Displaying articles tagged with: perpetuation | Clear Filter

OIA Has the Resources You Need for Perpetuation Planning

The OIA launched business planning and valuation practice in early 2018 to fill a void in the marketplace. We recognized that many of our agencies were not seeking valuation services that were available in the marketplace due to cost, complexity or availability. Although the needs of our members are the same as the largest agencies in the country, many agencies were being sold and transitioned without a valuation.  We want every agency to have the information needed to make the best and most informed decision for what is most likely their largest asset and life’s work.  We know that our agents care deeply about their customers, staff, community and family and we want to provide them with everything they need to protect and plan for the future of those they care about the most.

In addition to introducing our agency fair market valuation services, priced for our constituency, we also started a business planning and consulting practice. Instead of just providing agencies with their fair market range of value, our consulting team is prepared to help agents determine their next steps based on their specific goals, situation and priorities using the information and insights captured in the valuation report.  We are prepared to work with agents every step of the way through their transition whether it is and internal or external sale.

In our consulting engagements, OIA works with agencies to understand their wishes and to determine what their viable options are based upon their priorities, structure, timeframe, financial position, and perpetuation candidate pool. Our financial modeling enables agency principals to better understand their options based on our thorough analysis. Additionally, our consulting practice helps agencies with planning the transition of leadership, client relationships, books of business, agency stock and creating documented perpetuation plan.  We work with agencies every step of the way to ensure that they are best positioned throughout their transition and for the future.

In order to meet the varied needs of our agents, OIA has vetted and retained the services of professionals with expertise beyond our own, to ensure the mechanics of any agency transition.


If you are looking for external financing to enable the perpetuation of your agency, OIA can introduce you to several lending options. And, while you might have a great relationship with your local bank, our lending resources lend specifically to insurance agencies and understand the unique nature of the business. They can also serve as a “second look” service if you want assurance that your bank is giving you a good deal.

Accounting / Tax

Due to the tax implications to both buyer and seller, OIA works with accounting professionals that work specifically with insurance agency transactions. They know the current tax law and can provide advice on corporate structure and detail the tax impacts that we incorporate into our models.


Although the OIA consulting team will help you create a draft buy-sell agreement, our attorney partners can ensure that every detail is covered. They are also available to help with items such as producer/solicitor agreements, non-solicitation and confidentiality agreements, and estate planning.

OIA values its members and works to maintain the health of the independent channel. Our consulting practice and partnerships enable us to offer a one stop consulting solution for our agencies.


Click Here

Selling your agency can be just like selling your house

About a year ago, my neighbor put their house on the market. It sold in 3 hours for $30K over asking. I’m sure you’re asking, what did they do? It’s simple, they did their research; they knew the market and they knew how to strategically price it for multiple offers.

If you were going to sell your house, what would you do? Would you sell it to the only person that knows that it is for sale or would you want to understand the market, create demand and give all possible buyers the opportunity to make an offer?

Most people want as many buyers to be aware that their house is for sale so they can find the best possible match and get the best possible price – therefore they list their house with a real estate agent or “put their house on the market”. My opening story proves, by listing your house at the right time with the right conditions, you can receive multiple competing offers for your house based on the demand in the marketplace.  A high demand and receiving multiple offers is the best possible scenario for you as the seller because it gives you choices – and the ability to find the best fit for you and your situation.  Wouldn’t you want to know that there are several great options to consider when it comes time to sell your agency?”.

Agency Link is the marketplace for your agency!

The basic principles between selling your house and selling your agency are the same with one huge exception – CONFIDENTIALITY. We know that selling your agency is not something that you want your competitors, clients, and carriers to know you’re considering as that could be detrimental to your business.  When you know that you want to sell your agency, we can list your agency confidentiality so you can understand the marketplace, find the best fit for your agency and ultimately locate the best buyer based on your specific criteria without the risk of losing any business.

Here is how Agency Link works:

Know your agency’s Fair Market Value

It is important for you to know the value of your agency as you enter the process of selling your agency.  You will need to obtain the Fair Market Value in order to adequately assess any offers you may receive for your agency.

Define Your Priorities

It is critical that you decide what is most important to you as you sell your agency.  We will need you to tell us exactly what you are looking for in a buyer and what is most important to you as you sell your agency. 

  • Are you looking for an agency that has the same or similar carrier mix so you can ensure that your clients can stay with their same carriers?

  • Are your employee’s futures what is most important you?

  • Is maintaining the location and current management of the agency the highest priority for you?

  • Are you looking for the highest price for your agency?

