Most successful business owners have pulled themselves up by their bootstraps. They survived through all sorts of ups and downs in the economy and struggles within their own business. As such, they rightfully believe in their ability to make things happen. As a business owner myself, I understand the get-it-done mentality.
What I don’t understand is the thought process behind selling an insurance agency direct to a buyer. Let me be blunt: What is the benefit?
I can’t imagine that many successful business owners forgo hiring an attorney for writing up agreements, file their own taxes, or even sell a house without a real estate agent just to save a few bucks. Aside from the risk of doing those tasks on your own, your time is best spent working in your business, not playing the role of professional advisor in a field that you have little experience.
Negotiate a better deal on your own?
Let me ask you a question relevant to what you do – can your clients negotiate a better deal on their own going direct to a carrier? Many of the same reasons you would give them apply to selling your business direct – you won’t get the best price, you won’t have competing offers to compare it to, you won’t understand what is and isn’t customary in the agreement you are signing without an experienced advisor looking out for your interests, and on and on.
Just in terms of price, we have data that supports that our clients receive over 25% more than agency owners that sell on their own. Not only that, we have been hired by clients that received offers from buyers before they hired us and those same buyers offered our clients significantly more money and with better terms once we took over managing the transaction. And I’m talking about 20% more in price (they ultimately were not the highest bidder too) and 20% more in upfront cash. Not only are you not going to get the best deal selling on your own, but you’re going to leave a considerable amount of money on the table.
Retain control of the process?
Ask anyone that has attempted to sell on their own how much control they had during the process. The answer is very little because when you deal with a buyer directly the buyer dictates the meetings, discovery process, and negotiations and through it all you become more and more emotionally committed to the idea of selling, even though you have no idea what the final offer will be once they get through their due diligence. You will feel more out of control then you likely ever have before in business.
Build better rapport with the buyer?
I’m sure this is one of the reasons because most of our clients care who they sell to. If you are engaging in discussions with a buyer because you like a particular representative, ask yourself these questions:
- Is this person being financially incentivized to close my deal?
- Is this representative that I like someone that I will be interacting with long term?
- Is it in their interests to offer me the highest price and best terms for my agency?
- Do I like the person enough to leave 25% or more of sale price on the table?
Better yet, ask your spouse or someone that you trust to answer these questions for you.
Yes, it is important that you do your due diligence on the buyer of your agency, but our sales process provides you with the ability to achieve that while interviewing and soliciting offers from an assortment of buyers. We also have experience working with all of the major acquirers in the marketplace, and connections with folks that have sold to them and that provide us with feedback on life after the sale.
Avoid the mistake
Sincerely, I can’t think of any valid reason why someone would sell their agency direct and I’ve been doing this for quite a while.
Many agency owners that have negotiated the sale of their insurance agency on their own and sold direct to a buyer, or started down the path to, have told us that they wish they had not. The ones that sold, were stuck with that decision. The ones that started down the path but didn’t, were either burned out on the process or tied up under a lengthy no-shop period and had to wait a few months before they could try again.
Learn from their mistakes because, as my business partner often says, “You only get one chance to sell your business, so you better do it right the first time.”
The benefits of hiring our firm
- Receive more money at closing and better terms than you will selling the business on your own, and that amount will greatly exceed our fee.
- Be introduced to a variety of buyers, which gives you the ability to better select your successor and/or future partner.
- Stay focused on running your business while we manage the sale process for you, which helps you to avoid a decline in the business as you attempt to sell it.
- Be alleviated from the pressure and emotions of dealing directly with a buyer, which allows you to make logical decisions.
- Realize better control over confidentiality due to our expertise and processes, which helps you to avoid major issues that arise when confidentiality is breached during a sale.
- Complete a sale of your agency and do it faster, which prevents you from getting burned out on the process.
Posted by: Michael Mensch, CBI, M&AMI and Managing Partner
Direct: (321) 255-1309