Times are tough in this “new normal” of an economy. The softmarket endures. Larger agencies are starting to dominate themarket. If you want to survive—and hopefully flourish—you may notbe able to operate your business the same way.

So figure out what's the most viable strategy to achieve yourgoals over the next five years and beyond.

You've got three options: buy, sell or grow organically.

Whatever path you choose, be sure to actstrategically rather than out of impulse or fear. Consider all theeconomic, market, lifestyle and even emotional factors.

Accept the fact that some change is inevitable and be preparedto go beyond your comfort zone. Start by assessing your agency'scapabilities and then take a hard look at each option outlinedbelow.

ACQUIRING: YOU DON'T HAVE TO BE A MEGA-AGENCY

Over the past decade, small and midsize agencies have foundacquisitions to be a fertile path to growth. Many principals, whohad for years been content running their own business, neverimagined themselves on the buying end.

But the continued lag in organic growth rates and decline inagency values have created the most attractive buyer's market indecades—an opportunity too good for some owners to pass up.

If you want to purchase one or more agencies, be ready to takeon more responsibilities and deal with more stakeholders. Thenfollow these steps:

• Assess your business model and set clearly definedgoals, such as increasing revenues by a certain percentage,expansion to key locations and breaking into new markets.

• Define your ideal agency or book to be acquired,considering size, location, carrier and product mix, and leadershipstyle.

• Decide whether the acquired agency will open as abranch office or be consolidated into your current operation.

• Ensure that you have enough cash to cover purchaseand transition costs and contingencies that may occur after theacquisition.

As a buyer, you must be prepared for the exhaustive duediligence required on the seller's book of business to determinefactors such as client retention, types of clients, loss ratios,carrier persistency, and contingency liabilities andopportunities.

You may also need to build a convincing case for securingadditional capital and your ability to repay the debt.

WHEN SELLING MAKES SENSE

If you're closing in on retirement or don't have the resourcesto invest in the growth of your business, consolidating withanother agency could be the right move. But selling to a thirdparty—and relinquishing control of a business into which you've putyour heart and soul—is a tough decision that requires carefulconsideration.

Even if the sale is part of an internal perpetuation plan with afamily member or trusted employee, be prepared for significantchanges in your work life.

Before selling, create a written agencyperpetuation or succession plan. Among the questions you'll need toanswer:

• Does the prospective buyer have solid financials anda workable long-term plan?

• How much of the selling price are you willing totake on contingency or as a deferred payout?

• Is the buyer valuing your agency based on projectedearnings, not commissions, because they expect to earn a fairreturn on their investment?

• What percentage of your book will you be able toretain after the consolidation?

• Have you and the individuals who will be running theagency agreed on your role after the sale—even if they're familymembers?

• Does your gut feeling tell you that the company orindividuals buying your agency are the right fit?

TO GROW ORGANICALLY, INVEST WISELY

Many experts predict that agencies' organic growth rates andaverage revenues will continue to fall in 2011. But if you'recommitted to building your agency the old-fashionedway—organically, without acquisitions—go for it.

While most small and midsize agencies arescaling back or waiting for the economy to improve, now is anopportune time to invest in your agency's growth.

Start by figuring out what differentiates your business fromcompetitors. Then develop a well-orchestrated plan that capitalizeson these advantages and identifies your best growth opportunities.Your plan should answer these questions:

• Do you have the capital and manpower to sustaingrowth over time?

• How much are you willing to invest in marketing,technology and staffing so you can compete with the major players,many of which are growing through acquisitions?

• Which product lines give you the highestprofitability and the best opportunities for cross-selling?

• Have you analyzed the marketplace to see if somemarkets have dried up while others may now be ripe to approachbased on generational differences, new demographics and otherindicators?

If you plan to acquire another agency or grow organically,you'll probably need financing. But don't get discouraged by allthe negative news that money isn't available to small businesses.If you've got solid financials, a strong track record and awell-orchestrated growth plan, loans are available at affordablerates.

Look at different lending sources, including non-traditionallenders that specialize in the insurance industry and understandthe way you work.

Sometimes the most challenging part of a journey is deciding onthe best course to get there. So before you choose yours, honestlyassess all aspects of your business.

Determine what's practical, how much you can invest, and how farbeyond your comfort zone you're willing to go. Then develop a planand find the right players and resources to make it happen.