It is important to understand that priorities are different for everyone. There is no right or wrong answer, but it is important that you are clear on what is important to you as you consider your options.

List your agency

You will complete a list of questions about your agency and communicate your priorities to OIA so we can fully understand your agency and what is most important to you as you sell your agency.

Complete a confidential search

OIA will complete a confidential search to find the agencies that are looking to buy that best fit your criteria.  The search will be 100% confidential meaning that the potential buyers will NOT know your agency name at this point in the process. They will be given enough information to make a preliminary offer for the seller to evaluate, but the name of the selling agency will not be revealed. The selling agency will pay a fee to OIA to conduct the search.  If you choose not to pursue any of the potential buyers, OIA will conduct another search until you find a buyer that you are interested in pursuing.

Assess the matches

The selling agency will be provided a list of potential buyers, their offers and listing of all of the areas of matches between the selling agencies priorities and the buying agencies priorities or characteristics. Again, the potential buyers will not know the name of the selling agency at this point in the process, but the seller will know the names of the potential buyers.

Select a fit

Once the selling agency chooses a fit, the potential buyers that were not selected will be notified that their preliminary offer was rejected.  The selected potential buyer and seller will execute a NDA agreement in order to move to the due diligence and negotiation process.

Legal representation

Both the potential buyer and seller will obtain separate legal representation that will lead them through the due diligence and negotiation phase.  OIA will not represent either party in this phase of the process.  Our role is to create a market and provide the sellers with several offers for their agency.

Fee to OIA

Once an agreement has been reached between agencies that OIA has linked together for this transaction, OIA will be paid a fee for their services that is equal to a percentage of the transaction.  The original search fee that was paid to OIA will be deducted from the percentage fee that is charged at the time the agency sale has been completed.   For further details on the fees, please contact OIA.

If you are looking to sell your agency, which is likely to be your single largest asset, it is in your best interest to have a solid understanding of the marketplace.  OIA can help you every step of the way with our Agency Link program.   

Based on our demographic data on over 1,300 agencies in Ohio, we know that 45% of our agencies will transition their ownership over the next 10 years.  Any agency that is interested in buying an agency should be listed on Agency Link. There is no fee for an agency to be listed as a potential buyer on Agency Link.  You can expect that we will keep in contact with all potential buyers on a quarterly basis to ensure that your preferences are up to date and accurately reflect what you are looking for in an agency.

To get started, list your agency on Agency Link. For more information on Agency Link, please contact Carey Wallace at Carey@ohioinsuanceagents.com.

How OIA Can Help You Value and Perpetuate Your Agency

When Seth Zaremba of Zinc Insurance and Michael Davis of Michael L Davis Insurance met, they new they had similar interests in the insurance industry. Utilization of Indium market access, an interest in motorsports, and they conveniently live down the street from each other -- this match was meant to be!

When Davis decided he was ready to retire, he didn't have an internal perpetuation plan. That's when the opportunity came along for Zaremba purchase Davis' agency. 

"I think agents start at the wrong place in this conversation" says Zaremba. "Working with the OIA, I was aware of their valuation efforts so I suggested we get an objective third-party to inform us on this decision." 

"The process was very easy" states Davis. "I put together a large amount of information...which I would expect to put out for a valuable and accurate valuation. OIA was very quick to ask questions, put together the paperwork, and return a nice report." 

OIA gave Zaremba and Davis the tools they needed to provide an unbiased guidance and make an informed business decisions. Our Full Valuation Services are available for those who are considering perpetuating internally, selling their agency to a third party, or even purchasing another. 

Davis got his valuation at the right time for him so he could easily transition Michael L Davis Insurance to Zinc Insurance with no issues and no rush -- don't wait until it's too late for your agency! 

Check out the video above for the full testimonial!


Get started

Narrowly Held Stock Ownership and the Impact on Agency Value

Many insurance agencies have narrowly held stock ownership.  In most cases, the principal owns 100% of the stock and has no plans to transition the stock, and in many cases, no one to transition the stock to.  In this scenario, there is an increased risk in the business and a corresponding decrease in agency value.

The risk increases for several reasons. When the agency principal owns most of the stock, they generally own all of the key relationships with insureds as well.

The principal is the face of the agency to their clients and if they were to exit the business, there is a high likelihood that the key clients will leave the business as well.  A high attrition rate will lower the value.

When older principals own a preponderance of the stock and relationships, there is a high correlation that the age of the book of business will be old as well.  There is elevated risk in an older book, as many of the clients will be transitioning out of their businesses in the same timeframe as the agency principal.

