Don’t wait too long!
Some independent general insurance owners wait too long to sell their agencies. Often times, they started the agency from scratch or inherited the business through their families. The agency has done them well over the years and has provided them with a good life. The problem arises when the owner does not have his “heart” in the business. They are simply moving forward and not pushing to grow the business.
We have seen agencies where revenue is dropping more than 15% per year for many years. This is not OK. It will be difficult for you to impose a high selling price for your agency. There can be many reasons why your revenue is dropping (ie changing carriers, local demographics, etc.) but the most important is that you generally no longer have the “inner fire” to attract new customers.
When you lose the “fire” it is time to sell. Don’t wait another day to sell as you will only lose potential profit when a check is cut for the transfer of the business to a new owner.
Also, many homeowners are losing income but are unable to align expenses with lower income. The largest category of expense in any agency is wages, salaries, and benefits. You may feel loyal to your employees, as they have been to you. However, you will have a hard time finding good buyers with these additional employees on board. Make the cutbacks before you start marketing your agency and you will do well in the end.
One of the other traps of waiting too long to sell is agency owners who don’t want to give up their day job and love relationship with their agency. He is now 75, 85 or even older and has not thought about who will take over the agency if he gets sick. The last thing you want your family to deal with is trying to sell your agency (or run it) while you are sick and in the hospital. Do you really want that extra load on them?
Many clients will be linked directly or indirectly to the owner himself. So if you’re not there every day in some way, will those customers stick around? It is best to have a seamless “handover” over a period of months or years to the new owner. This way, the customer base you have created will not feel lost to the new owner.