NU Online News Service, Jan. 25, 12:08 p.m. EST
Times are tough for small and medium-sized insurance agencies in this "new normal" of an economy, with larger agencies starting to dominate the market as the soft market continues.
"If you want to survive—and hopefully flourish—you may not be able to operate your business the same way," said Rick Dennen, founder and chief executive officer of the Indianapolis-based Oak Street Funding, LLC, in an article he authored for National Underwriter's Jan. 24 print edition.
Mr. Dennen's article, titled "Buying, Selling, Expanding: What's Your Path To Success," appears in the magazine's quarterly report on Agency Management & Technology.
In his article, Mr. Dennen reviews three strategic options smaller agencies can pursue to achieve their goals over the next five years and beyond—buying, selling or growing organically.
"Consider all the economic, market, lifestyle and even emotional factors," he wrote. "Accept the fact that some change is inevitable and be prepared to go beyond your comfort zone."
Commenting on acquisitive strategies, he said they're not the exclusive domain of mega firms. Even small and midsize agencies have found acquisitions to be a fertile path to growth, he said.
For sellers, he advised, "Even if the sale is part of an internal perpetuation plan with a family member or trusted employee, be prepared for significant changes in your work life."
He added, "Before selling, create a written agency perpetuation or succession plan."
His article also lists questions for sellers to answer including one that has nothing to do with the economics of the deal—"Does your gut feeling tell you that the company or individuals buying your agency are the right fit?"
Finally, he said that while many experts predict that agencies' organic growth rates and average revenues will continue to fall in 2011, "if you're committed to building your agency the old-fashioned way—organically, without acquisitions—go for it."
To pursue this strategy, however, agencies need to start by figuring out what differentiates their business from competitors.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.