Who’s Taking Over?: Handing Off Your Independent Insurance Agency

Who’s Taking Over?: Handing Off Your Independent Insurance Agency

When it comes to agency perpetuation planning, you’re likely somewhere between square one and planning your retirement party. Let’s hope, unlike some of 2016 Future One Agency Universe Study respondents, you’re closer to a beach house and a cold drink. The study found 23% of agencies with one principal over age 66 said perpetuation was more than five years out. Age may bring wisdom, but it should also bring retirement before 70!
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Who is Taking Over Your Insurance Agency?

Who is Taking Over Your Insurance Agency?

Are you looking for the secret to a successful agency perpetuation? We’ve got it in three simple steps:

  1. Plan ahead
  2. Plan ahead
  3. Did we say plan ahead? As in…NOW!

Whether you’re handing off or taking over an insurance agency, it’s never too soon to start thinking about and planning the transition. A large part of that planning is deciding who will be taking over.

Many decide to perpetuate internally, thinking it’ll be easiest to pass on operations to a family member or long-time employee. But, as any owner knows, running an agency requires more than logging hours. It’s what you do with those hours that counts. Here are three real steps you can take towards a successful transition with your successor.

Is internal perpetuation right for you? Read our post on internal vs. external perpetuation to find out

1) Find the Right Person

Don’t get us wrong, long-term investment in the agency is a good indicator for a potential successor. A good successor knows your agency and its culture. Though they won’t run it the same as you, knowing the history and the spirit of the business is huge.

You’ll also want someone who is up to the challenge. Taking on an agency is a big undertaking. Look for someone who deals well with uncertainty and thrives on possibility.

Finally, leadership is essential. A great successor will be able to bring the team together and clearly communicate mission, vision, and goals. They’ll be able to motivate employees to take on the transition ahead, celebrating successes and keeping the team positive through challenges.

Are you asking these five questions as you prepare for perpetuation?

2) Get Them Involved

Once you know who will be walking the transition journey with you, get them involved in the process. Include them in strategic agency planning and get their input. The more your successor knows the better. Give them insight into why things are done a certain way, how decisions get evaluated, and their implication on the agency. Sharing these elements with your successor helps them build a broader perspective for when they take over the agency.

You should also include your successor in all perpetuation planning (you’re starting now, right?!) going forward. Again, the more they know, the smoother it’ll be to hand things over. Part of this planning includes being clear on how you want to be involved post-transition.

Read the dos and don’ts of taking on the family business

Lastly, be intentional about bringing your successor into the key relationships involved in your agency. As an owner, you’re well aware the important role each of these relationships play. Introduce your successor to industry group members, board members, carrier contacts, and your agency management system contacts among other key players.

3) Lean on Your Management System

One of the most challenging pieces of your #agency #transition is exchanging information and knowledge. Your agency management system is an asset here. Be intentional about using it to store data and create a comprehensive picture of where your agency stands. Work with your successor to create and understand financial and other reports and map out best practices for use.

Find out more on how to leverage your agency management system

It’s helpful to get a re-training from your agency management system provider. Use these sessions to introduce your successor to the ways an owner can maximize system use and get your employees on the same page about workflows and best practices.

The dedicated service team at SIS has been part of numerous agency transitions, walking with owners as they navigate the seemingly murky waters. Our team has been praised many times over for their aid during transition, and our PartnerNet portal acts as a 24/7 resource for our partner agencies.

If you’re thinking about making a change in your agency, get in touch with us. Contact the SIS team at sales@sisware.com to get connected today.

Internal and External Agency Perpetuation: How to Choose

Internal and External Agency Perpetuation: How to Choose

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?

Making Your Insurance Agency Perpetuation Choice

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 Agency Perpetuation

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:

  • Provides cultural continuity
  • Allows owner to stay involved
  • Ensures experienced, trusted party is taking over
  • Gives customers and carriers a familiar face

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:

  • Establishing deferred compensation for you, the owner, or producers
  • Offering stock redemption as a form of deferred payment, or
  • Gifting the agency, requiring no payment

External Agency Perpetuation

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:

  • Larger cash benefits
  • Separation from involvement
  • Potential for more robust infrastructure

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.

The Bottom Line: Protecting Your Agency’s Value

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 sales@sisware.com.

Giving and Receiving: How to Pass on Your Agency

Giving and Receiving: How to Pass on Your Agency

The Gift of Insurance Agency Perpetuation

Chances are you have at least once received a gift and your first thought was: “Thanks?”. That question mark means you either don’t know what you’ll do with the gift or you didn’t want it in the first place. Both are not great reactions. Unfortunately, this is how some people feel when it comes to insurance agency perpetuation.

Something as large and meaningful as your independent insurance agency shouldn’t be received with hesitation! Whether you’re turning over ownership to a blood relative or a member of your larger agency family, it’s important to have both the giver and receiver on the same page. To avoid an uncertain or unwelcomed transition, both need to be prepared for perpetuation.

The SIS Agency Perpetuation survey showed 60% of respondents chose a family member as a successor. See the full results here.

Tips for the Giver: Wrapping Up Your Agency

  • Start planning now: There is no “too early” in planning your agency perpetuation. Some suggest starting as early as your mid-30s. No matter what age you are, it’s a good idea to put thought into how your agency will transition now.
  • Get a plan in writing: Focus first on defining milestones and a final end date. You should also consider incentives for employees to stay past the transition, client care plan, successor mentorship, and your ultimate goals for perpetuation.
  • Keep your plan fresh: Perpetuation is a big deal, and can’t be completed in one shot. Review your succession plan annually and update as needed. Include your successor in these reviews if you can.
  • Track and integrate agency progress: Part of your annual review of your plan should include analyzing agency data. Keep track of how you’re doing through reports generated by your agency management system.

