The challenges of agency continuation and perpetuation arealways hot topics for owners and would-be owners. As vice presidentof education for the Florida Association of Insurance Agents(FAIA), I have received hundreds of calls over the years aboutagency perpetuation. Members call wanting to know how to preparefor this major transition in their lives, where to find buyers andsellers, and what options should be considered.

In response to these questions, we hosted a series of clinicsabout the process, featuring four nationally renowned speakers fromInsurBanc, MarshBerry, Hales & Company, and Reagan Consulting.We asked those experts to compile a top ten list of tips for thosewhose plans for the new year include a change in agencyownership.

Tip #1

Start now! You cannot start too early planning for your agencycontinuation. To perpetuate, you must set the stage for employees,buyers, bankers, carriers, and any other stakeholders. This cantake years to get right, and the better you handle the preparation,the more money you can get for your agency. The motto is: “The dayyou buy your agency is the day you begin preparing forperpetuation.”

Tip #2

Institute best practices. Take a look at how your agencyperforms in all the usual business areas. Are you making money? Isanything reinvested back into the business? What if you had to selltoday? Do you have procedures and policies in place to help easethe transition? Would a bank give you a loan tomorrow?

Tip #3

Invest in your employees. Begin grooming employees for futureleadership. Do you have employees who are holding you back andcosting you money? Start documenting their performance now. Be surethat you have leaders in place that will keep the agency healthyafter you go (and who can keep paying you during the earn-out phaseof your payment plan). Young people all want to own an agency. Haveyou found a few who are willing to buy one — maybe yours?

Tip #4

Evaluate your book of business. Are your carrier relationshipstight? Do you have a good mix of companies, products, and spread ofrisk? If they came in today, would the carriers you have now stillmake the appointment? If the answer is no, those contracts could belost when ownership transfers are made.

Tip #5

Upgrade and document. Are you up to date with technology? Areyour procedures all in writing and current? How consistent isworkflow from desk-to-desk in each department? The better yourdocumentation is, the easier the transition will be if you end upwith a merger or roll-up in your perpetuation strategy.

Tip #6

Get the back office in order. How does your back office work? Isyour accounting system merging with your agency management system?Do you follow proper GAAP standards? Is your personnel manual up todate, published annually, and signed by employees?

Tip #7

Write it down. Do you have a well thought-out perpetuation plan— and is it in writing? A buy-sell agreement is important, but it'snot the whole plan. Do you have help with this? (You need anobjective opinion.)

Tip #8

Verify your worth. Get an appraisal of your agency on a regularbasis. This is expensive; however, if you don't know what you areworth, how can you sell? Using a multiple of revenues is not avaluation. “Three times revenues” is a way to express a finalvaluation number, but it is never that easy to figure out your realvalue. Remember, buyers want to talk about profit, notrevenues.

Tip #9

Consider all options. Do you know what you would be willing tosacrifice to sell internally? External sales statistically bring inmore money. Internal sales involve more owner financing and can runas much as 20 percent lower in terms of final purchase price.

Tip #10

Understand it's not “just business.” Prepare yourselfemotionally for the transition, too. You may need to find a hobbynow, so that when it's time to go you have something to do. Thatmay sound odd, but many agency transitions fail because the “old”owner won't let go. Be ready to disengage your personal self-worthfrom the activities of the agency, because looking over the newowner's shoulder really won't help. Find a way now to get excitedabout that next chapter in your life.