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5 min to read

3 Things to Know When 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.

3 Considerations When Selling an Insurance Agency

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!

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