Planning an Exit Strategy for Your Insurance Agency

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Through years of hard work and resolve, you’ve built up a successful agency in a challenging industry. Now you’re ready to move on and reap the rewards of all your efforts. The process of selling your agency and ensuring you find the deal most in line with your goals and expectations for the future is one that you should not go through entirely on your own.

Whether you’re planning to retire or you simply want to pursue other career opportunities, here are a few key points to consider when trying to sell your insurance agency.

Plan a few years ahead before selling. Two to three years is usually recommended to develop a sales strategy. You need to research all the factors that will affect and result from the sale. Gauge market conditions, and figure out how much you need to sell for to retire comfortably or move on to your next venture with enough capital. In addition, you should speak with your CPA about the various tax implications. There can be significant tax benefits if you know about them ahead of time and structure the sale, as well as your post-sale strategy, accordingly.

Two to three years also gives you the time to clean up the company’s financials to provide the greatest impact with buyers. Buyers and lenders look more kindly on deals with clean financials, and every extra $1 that drops to the bottom line can equate to an extra $5 or more in the sales price!

Determine the current market value of your agency. To make the swiftest, most advantageous sale, you need to get a real sense of what your firm is worth. This involves understanding the market for insurance agencies right now, including what buyers are paying for agencies like yours and how the deals are structured. Buyers typically consider four main factors when looking at an insurance agency to purchase: earnings history, pro forma earnings, risk associated with future earnings, and current market conditions. A merger and acquisition firm that specializes in the insurance industry, such as Springtree Group, can help determine the real value of your business.

Empower your employees. Don’t manage everything yourself. Buyers will shy away from a deal or offer a lower purchase price if they perceive too much risk, such as the business being too reliant on one person. Putting the right people in place to handle day-to-day operations can expand your client base and will help guarantee that when the time comes to sell, buyers see a well-organized business that can thrive without you. You’ll also be better able to focus on the sale and your transition out of the agency.

Seek wise counsel. Perhaps most important to a successful sale is engaging the services of a firm that specializes in the industry and can advise you properly on all the intricacies involved in valuing, selling and financing an insurance agency. The right M&A firm can help you devise your sale strategy, time the sale of your agency appropriately, and pre-qualify suitable buyers. The firm will help you identify the best operationally and financially qualified potential buyers, assist with negotiating offers, protect the confidentiality of the sale, and work with you to finalize the contract, arrange for financing and close the deal.

These are all vital elements of what is often a complicated and lengthy process, fraught with its own risks and challenges. You owe it to yourself to do the needed legwork and call upon an experienced M&A firm, like Springtree Group, to structure a successful outcome. Ultimately, the goal is to ensure that you receive the best possible deal for the agency you’ve worked so hard to build.