Perpetuation planning: Options have value

Plans crossed out on sticky notes

When perpetuating an agency, time is of the essence. It is important to remember that the earlier you start the planning process, the more options you will have.

Agency owners that wait or do not plan effectively will have fewer viable options and may not realize the full potential value of their agency.

Perpetuation is a process

Perpetuation is not an event but a process. By carefully planning and executing the gradual transfer of stock, agency owners can transition to the next generation of leaders and position the agency for success in the future.

The key is to start with the end goal in mind and build a practical plan to get there.

Make sure you are revisiting your plan early and often – what we call perpetual perpetuation planning.

By revisiting the plan regularly, you can make sure you stay on track. If not, you can retool the plan to reflect changes in the agency or in the perpetuation goals.

Internal vs. external perpetuation

Agencies have several options when perpetuating. In an internal perpetuation, they transfer agency stock, relationships and leadership to the next generation of family and/or other key employees with the intention to remain a viable operation.

To perpetuate externally, an agency could consider merging with another agency, or selling outright to another agency, broker, bank or private equity firm.

The goal of an internal perpetuation is to keep the agency’s legacy alive in the community for the next generation of employees or to keep the agency in the family.

This method of perpetuation takes the most time, planning and follow-through to be done correctly. For agencies that wait too long to create and execute their plan, an external perpetuation will likely be their only option.

In many cases, deal values for external sales could exceed the prices paid for internal perpetuation.

You want to make sure your end goal is achieved by establishing a plan versus a panicked sale at the end of your career – simply because you failed to plan.

No matter your exit strategy, plan early to give yourself the most options. Remember, options have value.

Perplexed about perpetuation?

OIA’s Full Valuation Services, exclusively developed for independent agencies, are now available for those who are considering perpetuating internally, selling their agency to a third party, or even purchasing another.

Let us be your trusted advisor. We’re here to ensure small- to mid-sized agencies are empowered with the right tools to plan their agency’s perpetuation.

Questions about OIA's valuation services? Contact Craig at (800) 555-1742 or fill out a valuation inquiry on our Valuation Assistance page!

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