Over the past few years, there has been a surge in insurance agency management transitions. Mergers and acquisitions specifically are on the rise, with an estimated 550 deals, up 12% from the previous year, in the first quarter of 2021. While these transitions can be profitable for owners, they can come with significant trepidation and worry from employees and customers.
As an owner, you need to start thinking ahead about how to prepare your agency for its eventual ownership transition. Whether you plan to perpetuate internally or externally, it’s essential that you prepare. That preparation includes setting your agency up for its highest valuation, prepping your team, and investing in tools and processes to bring your agency into the future.
Financial Prep
One of your top goals should be to set your agency up to gain its highest valuation. Whether you’re selling internally or externally, it’s beneficial to add the most value possible to your business. Spend time defining the methods you’ll use to determine your worth and focus on how to boost them. One of the best ways to increase your value is to focus on a niche market. Carve out a few areas that you specialize in, and capitalize on that exclusivity.
Tech Prep
Part of increasing your value is equipping your agency with the tech it needs to stay competitive in the market. Invest in critical insurtech like a cloud-based management system and integrated accounting. Successful agencies have turned their focus to customer tech tools like a client portal and branded agency app. You’ll also need marketing automation and a customer relationship management tool to stay on top of valuable data to inform your marketing and service plans.
Beyond the technology itself, you also need to train all of your team on each new tool. Even if you don’t anticipate a particular team member or group will frequently use a new piece of tech, they still need to know what it is, how it works, and why it’s valuable. Keeping your team educated is part of setting your agency up for a successful future.
Staff Prep
As you create a perpetuation plan, keep your staff involved in the process. You need to be aware of how each department and team member is performing as part of your valuation process. The more open and connected you are with your team, the better they’ll perform since they’ll be more invested in future success.
Open communication also helps ease any anxiety around change. Change is uncomfortable in any context, but especially when it comes to one’s job. Continual training on new technology and a slow introduction of process updates can help normalize change in your office.
Partner Right to Prepare for the Future
Who you partner with has a significant effect on your agency’s future. We at Partner Platform know how important it is for our agencies to be well-equipped with the best technology and training to stay competitive in the market.
That’s why we invest in tech and training for all our Partner Platform agencies. And our technology partners help us stay ahead of the curve for the best insurtech to serve both our agencies and their customers.
Planning for the future is never easy, but it can seem even
more complicated when thinking about your business’s future. When it comes to
transitions, you need insurance agency support on all sides.
Over the past year, we’ve delved into the topics most important to our Partner Platform community and all independent insurance agents and owners.. From the top insurance software you need to make it in the digital world to how to pass on your agency, we’ve covered it all. As the year comes to a close, we’re looking back at some of our most popular and impactful posts.
Whether it’s year or decades off, you can be doing something right now to impact your agency’s perpetuation. Each day is an opportunity to increase your value, all you need is the right insurance agency support tools and methods.
Essential Tools to Elevate Your Agency’s Worth
Customizable agency management system: Notice we didn’t just say “agency management system” – that “customizable” piece is what makes the difference. Invest in a system that adapts to your agency’s specific needs, with room to grow. You want a system you’ll instinctively use every day, tracking and analyzing data that’s critical to assess your value.
Integrated accounting: Accounting integration is an essential piece in your management system. With integrated accounting, your policy, client, and financial data is stored in one place, so you get a clear picture of where your agency stands.
Customer relationship management tool: Also known as a CRM, a customer relationship management tool helps producers better manage their sales pipelines. With an integrated CRM, agents can turn even more prospects into lasting clients, adding to your overall agency value.
Stellar customer support elements: The top three customer support tools to have are: an intuitive and informative website, agency customer portal, and customer agency app. Each of these three is part of a trifecta of reliable customer support, leading to higher retention rates and attractive growth potential.
Secure cloud hosting: Safe data means a safe future, and a secure future means higher value. Ensure your agency’s data is protected on cloud servers with redundant back-ups and multi-character encryption for increased security.
Steps for Perpetuation Prep
Pay attention to cash flow
Current and projected cash flow make buyers take notice. That means your accounting needs to be accurate and your growth needs to be steady. Invest in quality marketing and customer service to maintain a steady influx of new customers and base of lifetime clients.
Focus on cost reduction
Your income will look even better when next to lowering expenses. Pay attention to ways you can reduce waste or streamline processes, knocking down your superfluous output. Tech advances like paperless processing, e-signing, and streamlined document management are game-changers here.
Investing in tech is one of the ways to create value for your agency. Another is hiring the right people. The knowledge and experience possessed by your staff are invaluable assets. Knowing your team’s value, build in funds to offer stay bonuses to keep them around after you retire. You want to pass on an agency with the team that helped build it.
Identify a successor
Part of hiring right is hiring with your departure in mind. Identify potential successors early on and put time into mentoring them. Regardless of whether they’ll be buying, you need to have someone in place to take over the reins when it comes time to retire.
Look for someone who possesses superior leadership skills, is willing to learn, and wants the job. Too often, agency owners want to pass on their business to their children, but the next generation has no interest. Be sure your selected successor is in it for the long haul.
Now is the time to decide how you’ll be involved after passing on your agency. Don’t wait till the moment comes to make a decision! Chances are you will have more emotional attachment that you expect and may not make the right choice. Be specific in your succession plan how you’ll stay connected (or not) once retirement rolls around.
What you do today has a significant influence on your agency’s (and your) future. You need the right tools to help you do business well today and improve it for tomorrow.
It’s been said, “when you know, you know.” This is true for all major moments in life: getting married, having kids, buying a house, and even when you’ll retire. But, when it comes to insurance agency perpetuation, you need to think ahead for that “the time is now” moment.
Your insurance agency marketing goal is to stand out among the noise. Identifying and investing in serving a niche market is one of the most efficient and effective ways to achieve this challenging goal.
When you serve a niche market, you have less competition, making it easier to gain new customers in a specific arena. Your agency is set apart as providing “X” type of insurance, making you distinctive. PIA National’s 2022 Independent Agent Survey found that respondents devoted more than 20% of their book of business to a niche market. You, too, can capitalize on this valuable strategy.
Over the past few years, there has been a surge in insurance agency management transitions. Mergers and acquisitions specifically are on the rise, with an estimated 550 deals, up 12% from the previous year, in the first quarter of 2021. While these transitions can be profitable for owners, they can come with significant trepidation and worry from employees and customers.
As an owner, you need to start thinking ahead about how to prepare your agency for its eventual ownership transition. Whether you plan to perpetuate internally or externally, it’s essential that you prepare. That preparation includes setting your agency up for its highest valuation, prepping your team, and investing in tools and processes to bring your agency into the future.
Good partners and partnerships are critical to success in any business, but it’s crucial in technology where the pace of change and breadth of innovation is high. Insurance tech is growing fast, and it’s critical to look to progressive partners to keep up with the pace.
Why Partnerships Matter
Innovations happen everywhere, every day. Things like electric cars, an increase in IoT, the interconnectedness of tech systems in healthcare and our own homes, and other innovations significantly impact our industry. These tech advances inform how insurers can gain data to inform policies and process claims.
