Agency succession is coming. You have two choices: make it happen or let it happen to you.
As an independent agency owner, you know the first option is the best. Taking control of your succession planning means you’re ready when the time comes. To prepare, you need to do things like choose a successor, determine your agency’s worth and have the right insurance agency support procedures in place. In short, you need to think about three areas: People, Profit, and Process.
Planning for your exit from the independent insurance agency you helped build, whether passing it on to family or not, is rarely an easy task. However, succession planning is a necessary part of running a successful business, and it’s important to start the process sooner rather than later.
Two major factors to consider when succession planning are who will be involved and what components need to be included in your plan.
Who to include:
Business attorney
Tax professional
Successor(s) (internal or external)
Spouse and/or other family members involved in agency operations
Your list may expand beyond these key people, such as partners or advisors, but be careful not to include too many ideas and opinions. Although it is helpful to solicit the advice of others, ultimately you are the decision maker for your agency.
What to include:
Total cost of your agency: this should be revised regularly, including any outstanding debt.
Impact on employees: are there staff that will be leaving when you do? Staff you want to stay? You may want to “bonus out” the first group and provide a “stay bonus” (i.e. 50% more than a usual bonus) for the second.
Client care plan: Think about how to inform clients of your departure. This should include a transition plan for introducing clients to your successor. It’s important to have little to no interruption in client care.
Mentorship for successor(s):It’s best to have two successors for each principal owner. Look for younger agents so they have a longer potential tenure at your agency. Be intentional about mentoring these successors, including bridging the relationships you’ve built over the years and passing them on.
Your goals: These will differ by owner and, with multiple owners, may involve some compromise. Be clear about what you want whether it be a certain amount of cash intake, continued involvement in agency decision making, or a distinct perpetuation of agency culture.
When it comes time to roll out your succession plan, make sure you’re ready to retire. Although you may stay involved in your agency’s operations and/or decision making, it’s important to be prepared to spend less time focused on your agency. Invest in other interests, setting yourself up for success in other ventures.
Moving on from your agency can be difficult, especially because of the relationships you’ve built with your employees, partners, and clients. We at SIS value such relationships, which is why we provide pieces such as this for our clients and partners. We realize your agency is more than just a business, and treat it as such with our dedicated staff and individualized client care. To find out more about the SIS community, visit our website or contact us at [email protected].
As we delve into our second post focused on succession planning, we look towards addressing when to start planning and where to go given the multiple tracks for exiting your independent insurance agency.
When to Start Planning
As with most big decisions, it is never too early to start planning. According to a recent Property 360 article, it’s best to start considering your exit plan in your 30s. However, most owners make the mistake of waiting too long, not starting the process until their late 50s or 60s.
The reason it’s suggested to start planning early is so you can avoid having too many individuals leave at one time. You want to ensure there is a steady flow of retirees, leaving time for new, young agents and other employees to be trained. Similarly, your plan needs to be continually updated as employees come and go, and as your agency’s market value changes.
Where to Go
As mentioned in our last post, there are multiple exit options for you and your agency. Each has its own benefits and drawbacks, and it’s important for you to explore which is best for you.
Transfer to Family Member
+ Keeps agency in the family – May continue to be financially tied to agency
+ Perpetuates mission and values – Little to no cash gained
+/- Able to stay involved in agency operations – Cannot guarantee advice will be heard/heeded
Sell to Family Member or Employee
+ Keep up agency culture – Cash gain may be low
+ In competent, experienced hands – May continue to be financially involved
+ Some cash gain
Selling to Outside Party
+ Largest cash benefit – Loss of company culture
+/- Exit from involvement – May be damaging to employees
Retain Ownership and Move to Passive Role
+ Keep up agency culture – No cash gain
+/- Able to stay involved in decision making – Financial risk still attached
Take into account you and your agency’s specific needs and goals when making your decision. There are many options to face, but it is most important that you choose the option that is right for you.
SIS knows your agency’s unique needs, which is why we offer personalized service and customizable options with our Partner XE. Help us get to know your agency today – contact us today at [email protected].
Planning for the next generation of leadership at an agency can be a combination of excitement, uncertainty and lots of critical conversations. In our next series of blogs, we’ll look at the who, what, where, when, why and how of succession planning. We start off with a question many have yet to ask—why?
Why Start Succession Planning
The main reasons to create a succession plan are: relationships, money, and your business legacy.
Relationships are a big part of your agency’s success, and planning for your departure will make it easier to maintain these connections. Whether it be family, employees, or clients, making a plan means everyone will be ready for what happens next. This sense of readiness can establish clear expectations and address the emotions that are part of every agency transition.
