Selling Your Insurance Agency Without an Advisor: Why it’s a Bad Idea

Springtree Group repeatedly cautions owners of both small and large independent agencies:  Selling your insurance agency without an advisor can result in an artificially low range of offers. Today, let’s discuss how the impact on smaller agencies is truly more disastrous than on larger businesses—though we have evidence that both categories must work with an advisor to reap a fair, competitive range of offers when it’s time to sell.

In short: Owners, there is a substantial cost associated with attempting an independent sale of your agency.

The Real Cost for Smaller Agencies

Advisor-led transactions close at significantly higher multiples (or ratios of value to items listed on your agency’s financial statements) than those conducted without. In 2021, we saw sellers of agencies valued at $1 million and below who did work with skilled advisors net earnings 55% greater than sellers who failed to do so.

This means that we’re seeing the disparity between these two approaches increase rapidly. In 2019, the disparity was a mere (yet still significant) 28%. In 2020, this figure jumped to 41%. Assuming this trend continues through 2022 and into 2023, it’s very possible that selling without an experienced advisor will net very dire results for smaller agency sellers.

The Devastating Effect on Smaller Agencies

Larger agencies almost always work with advisors when they sell. Smaller agencies often do not. The result is that owners of smaller agencies, especially those valued below $1 million, are leaving hundreds of thousands of dollars on the table when they agree to a sale price. For many owners, this additional revenue would contribute significantly to supporting their retirement goals, future business plans, and/or investment opportunities.

Furthermore, when agencies valued between $1 million and $4 million decide to proceed without hiring an advisor, they miss out on “only” 24% on average. While this number is inarguably substantial, it’s clearly less disastrous than the sums smaller agencies lose.

These figures could not be clearer. If you work with Springtree Group, your transition event will garner you profits that you will not otherwise earn. Additionally, working with us will grant you access to a large pool of premier, financially vetted buyers who are actively scouring your region for the best agency to purchase.

Keep in mind that inadequate financing is the most common reason a deal fails. Spending time negotiating and pursuing deals that are doomed to collapse wastes your valuable time, delays your exit from the business, and means that you are not engaging with qualified buyers who will, while you’re distracted, have found another agency in which to invest.

Once you have determined that you plan to sell your agency within the next one, two, or three years, it’s already time to reach out to Springtree Group. We can advise you on preparing your business for sale, the best methods for transitioning away from your role as owner, and how to arrange a sale that nets you the largest possible price for the agency you’ve worked so hard to build, maintain, and expand.