3 Questions for Insurance Agency Owners in Today’s Seller’s Market

According to recent data released by Optis Partners, 2017 is on pace for another record-setting year of M&A activity in the insurance-broker space. Private Equity-backed buyer groups continue to drive up valuations creating many attractive opportunities for agency owners looking to sell. In fact, this seller’s market is creating too good to be true offers for many owners who would otherwise have no intention of selling their agency.

In today’s seller’s market you have most likely been receiving many calls from interested buyers. The attention can be flattering but also overwhelming.  Are you ready to sell your business? Or are you letting the current valuations cloud your judgement. Obviously, the valuation of your agency is a critical factor in deciding to sell your business but for many owners it is not the most important.

3 questions that you should answer prior to engaging in conversation with potential buyers:

  1. Why would I sell my agency? Think about your options for selling. Do you want to transition your business to family or current employees, or do you want to sell outright? Consider factors like the culture of the acquiring firm, the time necessary for a successful transition and the legacy you want to leave behind. Many sellers are looking to exit the business to retire while others are simply attracted to the opportunities a larger agency can offer.
  1. Can I work for someone else? Do some self-reflection to decide whether you can transition from boss to employee if you plan to remain with the company for any time after the sale. Not everyone can or even wants to—many agency owners would rather forgo the financial upside in favor of maintaining their control and freedom. Many owners started their agency because of the autonomy and control it provided.
  1. How much longer do I plan on working? Know when you would like to retire or move on to the next phase of your life so you can work toward that goal during the planning process. The wealth you accumulate by working longer could impact your retirement lifestyle. Additionally, when selling your agency many buyers want the seller to stick around over a period of years to help transition client relationships to the new agency.

These questions are not easy to ponder, and there are no right or wrong answers. However, the answers will help provide clarity should you engage in sales discussions.  For additional details on this topic see Life After the Sale: Are You Ready for Retirement?