding factor for clients to either stay or go. To inspire trust, the acquirer has to show they’re honoring the traditions and values of the original company as much as possible.

Communication

Communication is key during a merger, and it matters how the information is delivered. Clients will want to know about the details, so they can address their own budget and time concerns. If customers can’t form realistic expectations, the merger will have a very difficult time moving forward. And make no mistake about it: the natural response will be to reach for white lies to appease them. Clients want to hear that there will be no hiccups. However, if they run into one (or several) down the line, they will be even more angry than if they were told upfront about the potential snags in the operation.

Larger clients should always be told face-to-face, but every client will need some degree of hand-holding during the merger. Scripts can certainly help in terms of getting the language correct, but they may also backfire if an employee sounds too robotic or unconvincing. Also, only changes that affect the client should be discussed. The client doesn’t need to be concerned about peripheral decisions that won’t affect their personal business.

The Importance of Loyalty

Thankfully, clients are more likely to stay if they’re loyal to their insurance carrier, even in the event of a merger. This is because they have developed such good relationships with the people on the other end of the transaction that they’ll follow their trusted advisors wherever they go. Retention rates will fall only when the acquisitions company devalues that loyalty, and starts making drastic changes that shatter the fragile bonds. Transition lengths will vary based on the size of the two companies, but they will normally take longer if the clients aren’t given enough ways to stay in touch with their original points of contact.

Finding Help

There are complicated times ahead for everyone with mergers and acquisitions, which is why hiring a company like Agency Brokerage Consultants can be the answer to retaining clients. A third party is sometimes the only way the primary parties can find the common ground between them, as opposed to concentrating on their differences. Our goal is to make everyone comfortable with the changes as quickly as possible, so the company can move forward toward a brighter and more profitable future.