passing the torchPlanning 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].

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