You’ve reached a point in your life and career where you’ve decided it might be time to sell your insurance agency. Regardless of what the plan is for your next chapter, the timing of the sale of your agency is imperative to ensure you make a nice profit and can fully enjoy everything that lies ahead. Here are five important factors to consider when timing the sale of your insurance agency.
The mergers and acquisitions market
Supply and demand plays a critical role in the successful sale of your agency. As is currently the case, when there are fewer agencies available for sale and plenty of buyers, the seller is at an advantage. When you are considering the sale of your insurance agency, take full advantage of a low supply-high demand situation.
Business cycle stage of insurance industry
Just as the economy is an important aspect of selling your agency, so is the industry business cycle. Business cycles tend to last several years; therefore, it is imperative to watch industry indicators closely and be prepared to act when the time is most beneficial for your sale.
Your profit margin for the last three years
When doing their due diligence, buyers tend to base their projection models on the previous three years of a business’ performance. If your agency has had positive upward trends in its financials, it provides optimistic projections for future growth, generally making valuations higher and the odds of a successful sale much more likely.
Federal Reserve policymakers are once again discussing when to raise interest rates, with the hike currently anticipated to take place sometime in September 2015. Higher interest rates lead to higher prices in capital, which in turn lower valuations. The more expensive it is for a buyer to access capital, the less likely they are to pay premium valuation.
Your exit plan
Exit planning is essential to ensuring you’ve maximized the value of your agency, and it is never too early to put a plan in place. Ask yourself how long you plan to work at your agency and set an ideal date for your exit. Then, keep in mind it generally takes between nine and 12 months, from start to finish, for your agency to sell. Your exit date can be changed as your business evolves, but having a plan in place will help you avoid losses in the event the sale of your agency is delayed.
The experts at the Springtree Group (STG) can make this process go smoothly by helping you plan and execute the sale of your agency. STG specializes in managing all the aspects of ownership transfer of small and mid-sized agencies, from confidentially matching you with potential buyers to finding financing options that will work best so you receive maximum payback.
If you are considering selling your insurance agency and want to know whether the market is ripe for a successful sale, contact us online or call us at (972) 395-8811.