How You Can Maximize The Value of Your Agency

Some of the toughest situations occur when an agency owner has poor health and is unable to sell on his or her own terms. The children are interested in the business, but don’t have the money. Or the kids have no interest in insurance and the owner has to sell in order to support him or herself in retirement.

There exist several myths in agency achievements, one of them is that agency value is determined by the blood, sweat and tears which you invested over the years. Insurance agencies are worth the cash flow accessible to the buyer when the current owner leaves. It’s not based on a multiple of revenue, how hard you have worked or anything else.

Few tips to make sure you get the most out of your agency when you sell:

• Data: You need accurate data in order to pass the smell test. This includes downloads, management system usage, e-mail addresses, client documentation and other forms of data.

• Accounting: This is the biggest pain point for buyers and sellers. Your P&L should match your commission statements to the penny. Your expenses should be clear and concise and match your corporate taxes. I’m a big fan of saving trees, but printing commission statements and filing monthly by carrier in bankers boxes will help when it comes time for due diligence.

• Marketing: Nobody wants to pay top dollar for a declining business with no strategy in place to grow. Investing time and money into building a sales machine will go a long way in not only increasing the value of your agency, but also earn you more money while you are in business.

• People: Is there someone in your organization who can run the agency for a new owner? Chances are the buyer has other locations or isn’t involved in daily management. Do you have someone there that can manage the day-to-day operations? That’s valuable to a buyer, because when you leave, your salary and expenses go to the bottom line as the buyer won't have to hire a manager to run the agency. The additional cash flow will make a vast impact on your valuation.

There are obviously other ways to increase value, but you need to cover the basics before anything else. First and foremost: Treat your agency like it’s for sale today. When you create a process, take on a new carrier or invest in technology, ask if it’s adding value to the agency. Most agency possessors sell a business once, but agency buyers have purchased several. This puts the seller at disadvantage due to the lack of experience, so hire a professional. When we sell our homes, we hire a Realtor. Selling your agency should be a blissful occasion if done properly. Make sure you are prepared and avoid waiting for hard times to sell.