Agency Succession Planning

Most agency owners dream of either selling their company or passing it onto the next generation. Whatever the plan, the goal is a successful transition for all involved. As with any long-term strategic planning, you’ll need to establish business and personal goals as part of the process.

There are five ways you can leave an agency:

  • Sell to a third party.
  • Sell to a family member or co-owner.
  • Sell to key employees.
  • Die owning the agency.
  • Liquidate the agency.

Fortunately, you can plan for each of these eventualities well in advance.

Catching the Vision

Consider the answers to these four universal questions as you begin planning:

  • How much longer do I want to work in the agency?
  • Who would I like to sell or transfer my agency to?
  • What is the annual after-tax income I will need?
  • What will I do when I no longer own the agency?

You should spend time thinking about who you are and what you want to do when you’re no longer an agency owner. How much of your identity is through the agency? What personal relationships might change or go away when you leave the agency? What post-ownership activities will provide meaning and purpose?

You have to be the CEO — the Chief Exit Officer — creating the vision of where you want to go with the agency, and you must be able to clearly describe that vision to everyone involved in the process.

Once the vision has been established, you’ll need a team of advisors to help achieve it. You’ll continually have to ask the advisors: “How do your planning strategies achieve my vision?”


Whichever course is selected, be prepared to steer the agency through four important cornerstones.

One of the four cornerstones involves business independence planning. This emphasizes the steps to be taken for the agency to become independent of the owner.

Few companies are sold and the vast majority are rejected by investment bankers, private equity investors and business brokers because the businesses are not prepared or have little value without the current owner. Create a list of actions that need to be taken to preserve, protect and promote agency value before you can leave.

The long-term success of the agency is greatly impacted by your ability to recruit and retain the next generation of managers and owners. The majority of closely held business owners are baby boomers between the ages of 50 and 70. The total baby-boom generation represents approximately 79 million people. Gen X, the next generation, is between 30 and 50 years old and totals only 58 million people. This significant difference in population between the boomers and Gen X will have a significant impact on future ownership and management of closely held businesses.

It’s critical to have a key employee plan that demonstrates how vital staff members will share in the financial growth of the agency they help manage.

A business contingency plan determines how the agency will successfully operate if you don’t return to it one morning. It addresses issues your family may encounter such as:

  • Loss of financial resources: Will these be lost through guarantees or loans made by you to the agency?
  • Loss of key talent: Who will immediately fill your role of owner? What tasks does someone need to do?
  • Relationships with customers and vendors: Who is going to immediately maintain the relationships you have with customers and vendors?
  • Impact on key employees: Will they stay or go to work for the competition?

Having a solid owner’s life plan helps with planning for life after agency ownership. By asking who you are and what you want to do with your life, it’s easier to see a clear vision of what the future will entail.

You control the vision, ideas and concepts that directly relate to the integrity and value of the agency. It will be important to prove to any buyer that the agency has a successful business model, sustainable cash flow, growth potential and minimal risk.

The focus of the transaction is not the end of the plan, but you living the life envisioned will be the completion of a successful journey. Learn and ask questions about post-ownership and the three components of well-being: prosperity, health and happiness. Look outside the agency to understand what creates happiness and which relationships provide experiences, engagement and meaning. Once you’re aware of the steps to be taken, you can prepare and execute the business and personal plans for a successful transition.

Article written by Bob O’Hara

Originally appeared on Property Casualty 360