How to Answer that Burning Question: When is the Right Time to Transition Your Agency?

May 26, 2022

This is the fifth in a series of ten articles that will guide agency owners as they try to determine if now is the right time to transition their agency. When considering what the future holds, agency owners should examine the complexion of their book of business.

Complexion of Book

The average Ohio agency has a book composition of 48% personal lines and 52% commercial lines. Agencies that have a heavier personal lines concentration, are facing increased risk to their agency and their overall value. Agencies that have a heavy personal lines concentration, are more subject to commoditization. InsureTech companies and carriers are working to remove the trusted advisor status of the independent agent and enticing consumers to shop online for the coverage they “think” they need. Additionally, overall, personal lines have a lower retention rate and smaller commissions. Agencies that are heavy in personal lines should seek to diversify into commercial and small commercial accounts.


Are you primarily concentrated in personal lines? In addition to the dangers of commoditization, there is an increase in competition for these accounts. Other considerations are advancements in technology and autonomous cars. How are you planning to diversify your business? Have you considered new niches?  Are you pursuing new appointments with carriers that offer different markets? Have you explored offering cyber coverages to your clients?

Client Concentration

Many agencies have a large portion of their revenue tied to their top-ten accounts. Have much of your business is tied to your top-ten accounts? How long have those clients been with your agency? Are you rounding these accounts and cross-selling additional coverages? In some cases, we see the average age of the accounts in an agency at greater than 20 years. What is your plan to replace these accounts when you retire and sell or perpetuate these accounts?

The value of an agency is impacted by the complexion of the book of business. Agency owners should look at ways to diversify their book make-up, add additional carriers & coverages, and look at adding new accounts to replace the aging accounts. Driving new organic growth is key to maximizing the value of your agency. Agencies that are not growing will see an impact to their overall value when it comes time to transition their agencies.

If you want to know the value of your agency, are business planning for growth or a transaction please contact Jodie Shaw at

April 28, 2022

This is the fourth in a series of ten articles that will guide agency owners as they try to determine if now is the right time to transition their agency. When considering what the future holds, agency owners should examine their overall team health.

Generational Health of the Staff

According to the Big I & Reagan Best Practices Study, nationally, the average age of a principal with 20% or more ownership, is 54. Our own data indicates that the average in Ohio is closer to 60. If intending to perpetuate your agency, it is important to recruit and train the next generation of talent sooner rather than later.  For many agencies, it is hard to find quality candidates and would-be future owners. Furthermore, some great employees aren’t keen to move into an ownership role. By beginning the process earlier, agency owners will give themselves the time necessary to find key talent and demonstrate the fruits of ownership that will be available if they are interested.

Staff Turnover / Retention

Is your agency experiencing high staff turnover? One of the key factors in the long-term success of your agency is finding and keeping the right talent. If you have struggled with this, it may have an impact on the value of your agency, as many buyers will prefer agencies with a staff that enables a plug and play transaction. By bolstering your staff and rewarding them for their work, you will work to increase the value of your agency by having a dedicated workforce in place should you decide to sell.

Employment Agreements / Non-Piracy – Non-Compete Agreements

Have you protected your agency by requiring your employees to sign employment agreements? If you have not done so, we highly recommend that you do this at once.  If these agreements are not in place prior to an agency transition, there could be a negative impact on your agency value. Potential buyers want assurances that the book of business they are buying is protected by these agreements.

Agency owners should take some time to consider the health of their team and how it might impact an exit in the future. By recruiting and retaining great talent, and protecting the book of business with employment agreements, you will ensure maximum value for your agency should you decide to sell.

March 4, 2022

This is the third in a series of ten articles that will help agency owners determine if now is the right time to transition their agency. By taking a step back from running the agency to consider what the future holds, agency owners might better understand their future options.

Another thing for agency owners to consider is their agency’s financial health.

Tangible Net Worth
Tangible net worth is a good indicator of an agency’s balance sheet and financial health. It is a calculation of the net worth of an agency that excludes any value that is derived from intangible assets such as goodwill, expirations, customer renewal lists, or covenants. The simple calculation is total tangible assets minus total liabilities. The tangible net worth is then divided by net revenues to arrive at a percentage value. In an agency valuation, the value of the tangible net worth is added to the book of business value, to arrive at total agency value.