Agencies with narrowly held stock ownership generally do not reinvest in next generation talent and technology.  Without shared ownership and an engaged next generation of agency leadership and production talent, organic growth is hard to achieve, and the resulting impact of low growth will decrease agency value as well.

A prospective acquirer would assign a lower value to this agency because the stability of the renewal commissions is at risk.  In such a deal, the acquirer would likely insist on a lengthy earn-out period in the deal structure.  The earn-out period would entail that the outgoing principal remain involved in the agency for several years to transition the book of business to the new owners and insure a pre-set account retention rate.  They would be incentivized to hit key retention milestones to earn-out a large portion of their deal.

Broadly Held Stock Ownership and the Impact on Agency Value

An agency that has broadly held stock ownership has less risk and therefore increased value to a potential acquirer for several reasons.

When agency stock is broadly held, we normally see that the key relationships with insureds are also often broadly held.  Additionally, high-performing agencies will often have several employees manage each key relationship, so that if one employee leaves there is less risk of losing the account.  A general rule of thumb is that no one employee should manage more than 20% of the agency book of business.

When agencies offer the opportunity to own stock to their next generation employees, these employees see the potential fruits of their labor and are compelled to drive agency growth.  By driving organic growth year after year, these agencies increase their profitability and value.  Another benefit of the organic growth mindset is that it will lower the age of the book of business and lower the risk of attrition.

Having a vested interest in the agency will change the mindset of employees from having a “job” to having a career.  Employees with a stake in the business will make decisions from an ownership versus an employee perspective.  These agencies are always looking to hire next generation talent that will help drive the business and to set in place employees that will buy them out at the end of their careers.

A prospective acquirer would assign a higher value to these agencies because there is lower risk to the book of business and the renewal commissions.  In such a deal, the acquirer would likely pay a higher multiple and would be more flexible on the earn-out period in the deal structure.

Agency stock ownership is a key driver of agency value.  Narrowly held agencies generally have higher risk and lower overall value.  Broadly held agencies set in place the forces to drive agency growth and profitability, while decreasing the risk and increasing agency value.

Want to know more about how to structure your stock ownership? 

Contact Craig Niess at (800) 555-1742 or visit our Business Consulting Services page!

Get started

Planning for your agency's future

What's your plan note on corkboard

Many agency owners are unsure of their exit plan, and many fail to take the time to consider their options as they are busy running their day-to-day agency operations.

But, a time will come when they must decide whether they will sell externally to a third-party buyer or sell internally to family or key stakeholders.

Whether you choose to sell internally or externally, having a working plan in place will ensure that you have all options available to you when it is time to decide.

The plan should address the following areas: hiring next generation talent, developing that talent, creating ownership opportunities, and implementing a sales culture.

Hiring Next Generation Talent

If you are like most agencies, you are always searching for rising stars and often coming up short in your quest.

This is certainly a theme that is endemic to the independent agency space, and one of the biggest factors affecting an agency's ability to perpetuate internally or sell for the highest multiple.

Those that were born into or stumbled into the independent agency channel know that it is a best kept secret with potential for a high quality of life and high earning potential.

Communicating these benefits effectively will help you recruit others who might not have considered insurance previously. Additionally, many agencies find success recruiting stars from other industries and teaching them insurance, instead of looking for latent talent in other agencies.

Developing Your Talent

Agencies can do many things to develop their talent. Pairing new talent with successful agents in a job shadowing or mentoring program will help teach them what makes a successful employee.

For outgoing agency principals or producers, fostering the hand-off of key accounts in a timely manner will ensure that the agency is positioned for success without a hit to retention.

Creating Ownership Opportunities

During the recruitment process and early in the careers of your next generation employees, you should demonstrate the financial rewards that will be available to them if they meet certain performance expectations.

Set and communicate the criteria that would need to be met to be invited to own agency stock.

Create models that show how agency stock could be transferred and the W-2 impact it would make.

Lastly, draw a current and future organizational chart that shows what the agency could look like if the employees continue to perform at a high level.

Implementing a Sales Culture

Ultimately, agencies are sales organizations.

Creating a culture focused on organic growth by establishing and enforcing various metrics including requirements for minimum book size, new business written minimums, and trading down smaller accounts to the house or small business units.

By creating a plan that addresses these four key areas, agencies will put themselves in the best possible position when considering their future options.

Ready to start planning your agency's future?

For more information, or help with perpetuating your agency, contact Carey Wallace or Craig Niess or visit our Business Consulting Services web page.

Get started

  < 1 2 3 4  >