Agency Perpetuation – What’s Your Plan?

As the owner of an independent insurance agency, people count on you to make the right decision for their security – your customers, your carriers, your employees and your family.

In the same way we help our customers prepare for the worst-case scenario, it is important that we make those plans for our agency.

Most agents I speak with indicate their perpetuation plan is to “sell their agency.” But when I ask them to whom they’re planning on selling, too many agents shrug their shoulders, grunt, or change the conversation. The truth is they don’t have a formal plan. They have an idea.

Even if you do have an informal plan in mind, plans can always change, particularly if your plan depends on unlicensed family members becoming licensed agents. There are too many variables with this option including family members not being able or willing to become licensed.

A successful agency experiences an unexpected death or incapacitation of an owner and family members are left trying to salvage the business so it remains a viable asset.

This can take several months, perhaps even up to a year to find a qualified buyer, negotiate a price and have financing approved for your buyer. In that time, you may have lost direct appointments because you don’t have a licensed agent and you’ve probably lost customers.

A $3MM agency quickly becomes a $1MM agency and your family pays that price.

SIAA members have a guaranteed perpetuation plan from day one. We clearly define in our contract that if you do not have a suitable buyer for your agency, we will buy your agency, at a pre-determined amount. Your customers will become customers of the master agency, The Insurance Connection, or of one of our other members’ agencies if they are closer in location to your agency. We step in immediately in the case of unexpected events to make sure that your customers are being serviced and your carriers know that the business is in good hands. Ask your carriers how important that is to them.

Additionally, if you do have a buyer, but they are struggling with financing, we have a relationship with Crestmark Bank who understands the insurance business. As an FDIC-insured bank, they don’t rely on external sources for funding and are able to move quickly and efficiently to help you with capital loans, lines of credit and other financial services.

Finally, even in the best of circumstances, it can take up to five years to transition an agency from an owner to a family member or producer. We can help you create a plan to help get that person up to speed on how to run an agency, in addition to being a successful agent. This way you’re gradually transitioning them so when you retire, the new change in leadership is seamless.

If you’re struggling with perpetuation, we have several proven strategies to turn that idea into a formal perpetuation plan. Now is the time to protect your own asset – your agency.

Article written by Kris Klopp, The Insurance Connection