By retaining earnings, an agency will increase its tangible net worth. These funds can be used to fund future growth, capital investment, investment in next-generation talent, and perpetuation of the agency.

As a rule of thumb, an agency should target a tangible net worth of 20% or more. For those hoping to perpetuate internally, the target should be 25% to 30%, in order to build enough capital to fund future buyouts. It is important to retain earnings, as fixed assets are not liquid and can not help to readily fund the buyout.
Agency owners should take some time to consider the financial health of their agency and how it might impact an exit in the future. Bolstering the value of your balance sheet will give you the most options for an exit and increase the value of your agency.

January 28, 2022

This is the second in a series of ten articles that will help agency owners determine if now is the right time to transition their agency. By taking a step back from running the agency to consider what the future holds, agency owners might better understand their future options.

One thing to consider agency performance: annual growth, retention, and profitability.

Annual Growth

Is your agency seeing robust organic growth or growth through acquisition? Or, are you having trouble driving growth due to lack of energy, non-producing producers, or an overly competitive marketplace. You might ask yourself if you want to stay on to drive growth, or just ride out a few more years on renewal business. If you are planning to remain, you should take time to review or create a growth strategy, knowing your agency will be more valuable when you eventually sell, if you can show positive year-over-year growth. Think about setting growth goals and setting up mechanisms that measure activities and performance metrics that lead to sustained growth.


Is your agency retaining business at a high rate? Best Practices agencies retain business at a rate of 90% or greater. The notion that keeping a customer is easier than finding a new one should drive your retention focus. Does your service and support staff understand the importance of retention and are they equipped with the tools and training to drive it higher? Does your agency offer a differentiated customer service experience that will get your clients to give referrals to you? Focusing on high retention, with or without high annual growth, will lengthen the runway for the agency and give the owner more time to plan their eventual exit.


There are several things to consider regarding agency profitability. Is your agency profitable? Are you running your agency like a business of like a lifestyle? Can you cover your expenses without your contingency bonuses? Agency buyers look for a pro forma profitability of between 25-30%. If you are below that target, what changes can you make in the years before your exit to demonstrate that the agency can operate with these margins? By tightening your belt now and driving profitability, you could realize a more lucrative exit when the time comes.
By taking some time and considering these agency performance factors, you may get some clarity as to whether you have the will and the plans and procedures in place to drive agency growth, retention, and profitability.

January 10, 2022

This is the first in a series of weekly articles that will help agency owners determine if now is the right time to transition their agency.  As most agency owners are mired in the day-to-day operations of their agency, or busy prospecting or writing new business, many simply don’t have time to sit back and look at the big picture, and to plan their eventual exit.

One thing to consider is personal factors: health, focus, energy, age, and optimism.


Perhaps you are in good health and want to continue doing the job you love, but you might consider exiting earlier to enable you time to smell the roses. Have you thought about what you want to do in retirement?  Do you want to travel, or spend time with the grandkids or on a favorite hobby?

Focus & Energy

To lead and manage an agency requires focus and energy, every day.  Do you still enjoy the daily grind?  Or, are you retired in place?  Spend some time thinking about what makes you want to get up in the morning and that could help inform your decision to either keep working, or begin planning a transition.


How old are you and when do you plan to retire?  We meet many agency principals who are past retirement age and have no formal plan to perpetuate internally or to sell.  The sooner you plan your transition, and begin to enact your plan, you will set in place the timing, people, and resources necessary to exit the business.


For years, we have heard of the impending doom of the independent agency channel.  But, the agency plant continues to survive and thrive, despite increased competition and commoditization.  Couple this with the speed of technology innovation, and it can seem overwhelming.  Do you want to be part of the brave new world, embracing the technology necessary to thrive?

By taking some time and considering these personal factors you may get some insight into when you will transition your business, and why.  Determining what drives your personal satisfaction away from the office can help you make the right call.

If you are considering transitioning your agency and are looking for help, contact Jodie Shaw at and we’ll make sure you have everything you need to make the best decision for you and your agency.

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