However, that doesn’t mean that owners of niche agencies will never be able to sell or that you will need to diversify before you can achieve a successful sale. Instead, think about the central truth in every insurance agency sale, the valuation ultimately comes down to how much the buyer is willing to pay. For niche agency owners that can be a disadvantage, but it can also be a major advantage. The difference is timing.
Finding The Right Time
A few years ago, when the construction industry was really struggling, agencies with concentrations in construction lines generated less revenue and therefore sold for lower valuations. At that time, the last thing you wanted to do as an owner was sell one of those agencies. As economic factors affecting construction have turned, the industry is thriving. Agencies with a construction niche are generating more revenue.
The result is a sudden rise in popularity for insurance agencies with a construction niche. Buyers make acquisitions for a variety of reasons. As mentioned above, it may simply be a geographical or tactical choice; it can also be part of a product expansion strategy. Rather than bringing on new carriers, new lines and new producers, buyers acquire ready-made agencies. This makes previously undesirable niche agencies suddenly very appealing.
This year has seen significant growth in the health sector with the S&P reporting record increases this year of over 30% in healthcare. Tech companies like HP also had a major hand in those results; with the Nasdaq also recording huge increases this month. This kind of growth lends itself to increased revenues for agencies that deal heavily with these sectors.
Stock market records like these also serve as a reminder of the importance of timing in business decisions. While certain decisions are always good ones, others only work at a certain time of year or in a particular year. Buyers are keenly aware of this fact, so it’s important for selling owners to also bear this in mind. If you own a niche agency, there will be an ideal time to sell the agency. The skill is in spotting it.
Plan, Don’t React
That perfect time usually coincides with, or results from, a significant increase in revenue. That increase can make owners reluctant to sell. It can be difficult to battle through the tough times only to sell up as soon as things get easier. While the change may not be that immediate, it is important to remember that your perfect time to sell won’t last forever.
We tell every owner to run the agency as if you’re going to sell it tomorrow. As a niche agency owner, this is even more important. You need to plan, because you never know when the time will come to sell the agency. It can be difficult to sell a niche agency, but not if you do it at the right time.
The Lifecycle Of An Insurance Agency
Most agencies have a lifecycle of their own. As the agency grows, the owners encounter new situations and new challenges that must be overcome. Each of these stages presents new, unique challenges that will go on to affect the long-term value of the agency. As your agency grows you encounter each of these challenges and must learn to deal with them all the way through to the day you sell your shares.
Click below to download the free whitepaper today and find out how each challenge affects the long-term value of your agency.
