Selling Your Insurance Agency

There is little likeness in selling an insurance agency to selling an insurance policy. Selling your agency can be much more complicated, although, with the right planning, it doesn’t have to be! We will explain how to Position Your Agency To Sell below.

We’ve broken down the planning process to sell your agency into four steps for you to follow.

1.     FIGURE OUT OR DEFINE WHAT YOU’RE SELLING…

Do you also own the building where your agency is located? If so, there are few things to also consider when you decide to sell your agency. Are you planning on keeping the building and leasing it post-sale? Will you sell as a package deal or independently?

Selling the building and the company together as a package deal can potentially complicate things. We suggest you sell the real estate piece separately from the agency piece if it all possible, it will save you time and frustration!

2.     PLAN PLAN PLAN! DO YOU HAVE AN EXIT STRATEGY?

Starting years in advance (if possible) is when you should start working on an exit strategy. We suggest anywhere from two to five years prior.

Why? It allows you time to structure your agency financials in a way that will appeal to potential buyers.  Also, it will ensure that you are meeting your own goals and expectations you set for selling your agency. You will need to develop a sales strategy, do some research, set your goals, do your business valuation calculations, set your sales terms, etc.

Give Jason a call if you have questions! We can help you position your agency to sell. Jason Graybeal

541.310-1063

3.     YOU NEED TO DETERMINE THE VALUE OF YOUR AGENCY- HOW?

We have found the major thing buyers are looking for is ROI on their investment and that the business will remain stable post-sale. There are things you need to consider when determining the value of your agency to help ensure you alleviate possible buyer concerns. Below is a list of things to consider prior to placing your agency up for sale:

  • Management of cash and assets
  • Sales Management
  • The location and number of offices you have
  • Growth rate and revenue history
  • Retention rates and agency reputation
  • Technology platform and/or age of technology
  • Insurance market quality
  • Dependency on large accounts or specific industries
  • Employee quality and productivity, especially key producers

Remember that value, price and net proceeds from a sale can all be different. Value is a theoretical benchmark. Price is the agreed-upon number of dollars it will take to transfer ownership between the buyer and seller. Net proceeds are the actual dollars the seller keeps after taxes and other expenses.

4.     YOUR TERMS OF SALE

Most likely, your goals vs. the buyer’s goals will be somewhat opposite. You’re looking for the most cash you can get, up front. The buyer is probably looking for a smaller down payment and then pay over years renewed.

It is common that deals today tend to be asset deals that are based retention of the business. This could be limited or just the riskier parts of the book of business. Usually, the terms are a down payment and then balance payoff over an agreed upon set of years. Maintaining full disclosure with your buyer and working together will ensure a better transaction for all parties involved.

Jason Graybeal is well versed in sales and acquisitions from his experience in participating in them over the last several years. If you have questions, please give him a call direct!
541.310-1063