If you are well organized, have a knack for numbers, and enjoy meeting new people, a career in insurance sales can be very lucrative. But, just because you do well as an agent that is no guarantee that you will do well as an agency owner. Running a company, even a small one, is a very different undertaking than working for an employer and managing one’s own book of business. So, how can you tell whether you are cut out to run your own insurance agency? Here are three key questions to consider.
Do you understand what is involved? If you are seriously considering setting up your own insurance agency or purchasing an existing agency, you must first take a sober look at what small business ownership entails. On the one hand, you will have the freedom to choose your staff and create operational systems and processes the way that you feel works best. On the other hand, you’re the one at the helm, which can mean long hours and numerous responsibilities you may not have considered while working for someone else. If you are not taking over an existing agency, you may be responsible for locating office space, shopping for utilities and Internet service providers, hiring and training new employees, and managing personnel and payroll. And when it comes to chargebacks or client complaints, the buck stops with you.
How will you fund the purchase? Starting your own agency is not going to be cheap, and securing capital and the best financing terms for an acquisition is especially challenging in the insurance arena. Before you begin the search for a potential acquisition target or delve deep into planning your exodus from your current employer, think carefully about financing options. Do you have any savings or investments you could cash in? Will you have to take out a loan? Most lenders will expect the buyer to put 10 percent down or more, depending on the size of the deal, and the seller would hold an additional 10 percent in seller financing. Finding a lending institution willing to underwrite deals in the insurance space and cover the 80 percent balance of the purchase price is especially difficult for agencies with less than $10 million in annual revenues. To secure financing and ensure a successful start-up or acquisition, you should work closely with an experienced business broker with an advanced level of expertise in the insurance field. A firm that specializes in insurance M&A, like Springtree Group, can act as an intermediary between you and the seller, select and manage the lending company, and provide invaluable guidance as you launch your new venture.
Do you know where to find qualified sellers? If you are looking to purchase an existing agency, getting the financing in place is only half the equation. First, you need to find an agency in the right geographic area, at the right price, with the right book of business. Smart sellers want to keep news of their intent to sell confidential, to avoid any misgivings from employees, clients, their insurance markets and particularly the competition. Only a small fraction of these transactions are made public, which is why it is critical to bring in an experienced business broker, like Springtree Group, that has access to these otherwise undisclosed agency listings and a well-articulated approached to negotiate, analyse, fund and close insurance agency transactions.
Running your own business undoubtedly will be stressful at times, but if you do things right, it will also be ultimately rewarding and potentially very lucrative. To explore financing options or begin the search for a qualified seller, call the Springtree Group at (972) 395-8811 or use the online contact form. STG has long-standing relationships with a vast network of industry insiders to facilitate the acquisition process and offer multiple loan platforms and financial packages that can make your dream of agency ownership a reality.