Is a Valuation Right for My Agency?

Valuation options on street signs on rock wall

To provide the independent agent channel in Ohio with a much-needed resource, OIA recently launched an agency valuation program. We believe that by arming agents with the right information, we will help them make key decisions about the future of their agency, as well as determine their best perpetuation options.

So, who should get an agency valuation? There are many reasons to get one, but the primary reasons we see are curiosity, impending retirement, and to set up an internal perpetuation plan.

For the Curious

Many agency owners have never had a valuation and are naturally curious about what their agency is worth.

There is plenty of lore in the industry associated with valuations. The old stand-by is that “my agency is worth X times revenue.” And, while that is one way of expressing the value of an agency, it is generally too simplistic and does not determine the true value.

Agencies are valued based on how profitable they are currently, and how likely they are to remain profitable in the future. A valuation conducted by professionals who specialize in independent agencies  is a good way to truly understand your value and how that impacts your future planning.

For Impending Retirement

Many agency owners never get around to establishing an internal perpetuation plan. And, because they waited too long, their best options are usually a merger or a sale to a third party (another agency, bank, broker, or private equity firm).

Understanding what your agency is worth will aid you in your negotiations with acquirers. While other market factors might determine the actual price paid for your agency, having a baseline knowledge of your market worth will help alleviate surprises.

For Internal Perpetuation Planning

For agencies that already have an internal perpetuation plan, a valuation every few years will ensure that you are on track to transfer the business in the manner and for the value that you had hoped.

If you’re at the beginning of your perpetuation planning journey, a valuation will establish the baseline upon which all other decisions are made.

Knowing the value of your agency will help you establish the stock price for the shares you plan to sell or transfer, as well as decide on the price you would be willing to accept in an internal perpetuation versus a third-party sale.

Interested in learning more about OIA’s Valuation Services? Visit our Agency Valuation Tools webpage and fill out the inquiry form!

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