Money is, of course, a huge portion of succession planning. There are certain tax implications attached to the different ways to transfer ownership of your agency. Plus, some ways will leave you with more cash than others. Your financial goals may differ depending on whether you’re selling to a family member, employee, or to someone not associated with your agency. It’s important to take your time researching the different options so you gain the most from your agency’s transfer or sale.
Legacy brings a sentimental piece to the table. You have invested a lot of time and energy in your agency, and you want it to continue for years to come. By planning ahead you can ensure your wishes are instilled in the future of your agency.
How to Start Succession Planning
The best way to start your succession planning is to consider your “exit strategy” options. These include:
Transferring to family members
Selling to family members
Selling to one or more employees
Selling to an outside third party
Selling to other co-owners
Retaining ownership, but moving to a passive owner role
Each scenario has its own benefits and drawbacks. For example, transferring to a family member and retaining ownership mean you may continue to have influence on your agency’s operations, but you will have little cash gain. Selling certainly means a cash gain, but requires letting go of influence.
Think about what elements are most important to you, and begin putting together your own succession plan. As part of your decision, look into the marketability of your agency and the tax implications related to your options. The Center for Exit Planning offers great resources in this arena.
Get more tips on succession planning from the SIS blog or connect with colleagues via our Partner XE user community. As always, contact us to share your comments and concerns – we love to stay in conversation!
Recent
surveys found the average insurance agent is just shy of 60
years old. That means two
things: there are a lot of experienced agents out there, and there are a
good number of agents reaching retirement age. As these agents retire, they’ll
take their experience and wisdom with them. Don’t let that valuable asset leave
when retiring agents do! While investing in insurance agent software, you
should also invest in insurance agent talent.
As Millennials and Generation Z take over the workforce, get them into your agency before your experienced agents leave. Here are some tips on what to look for and how to attract young talent to keep your agency growing for years to come.
What to Look for in Agency Talent
The independent insurance industry is unique: it
has a small business, community feel and relies on technology to navigate a
complex system that affects people’s safety and livelihood. Such a multifaced
industry requires unique people. When
hiring for your agency, look for people who are:
Flexible, meeting people where they are
in their insurance needs
Resilient enough to hear “no” multiple
times before getting a “yes” on signing a policy
People-driven as the drive to serve
others is a major motivating factor in the business
Great communicators whether listening to
a customer during a crisis or working with their team to resolve an issue
Tech-savvy enough to understand the
latest in insurtech
Ultimately, you want someone who wants to help
others and can handle the challenges and opportunities of a service-oriented
industry. At the same time, you also want a team member willing to learn
and grow in this evolving market.
How to Gain and Retain Talent
Insurance doesn’t have the apparent perks of flashy
tech firms or start-ups, yet many elements appeal
to Millennial and Gen Z job-seekers. It’s your job as an employer to
highlight these assets:
Technology: wide-spread
tech use is important to the next generation. Highlight how you’re using
technology and emphasize your focus on leveraging tech to improve communication
and sales.
Diversity:Mercer
named one of the top 2021 global talent trends “an increasingly
diverse…workforce.” Diversity in your office is important to new hires, so you
should also start taking it seriously.
Training: The best way to keep hires
around is to prevent burnout. That starts at day one with training, equipping
them to understand their role and your agency. The more prepared they feel, the
better.
Mentorship: Beyond training, new hires
are more likely to stay if they feel supported. One of the best ways to show
that support
is through targeted mentorship – a dedicated person who walks them through
new situations and provides advice on tackling new challenges.
Culture: According to Cordia
Resources, more than 1/3rd of Americans say they would “pass on
the perfect job” if they didn’t fit with the culture. Culture is a crucial
differentiator in independent insurance and something you can highlight in your
agency as a significant asset.
And we work each day to improve our system and
training to make it that much easier for your agency to grow. Notably, our Partner Platform Community offers a wealth of educational opportunities
and chances to connect, mentor, and grow with other like-minded agents. Find out
more about this innovative system: get in touch at
[email protected] or 800.747.7005, Option 6, to request a demo today.
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.
Planning for your exit from the independent insurance agency you helped build, whether 
As we delve into our second post focused on succession planning, we look towards addressing when to start planning and where to go given the multiple tracks for exiting your independent insurance agency.
Planning for the next generation of leadership at an agency can be a combination of excitement, uncertainty and lots of critical conversations. In our next series of blogs, we’ll look at the who, what, where, when, why and how of succession planning. We start off with a question many have yet to ask—why?
