A solid client list is the foundation of any successful insurance agency. After all, without clients, there are no commissions, and therefore no revenues. Building a client base can take years and requires patience and discipline. But, many independent insurance agency owners are capitalizing on changing demographic trends in the industry to grow their business more quickly through acquisitions.
Changing of the Guard
As Baby Boomers transition into retirement, agency owners in their 60s and 70s are looking at options to transfer their business and ensure they can enjoy a comfortable lifestyle in their golden years. In fact, experts estimate that as many as 75 percent of all agencies in the U.S. will transition in the next several years through buy-outs, mergers, book purchases, and agency sales. Acquiring a well-established agency can be a great way to increase your client base and leverage established relationships to improve revenues.
Taking over existing accounts requires finesse, as trust in any business is never a given and must be earned. Agency owners considering the acquisition of another firm or book of business should put together a well thought out communication strategy to ensure they keep the clients they have purchased. If properly nurtured, these new clients can also be a great source of referrals to further boost business growth. For the best likelihood of success, however, any request for referrals should wait until the relationship with a new client is on solid ground.
A Tool to Increase Value
In addition to lifting annual revenues, acquiring another insurance agency can significantly increase the value of your own business. This means that you can ask a higher sales price in the future, when it comes time to pursue other interests. When looking for an insurance agency to buy, consult with an experienced business broker to determine how factors such as the number of accounts, carrier partners, and geographic location can affect your agency’s future value.
Springtree Group has particular expertise in managing ownership transition events, particularly for independent agencies with annual revenues under $5 million. Few lenders will finance deals in this space, leaving owners and prospective buyers without the means to fund a transaction. In addition to a suite of highly customized lending tools tailored to small and mid-size agencies, STG offers comprehensive acquisition process management, from deal origination through qualification, financing development, due diligence, and closing. When properly managed, an agency acquisition can create a trajectory for growth in set your existing business that would otherwise take years to achieve.
If you are considering an insurance agency acquisition or purchase an existing book of business to increase the value of your firm, or if you are a seller in need of confidential access to qualified buyers, call Springtree Group today at (972) 395-8811 or contact us online. Let us bring the strength of our complete M&A and lending solutions to support your next acquisition project in any part of the country.