Five Things to Consider When SELLING YOUR AGENCY By Jeff Smith, JD, CIC The process of selling your agency can be a long and winding road. As an agency owner, your agency has become a major part of your identity and is synonymous with your name in your community (often times the agency is the owner’s name). You have spent countless hours and energy building your business, serving your clients, and engaging with your company partners and now you have reached the decision to sell. In addition to the emotional attachment to the agency and clients, there are also many objective considerations you must contemplate when selling your agency. Aside from the financial/retirement, tax, and legal considerations, there are many immediate issues you must address related to the process of selling your agency. Below is a list of 5 things you should consider when preparing to sell your agency: 01 Define What You Want Before you start the process, establish exactly what you want and need at the conclusion of the sale. Objectively define what the result looks like. For every engagement we have with agency owners, we start with an extensive intake interview where we determine the priorities for the sale. Ask yourself questions about the following areas: value of the agency, financial component (lump sum, payment over time, earn out, etc.), client transition, buyer culture, staff, your future work-related obligations, legacy, agency name and location, and carrier relationships. Pro tip – this is often the most overlooked part of the process but the most important. You must start with a baseline of your expectations to find the right fit for you and to be able to articulate that to prospective buyers. If you do not know exactly what you want, it is unlikely that a seller will know what you want and how to meet your needs. 02 Multiple Options Do you want to consider multiple options in the selling process? This will require you to have a process to vet multiple buyers and conduct due diligence to ensure you find the right partner for your needs. 26
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Pro tip – be sure to require every prospective buyer to sign an NDA prior to engaging in any discussions with the prospect. It may sound harmless enough to talk to an old agent friend about potentially selling your agency to them but as soon as the word gets out in your community that you are considering selling, you will have wished you required an NDA. 03 Multiple Offers Do you want to consider multiple offers? While you can engage multiple prospective buyer options, there is an art to getting multiple offers through the process. You will need to make sure that you and the prospective buyers you are considering are a match and you should understand their acquisition experience and abilities. In addition, you should have a process to objectively compare the offers and negotiate the best deal for you. Pro tip – while agencies have great value today, that is not a guarantee that every agency or PE buyer is interested in making an offer for your agency. You must do the work in advance of engaging with the prospective buyer to ensure your agency is appealing to their business
Deal Valuations (2012-2021) 3.0x
3.0x
3.0x
3.0x
3.0x
3.3x
3.0x
2.8x
3.0x
2.0x 6.5x
6.8x
7.0x
7.5x
8.0x
8.5x
9.0x
10.0x
11.0x 12.0x
2013
2014
2015
2016
2017
2018
2019
2020
2012
Typical Guaranteed Price
2021
Earn-Out Opportunity
Source: Reagan Consulting Analysis: Quality $3-$10M agencies
04 Maximizing Your Agency Value Generally speaking, this is a sellers’ market where demand is high, and supply is limited. In addition, we are in the midst of the greatest wealth transfer in the IA system with baby boomers retiring and selling their agencies. We february 2023