3 Tips for Timing the Sale of Your Independent Agency

Successful insurance agents are knowledgeable about their industry, nurture good relationships with their carriers, and go the extra mile for their clients. But a select group of agents possess something more. They have an entrepreneurial spirit—they long to be their own boss and turn their profession into a legacy.

Independent agency owners know first-hand that building an insurance agency can be both personally gratifying and financially rewarding. Still, many overlook the planning needed to ensure long-term financial security when it’s time to leave the business behind. By timing your exit strategically, you can recognize the best windows of opportunity for a transition and realize a higher asking price for your business. Here are three factors to watch for as you plan for a future transition to other pursuits.

Positive Industry Buzz. If the insurance industry is in a growth mode or new legislation opens the door to new market segments, it may be a good time to start the search for a prospective buyer. Look for higher levels of activity related to mergers and acquisitions, as well as the trend toward a seller’s market, so you can get the most value for the business you have built. (See our latest Independent Agency Sales Alert for more insights.)

Favorable Interest Rates. Since most buyers need to finance their acquisition, a lower cost of debt can mean a higher valuation for your agency—and that means a bigger check to go toward your retirement. Springtree Group has established trusted relationships with nearly 30 niche loan underwriters who understand the unique factors related to financing an agency, and specializes in working with independent agencies that have less than $5 million in annual revenues. With a commitment to strict confidentiality, STG can provide unique lending tools to help you structure a successful business transfer.

A Strong Track Record. Prospective buyers want to know that the agency is healthy and generating positive cash flows. For this reason, you’ll want to time your exit when you’ve had at least three years of consistent growth (or at the very least, no downturn in business) and strong margins. By illustrating the potential for a high return on investment, you are more likely attract a larger number of buyers and sell your agency at a premium.

Of course, one of the most important considerations when selling your independent insurance agency is to find buyers who are not only eager to find a good acquisition, but also capable of seeing the deal through. Springtree Group can vet prospective buyers and perform the necessary due diligence to ensure that you don’t waste time, money and energy on a deal that ends up going nowhere. What’s more, STG can work with both you and the buyer to put together the right deal structure for the transaction. To learn more, please call (972) 395-8811 or contact us online.