In the first part of my article on how to sell your independent insurance agency, I covered assessing the value of the agency book of business. In part II, I will discuss the preparation and listing of your business for sale on the market.
PREPARING TO SELL
It is important to note that, before you decide to advertise your agency for sale, you need to be aware of the most common aspects of your agency that a buyer will want to evaluate. Any prospective buyer will want to ‘see the books,’ so here are the TOP TEN items they are looking for:
Premium and commission by carrier
Premium by carrier broken down by line of business
Loss ratios by carrier
Contingency bonuses paid by carrier
Renewal retention percentage by carrier (and overall agency retention)
Revenue broken down by line of business
A list of any accounts providing greater than 5% of the agency revenue
Any carrier appointments that have been terminated in the last 3 years and why
A list of any outstanding lawsuits or E&O issues
A non-compete in place with ALL existing producers and key staff
If you can gather this information up-front, your agency will be more attractive to buyers and they will be more willing to pay top-dollar for your business. Do your homework and it could translate to thousands of dollars of additional equity in your pocket.
READY TO SELL
The preferred way to sell a book of business is by word of mouth. You have spent years building connections in your profession, do not be afraid to reach out to your fellow insurance agents whom you respect and ask if they are interested in buying a book of business. Another great resource on this front and a great way to get the word out is to reach out to your favorite carrier sales representatives and give them a heads up. They are meeting with agents across your local area every day and will know of good agents looking to expand.
Another less preferred way to advertise your business for sale is to hire a broker to sell your business. This can be much more involved and come with many more strings attached. You will also pay a fee for their services, so be prepared. The upside of this arrangement is the help in preparation. A good broker will help set you up for success and can be a true asset if you are not accustomed to gathering accounting numbers and putting the polish on your business before selling.
Either way, there is a HUGE market for a good P&C book of business, and many are sold within a few months of being placed on the market.
This article only scratches the surface of what is required to set your business up for a profitable and efficient sale. An additional resource would be a regional (or national) bank like Live Oak Bank that assists buyers in funding an insurance agency purchase. They will be able to give you the buyer’s perspective on the transaction and may even be able to provide a worksheet to help get your books straight.
Also, please remember to think like a buyer. If you are wanting to sell your agency only to move two blocks down the street and open your doors again, a buyer will have very little interest in paying much for your business. On the other hand, if you are ready to move to another area of the state or country, or ready for life on the golf course or beach, expect top dollar for your hard work. You spent a considerable amount of time growing your business, now take the time to polish your business and books which could add thousands to your sales price.