Transitioning Your Agency For Success

Over the next ten years, we estimate 580 agencies, representing $6.5B in premium will change hands. Our data indicates that over 45% of the agency owners in the state of Ohio are currently 55 years old or older. According to the 3-year trend, 12% of agencies will perpetuate internally, 64% agencies will sell to another agency, and 24% will sell to brokers as a result of private equity money.

580 agencies, representing $6.5B in premium will change hands in the next 10 years.

The merger and acquisition activity in our insurance marketplace is at an all-time high, and this trend is not expected to slow down any time soon.  Many agency owners in the state of Ohio are currently working past the age of 65.  In addition, a significant percentage of agency owners are at or nearing retirement age, and this means that they will soon be weighing their options on transitioning the ownership of their agency.  The Ohio insurance marketplace is facing a significant shift in ownership during the next decade, and we want our agency owners to be informed and well-prepared as they navigate their way through the transition of their agency.

Regardless of your decision to perpetuate internally or sell externally to another agency or broker, it is critical that you are prepared and have all the information you need in order to make the best business decision regarding the transition of what is most-likely your single largest asset.  Here are some suggestions on how to be prepared and informed as you transition your agency:

Determine your goals & prioritize

As you decide what path is right for you as you plan for the transition of your agency it is important for you to ask yourself what are the factors in this decision that are most important to you?

  • Is keeping your agency in the family what is most important to you?

  • Is remaining as a positive influence in your community important to you and your legacy? 

  • Is ensuring that your clients continue to have the same level of service and relationship with the agency most important you? 

  • Is your client’s ability to stay with their current carriers important?  

  • Are you most concerned about your staff and their future as you transition your agency? 

  • Is getting the highest price for your agency your top priority? 

As I meet with agency owners who are planning for their retirement and agency ownership transition the answers vary.  There are no right or wrong answer to these questions as they are personal to you and your agency. However, in order for you to have clear goals and realistic expectations as you plan for your agency’s transition, it is very important that you to prioritize what is most important to you. For instance, an agency owner who prioritizes keeping the agency in the family, knows that they may not get the absolute highest price possible for their agency.  An agency owner that prioritize their clients and staff and is open to the idea of selling their agency to another agency that shares the same culture, carrier mix and approach may also not get the absolute highest possible price, but that isn’t their #1 priority.    

Get Informed

Once you know your goals and have them prioritized, it is important that you get all the information you can to help you make the best decision for your agency, clients, staff and family.

First, get a Fair Market Valuation of your agency as soon as possible. Do not wait. Knowing your agency’s value is an important first step in your business planning process.  This will allow you to understand your risks, identify areas of opportunity to improve your agency’s value prior to your agency’s transition.  If you wait to get a valuation at the time of the sale, you will not have any time to implement changes that could significantly improve your value. 

Know the market

Second, if you are interested in selling to another agency, gain a complete understanding of the marketplace and market demand for your agency.  Do not limit your options to agencies that you know – there are many, many agencies in the Ohio marketplace and it is likely that there are interested in purchasing your agency.  We can help you determine the agencies that fit nicely with your specific goals and prioritization.  If you limit your options to agencies that you currently know, you will miss out of the opportunity to explore all of the options and find the best fit from a carrier mix, systems and culture perspective. All other things being equal, an agency that is best aligned with your goals is more likely to pay a higher price than an agency that is not perfectly aligned. Agency Link is a service that can match up your agency with other agencies looking to buy.  It is data-driven based on factors like carrier mix, agency management system, use of service centers, product mix, and culture. 

Get started now

The best advice we can give you is START.

We understand that the transition of your agency is a big decision and there are many factors to weigh as you plan for your future.  Many agency owners struggle with redefining their role and the idea of no longer being a part of the agency on daily basis is hard. Others are fearful that perpetuating their agency internally isn’t feasible, financially so they put off even having a conversation about it. Time is scarce – the agency owners that I know are very, very busy people.  They are 100% focused on serving their clients and running their agencies, so there is little time left to spend on planning for their future – I get it!

I also know that an agency that transitions without a plan in place or as a result of an unexpected life event is more likely to be financially and emotionally difficult for everyone involved.  The OIA consulting team can help you document your goals, create a plan, understand your marketplace an ensure that the transition of your largest asset and life’s work is a planful and a positive experience. We will be your quarterback and help you every step of the way through the process.  We will help you understand your options and ensure that you have the plan in place that is best suited for you, your clients, your staff and your family.

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