By Carissa Newton, Oak Street Funding
Do you fall into one of the following scenarios?
-You know you want to buy an agency, but aren't sure where to begin.
-You want to grow your agency with a solid marketing plan, but aren't sure where to fund it.
-You are ready to begin a slow exit or retire, but aren't sure how you can do it. You see the market conditions and are sure they are going to affect your agency. You wonder when the right time to make your move is.
Nodding your head thinking one of these describes you and not sure where to start? Don't wait… Read on to discover how the needs of each of these agent types can still be met by utilizing commission-based lending.
NOW could be the right time.
As a new generation of agents enters the market, many are looking to purchase an already established book of business, a foundation so to speak. Conversely, as Baby Boomer agents near retirement, their thoughts shift to selling their agencies and/or books of business. Amidst the buying and selling that is poised to occur, current agency owners are simply looking to build their business further . . . whether it is to hire a new producer, implement a marketing campaign, obtain equipment, or grow the size of their agency; they simply want to grow.
Traditional lenders might scoff at the needs or cash flow of a typical insurance agency. Not because the businesses are not sound, but rather because banks simply don't understand the insurance market. They in turn look for more stringent ways to secure your funding. A better solution is to find a niche lender that understands your market, your needs, and what your business can truly achieve.
Getting Started
If you don't already have an agency in your sights, take advantage of free resources like AgencyEquity.com or Oak Street's Agency Exchange (osfagencyexchange.com), both of which offer listings of agencies for sale and buyers looking to acquire. Oak Street also maintains an online Agent Resource Center with news, articles, videos, and whitepapers about buying, selling and growing agencies.
After you have done your research, you will want to start assembling a support team of advisors with experience in business acquisition, such as an attorney, tax consultant and/or CPA. If you're interested in working with a business broker, consider seeking referrals from colleagues who have successfully bought or sold an agency with a broker’s assistance. These advisors will be key looking after your interests.
BUYING – Make sure you do your due diligence
Think about the type of agency you want to acquire or build. Then seek out reputable listing resources where you can look for agencies that meet those criteria.
Once you find a business that meets your criteria, learn everything you can about it.
-Identify the reasons for the sale
-Investigate how the agency operates
-Review all financials, including tax returns
-Review the book of business, product mix, and carriers
-Understand who is key to policyholder and carrier relationships
-Examine non-compete and/or non-solicitation contracts
-Assess compatibility of people and practices
BUILDING – Make sure you have a plan
So many agency and small business owners alike know they want to grow, but aren't sure how. They might want to add staff or implement a campaign to drive traffic. However, many skip the most crucial step in the process – planning. To realistically plan for your business growth, think about the following areas and how your plan will contribute to them:
-Articulate a goal
-Layout a timeframe
-Determine a budget
-Forecast the cash flows needed to support this plan
