For insurance agency owners, a well-conceived and properly executed perpetuation plan is a great mechanism for harvesting the value generated through their dedication and commitment to building their business. If planned properly and structured correctly, it is possibly the most rewarding and efficient method of harvesting value while allowing successors the opportunity to grow and yield value for themselves down the road.
While a sale of the business to an aggregator or public enterprise may appear to be lucrative for the seller up front, it forestalls the same opportunity for the next generation of owners, including the owner’s descendants. Further, an ownership transfer through a perpetuation takes place when the timing is right for all involved rather than relying on the vagaries of the market or “which company is looking to buy right now.”
Agency owners can position their agencies to be peak performers by installing a growth culture in their organization. To accomplish this:
A strategic lending partner can help work out the details for a financing structure for an agency perpetuation. Traditional banks have not been a good source of capital for agency perpetuation transactions because they usually require hard collateral (tangible assets such as property, plant, and equipment) to back up business loans. However, insurance agencies do not typically have significant tangible assets. When traditional bankers scan financial statements, they may not view intangible business assets as valuable for collateral. Thus, some banks may require agency owners to pledge a house or other assets as personal collateral.