You hear it in real estate all the time:
“Start high, you can always ask for less.”
“Sell your home on your own and save yourself some money!”
“Just throw a price out there and see what you get.”
Those strategies sound absurd and careless, but many insurance agency owners use these same strategies when selling their business. It’s true that no one knows your business like you do. It’s also human nature to overvalue our assets while discounting our weaknesses. When it comes to selling the insurance agency that you worked hard to build, a lack of objectivity can cost you thousands of dollars and cause unnecessary delays that keep you from enjoying the next chapter of your life. As you prepare to put your business on the market, consider these three important factors to avoid the common mistake that agency sellers make – trying to go it alone.
The “One to Two Formula” Isn’t a Sure Thing
Most agency owners know that their business is worth roughly one to two times annual revenue. But that’s a ballpark figure, and the more your business is worth, the wider those figures can get. When it comes to the asking price, you need much, much more than a ballpark figure. A professional valuation from an experienced business broker takes into consideration all the factors that make your business worth more than you thought, and gives you the knowledge and opportunity to fix any problems or liabilities that can take away value from your agency. If someone could recommend improvements that could get you extra revenue when it came time to sell, wouldn’t you want to know what they are?
Loose Lips Sink Ships
Putting an agency up for sale is delicate business, and confidentiality is key. Every day that your insurance agency is on the market, the chances increase that someone new finds out about it. That can mean clients change insurance agencies or competitors get an edge. It can also mean a loss of your most important asset—your people. A smooth transition and staff retention are key to a successful agency sale. When rumors start to circulate, people get nervous, and productivity suffers. An experienced business broker, like Springtree Group, will maintain strict confidentiality while working with buyers and lenders behind the scenes until the time is right to share the news with employees and clients.
Vetting Potential Buyers Takes Finesse
Beyond what your agency is worth, you need to know what potential buyers are worth, too, and whether they have the funds to get the sale done. Even the most experienced agency owner likely won’t know what questions to ask or how to review an interested party’s financials, and traditional lenders steer clear of the insurance agency space. Wasting time with an unqualified buyer puts the sale in jeopardy and keeps you from staying focused on your clients and staff. A professional business broker can vet potential buyers and aid with financing to make sure you aren’t wasting time and money on someone who can’t follow through on their offer.
Selling your insurance agency is a one-shot deal. You can’t make up the time spent waiting out a high asking price or get back a missed opportunity. Good decision-makers are fast and accurate, and so are smart sales. A professional valuation prices your insurance agency in a competitive range that will tell a potential buyer that you are savvy, you know the market, and your agency is a sound investment. Involving an experienced business broker like Springtree Group in the process also shows buyers you are serious and you won’t waste time on unqualified leads.
Don’t be that one house that languishes on the market because the homeowner thinks he knows best. Get a professional agency valuation today. To learn more, call our offices at (972) 395-8811, download our General Capabilities Brochure for an overview of the business valuation process, or contact us online.