3 Things to Know Before Selling Your Insurance Agency

You have built your book of business over years, maybe decades, and now you are looking toward a new chapter in your life. Whether you plan to retire or focus your attention on another venture, selling your insurance agency is a big decision with significant financial implications. Although you may think you know what your business is worth, it takes more than a ballpark valuation to find a viable buyer and complete the sale successfully. Here are three important considerations when selling your insurance agency:

1. Standard valuation processes don’t apply. You’ve crunched the numbers and determined the value of your business. The problem is, your buyer probably won’t care. Traditional rules of thumb for business valuations don’t work well for the insurance industry, because revenues are contingent upon commissions and most agencies have few hard assets. Even if you have followed the standard formulas to determine the worth of your business, most buyers will question your findings—and many may want to do a valuation of their own. Obtaining an appraisal from a reputable third-party can help assure the buyer that your asking price is fair. Having an outside quote also can speed up the selling process and ensure that you reap the greatest possible benefit from the sale of your agency.

2. Assets are great, but cash matters, too. A good list of assets will no doubt aid you in the selling process, but what really matters are the hard numbers that the new owner can expect to earn when buying your business. Prospective buyers will want to know the Sellers Discretionary Cash Flow (SDCF)—that is, the total compensation and benefits that come to the agency owner—to determine whether the profits are in line with their income goals. An independent business broker specializing in the insurance field, like Dallas-based firm Springtree Group (STG), can provide this type of third-party valuation and ensure that assets, cash flow and all of the other components of the financial income of your business are clearly documented for the buyer.

3. You shouldn’t go it alone. The smooth transfer of your insurance agency requires that numerous matters be handled efficiently and accurately, including proper valuation, buyer qualification, deal negotiation, tax analysis, and financing, among others. Most of these issues are beyond the experience or expertise of an agency owner. By contracting with a professional M&A firm experienced in insurance agency transactions, not only can you ensure that the sale of your business will go through faster, but you can also stay focused on the day-to-day operations to ensure that performance doesn’t suffer. Trying to sort out all of the components leading up to the sale while running an agency is a difficult process, and simple mistakes can cost you thousands of dollars, or cause a deal to fall apart entirely. An experienced intermediary can find a qualified buyer and manage the logistics of the transaction, so you can move forward with the next chapter of your career.

Springtree Group specializes in matching buyers and sellers nationwide for insurance agencies with annual revenues under $5 million and managing all aspects of the business transfer. STG not only can provide an accurate valuation for your insurance agency, but can also help you find qualified buyers while maintaining strict confidentiality, so that your employees, carriers and competitors do not learn about the planned sale. In addition, STG works with a highly specialized group of lenders that offer various financing options specific to the insurance industry.

Managing the sale of an insurance agency takes experience and a broad network of industry contacts. You’ll see a much stronger payback if you employ a professional advisory team to help you with the process. For more information, or to discuss the sale of your insurance agency, call Springtree Group at (972) 395-8811 or contact us online.