Planning your insurance agency perpetuation may seem like an insurmountable task. But, when broken down into manageable pieces, it can be tackled like any major project. Throughout the years, we’ve created a number of resources to help owners map out their succession plan. When compiled, we found five simple questions can put agency transition on the road to success.
There’s a reason this is question number one. Your answer will determine what path you’ll take and how to prepare your agency for it. Weigh what you’re looking for in succession. Internal perpetuation usually means more brand consistency and control, but external generally means a higher cash gain.
Once you know if you’re looking inside or outside of your agency, think about who will be taking the reigns. If internally, it may be a family member or employee. If external, it could be a local agency, larger regional agency, or even a bank. Decide what’s best for your business. Ideally, you should start planning your perpetuation 5-10 years out so you have time to work with your successor on the next three questions.
Read more on the pros and cons of perpetuating internally and externally
Determining agency value can be tricky. To help, ensure you have a financial reporting system in place early on. Most agencies use their management system to track money in and out. Use reporting features to set up recurring reports to give you a clear picture of where you stand year to year. This data will inform you on your agency’s real value. That’s a great bargaining chip when negotiating with potentials buyers.
If you’re asking when you should start planning, the answer is now. As mentioned, the nuts and bolts of perpetuation should be put into motion 5-10 years out, but it’s never too soon to draft a timeline. In your timeline, map out when you plan to select a successor, length of the transition period, and your expected turnover month and year. Knowing these dates ahead will help you prepare your staff, your successor, and yourself for the transition.
Everyone is different when it comes to how much they’d like to be involved post-transition. You can stay on with a more active role as an advisor or board member, or you can choose to take a more passive position jumping in here and there as needed. If full retirement is more up your alley, you can pass off your agency and hit the links. Just be sure you’re upfront with your successor on how you’d like to be involved.
Here’s what to do – and not to do – when planning succession
BONUS: What will be my biggest obstacle?
There’s a lot that goes into planning and executing your agency transition. What are you most anxious about? Whatever it may be, that’s the area where you need to spend the most time. Reach out to owners in your local professional organizations, do your research, and make sure you’re as prepared as you can be for whatever scares you most.
Find out what other agencies had to say about perpetuation in our Perpetuation Survey
For many, it’s the transition itself that is most intimidating. You can ease that fear by ensuring you have the right technology to easily transfer information. As we’ve heard from our partner agents, being able to turn over critical data with our Partner XE agency management system has been a lifesaver. With integrated accounting and email systems and an intuitive, easy to use interface, Partner XE leaves you one less thing to worry about in agency perpetuation.
To find out more about Partner XE, get in touch with an SIS team member today at [email protected].
You remember the days of you, a phone, and a desktop in a tiny office. The long days of calling carriers and hearing “no” after “no.” Waking up early and going to bed late, building a business based on hard work, professionalism, and care. And now it’s time to step away. Years of hard work and a lifetime of memories are invested in your agency. How do you pass it on?
Agency succession can essentially take one of two paths: internal or external perpetuation. Internally, you can pass on ownership to key employees, friends or family members through sale or inheritance. Externally, you can sell to another agency or merge with another firm.
Discover the “who” and “what” to include in your perpetuation planning
As often happens with such important decisions, both methods have their benefits and drawbacks. Let’s explore the positives and negatives of each.
Internal perpetuation means “keeping it in the family,” whether that is your blood relatives, friends, or trusted employees. Passing on your agency to someone you know has its benefits such as:
Yet, there is a risk involved when passing on your agency to someone internally. Stats show that less than 40% of family businesses survive to the next generation and even less to the third. Most internal perpetuation fails due to finances. In many instances, the buyer cannot afford the buy-out, and you end up losing cash in the long run. You can avoid these financial issues by:
Perpetuating externally means selecting an outside party to take over your agency. This could be another independent agency or a larger firm, but either way, it means you’re giving over control to someone who has no incentive to keep you involved. The benefits to external perpetuation include:
Still need more information? Access our full list of perpetuation resources here
However, external perpetuation also has its drawbacks. Selling to an outside party can cause stress for employees and a potential loss of company culture. Similarly, the transition may be difficult for customers. To combat this, you can stipulate certain employees stay on in influential positions or outline a “gradual release” of ownership. But, such conditions may negatively affect sales price.
No matter which way you go, it’s important to think about the value of your agency before making a decision. Whether it’s stock options or your book of business, buyers need to know its worth.
One of the best tools to keep track of overall agency value is your management system. Management software with integrated accounting and customizable reports, like SIS’s Partner XE agency management system, make tracking and reporting your agency’s value easy.
To find out more about how SIS and Partner XE can help you track and grow your business, contact us at [email protected].
There are many things we put off in life: dentist appointments, paying our taxes, that last nagging home improvement project. Whatever they are, these delayed tasks tend to be more of a hassle simply because we put them off.
Now is the time to cross it off!
We hear from our partner agencies that they are resisting perpetuation planning because they don’t know where to start. That’s why we’ve put time and effort into creating resources on this topic. Below are just some of the many tools at your disposal to help plan your agency’s transition.
One of the most important aspects of perpetuation planning is organizing agency records. The best tool for keeping those records in order is the hub of your agency data: your management system.
Start now by organizing agency data the way you want with personalized workflows and custom reporting, both of which are offered through Partner XE. These simple enhancements make it easy for you and you staff to enter and track data, setting you up for a successful transition.
Check out more Partner XE capabilities here. We’re always available to help your agency serve better, work more efficiently, and reach your goals. Get in touch with us today to schedule a demo and find out more on the Partner XE system.
SIS recently conducted a perpetuation survey to investigate the process and practices of buying and selling agencies. The results of this survey provided insights on independent insurance agency perpetuation, including:
When Lara Moffitt began as CEO of MHJ Insurance, her first order of business was to find a new agency management system. She knew their old system was complicated, expensive, and had poor customer service. It was clearly time for MHJ to make a change.
So, Lara rallied her team to start their search for a new agency management system provider. The three-month-long project included a series of interviews, demos, and plenty of internal discussions about what was working and what wasn’t.
Innovation is key to longevity in any industry, and the insurance industry is no different. Insurance revolves around people and relationships, making it an inherently dynamic field.
Digital insurance demands seem to change by the day to keep up with evolving customer and agency needs. That’s why we at Partner Platform partner with various tech partners to stay up to date with changing conditions. We as an organization can only be experts in so many areas, so we recognize the need to partner with outside specialists to fill our gaps.
We work with industry groups and tech companies to cover areas like digital document processing and cyber security, among others. Below are a few of our recent posts highlighting these valuable tech partnerships.
Insurance tech advancements are making everyday processes faster and more efficient, and customers are demanding more digital interactions than ever before. Despite the benefits and increasing customer demand for insurance tech, your team may be hesitant to adopt new technology.
This hesitancy is understandable. Change is difficult, and introducing a new process or system to an individual’s workflow can be frustrating. But, the benefits of integrating insurance tech into your agency far outweigh the challenges of overcoming change.
Here are a few ways we’ve seen agencies work to be more receptive to new technology and system updates.