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4 min to read

The 4 “Traps” to Avoid When Selling Your Agency

I made a post on LinkedIn last week that attracted attention. I was sharing my observation that more deals have been unwound in the last year than I had seen in my prior 16 years in M&A.   

First off, it is extremely uncommon for a sale transaction to be unwound (i.e., reversed).  Most of the time, it’s not even an option.  You (the owner) just have to live with the outcome of the decision that you made.   

Second, in the rare instances where a deal can be unwound, the legal costs are exorbitant.  The sale of a business is already a roller coaster of emotion for an owner.  Having to go through the slow, painful process of buying the business back also takes a huge emotional toll.       

Third, the common element between owners who went through the process of unwinding their deal was that they all sold without representation and without going to market.  In each case, the buyer or a peer approached the owner directly about selling, and they took the bait.

4 Common Pitfalls to Avoid When Selling Your Insurance Agency

There are 4 “traps” that cause us as humans to make bad decisions: (1) Ego, (2) Emotion, (3) Social Pressure, and (4) Inertia.

These 4 apply to every important decision, including selling your business.   

  1. Ego comes into play when you tell yourself, “I can do this on my own” even though you really don’t have the knowledge or experience.  As they say, it’s what you don’t know that will get you. I’ve seen owners sell their agency way below market value or on terrible terms simply because they were too proud to get professional guidance. Ego is a destroyer.
  2. Emotion comes into play when you tell yourself, “This feels right.”  Feelings are not a good source of truth – think of the last time you made a big purchase.  When it comes to selling your business, you may feel good about a person that represents a company, but that doesn’t mean their company is the right fit or that their offer is even competitive.  Emotion is a deceiver.
  3. Social Pressure comes into play when you interact with peers who are encouraging you to sell.  If someone is pushing you to sell to a specific buyer, I’ll wager money that the buyer is compensating them.  If you want to know the truth, ask them if they will benefit financially from the deal and look them in the eyes when you do it!  Social pressure is a distraction.
  4. Inertia comes into play after you have been in discussions with a buyer for some time. We, in the M&A business, call it deal fatigue.  The buyer strings you along, changes the terms later, and you accept the revised terms because you’re just so worn out and close to the finish line that you want to keep going.  Inertia is a drag to be resisted.

As I said in my LinkedIn post, don’t fall for the traps.  It’s hard to get out of them. 

While it is self-serving of me to say this, one surefire way to avoid making a bad decision is to seek the advice of knowledgeable and experienced advisors.  We would certainly rather help you make the right choice than console you after making a bad one.  

Posted by:  Michael Mensch, Founder and CEO
Direct:  (321) 255-1309

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