Not sure what you should be tracking? Check out our post on data tracking and reporting

  • Get your accountant involved: There are multiple tax implications involved in agency perpetuation. Depending on how and to whom you pass on your agency, you may have to pay more taxes or get a break. Get your accountant involved right away to ensure you’re ready.

Tips for the Receiver: Respecting Past Practices and Making the Agency Your Own

  • Be a part of the plan: Be part of perpetuation planning as early as possible. Let the owner take the lead, but don’t be shy about inserting your ideas. It’s important to be upfront about expectations.
  • Decide on owner involvement: One big item to plan ahead is how much the giver will be involved after the transition. Be clear about what you want, yet keep an open ear to what the giver intends. It’s best to negotiate these items, along with anything involving cost and compensation, with a third-party, preferably a lawyer.
  • Practice patience: Be patient and practice compassion as you take ownership. The independent insurance business is relational, meaning there are a lot of emotional attachments to the agency itself. There can be some strong feelings that come with change.

Get even more perpetuation planning tips from our list of agency perpetuation resources

  • Embrace innovation…slowly: Transition is the perfect time to try something new. But, don’t change everything at once. Come up with one or two areas to start with right away. Move to others as time goes on, giving staff and customers time to adjust.
  • Consult with staff: To help ease transition, consult with members of your agency before implementing anything new. Ask for input on how to implement the changes you have in mind and be clear about why you feel they’re important. Ask for their opinions on what other improvements can be made. Focus on building trust and gaining employee buy-in: you’ll need both before making any new moves.

Leveraging Your Consistent Resource: Your Agency Management System

One thing that will be there on both sides of your transition is your agency management system. This is a great tool for setting up your agency to transition. And, it will create a sense of stability for your staff as ownership is transferred.

At SIS, we’ve helped multiple agencies work through a variety of transitions. Whether it’s moving from a legacy system to our all-in-one, web-based Partner XE management system, transitioning staff roles within the system, or providing all-staff training for a fresh start, we’re here to help.

To find out more about SIS, the services we provide, and our leading agency management system, Partner XE, visit us at sispartnerplatform.com.

Attracting Millennials in Insurance

Attracting Millennials in Insurance

Let’s be straight: we need millennials in insurance.

In 2016, the average US insurance agent was 59 years old. Your staff is getting older. In fact, about 55% of insurance upper management are eligible to retire, and the industry is looking at 70,000 open positions, according to The Institutes.

Millennials are the answer.

But, why is it so hard to get millennials into insurance?

This question has those in the industry scratching their heads. The hard truth is insurance has a bad rap. A 2015 research study by The Hartford showed 18 to 34-year-olds saw the industry as boring. Overall, only 4% said they had an interest in insurance.

Looking to recruit top talent for your agency? Check out our “Key Strategies” eGuide

But, once millennials are in insurance, they plan to stay. According to a Vertafore survey on millennials in the industry, 81% said they’d stay as long as possible, and 70% would refer working in insurance to friends.

Ok, so how can the insurance industry recruit millennials?

The best way to bring in millennials is to speak to what they’re looking for in their job and career.  And, connecting those needs with what is already offered in a career in insurance. Some key areas to highlight are:

  • Industry stability

In that same Vertafore survey, 81% said financial stability was a big factor in why they stay in insurance. Like all career seekers, millennials are looking for a place that has longevity, and the insurance industry has just that. As long as people own things, they’ll need to insure them. Few industries can promise that kind of stability.

  • Work-life balance

78% of Vertafore respondents listed work-life balance as an attractive part of working in insurance. Millennials like being independent and setting their own hours. Working in insurance gives them the freedom to work flexible hours, work from home, and manage their own schedule.

Read more tips on recruiting millennials to your agency

  • Opportunities for collaboration

Though they love their independence, millennials also look for opportunities to collaborate. In insurance, they’ll constantly be working as a team to help customers and problem-solve on ways to meet their needs.

  • Making an impact

Millennials are looking for ways to be difference-makers, working to improve the world. Insurance agents, CRMs, owners, carriers, and all individuals in the industry are there to help people at the worst moments in their life. Now THAT’S making an impact.

SIS President Michael Doran speaks to the impact independent agencies make in the lives of their customers

  • Room for growth and influence

Millennials came of age in a start-up culture. Most are looking to be their own boss, or at least have a say in where their company is going. Independent agencies offer that “start-up” feel, allowing each employee to feel they have stock in the business.

Additionally, 75% of respondents to the Vertafore survey said “career development” was a major factor in why they loved their job in insurance. With so many Baby Boomers retiring, millennials have great growth and influence opportunity in insurance right off the bat.

The next challenge: getting them to stay.

While the industry has many aspects that make it appealing to millennials, it’s up to you to foster a culture that gets them to stay.

Part of that is setting up ways to welcome new staff and get them up to speed on processes and tech, including how to use your agency management system. To help our partner agencies grow, we at SIS offer personalized training sessions and dedicated online and in-person support so new employees can hit the ground running. Giving millennials that jump-start into your agency can be a game-changer.

To find out more about SIS, our Partner XE management system, and how we help our partner agencies achieve success, contact us at sales@sisware.com.