Reasons Why NOT to Hire an Advisor
A while ago, we posted a blog on the Reasons to Hire an Advisor. It made me reflect and I asked myself why someone would not hire an advisor. Hopefully, the Reasons for Hiring an Advisor were more compelling than the Reasons Why Not to Hire an Advisor.
Here are some of our reasons why you should NOT hire an advisor:
- Lack of Commitment to a strategy. Our worst case client is someone who is not committed to the execution of a strategy. Our process helps you identify your goals. If you are not committed to the execution of the plan required to meet your goal, wait until you are fully engaged.
- Valuation. Certain parties go through a sales process to “determine what their insurance agency is worth.” The process is time-consuming and distracting. Just ask us what you are worth, we will be happy to limit our involvement.
- Validation. We have experienced perspective clients that have already identified the buyer and want to hire us to validate their decision. Valuation and deal structure is a very subjective process and no one deal value or structure is ideal. If you have already made your decision, save your energy and money. An advisor should be open to give you all of your options and not just validate your decision.
- Lifestyle. If you are not committed to being fully engaged after a deal because of lifestyle issues, you should go it alone. We tell clients that buyers don’t expect to do deals with only saints. Be honest about your social habits and work schedule. If you aren’t able to be honest, it is best not to involve others.
- Unreasonable Expectations. You should set expectations regarding value before you engage an advisor. If you expect to receive “A multiple of 12,” an advisor should state that your expectations can’t be achieved.
- Buyer is Not Important – Our experience is that the most widely known buyers of most agencies are all very credible parties and offer many advantages to smaller agencies. There are subtle differences between these parties. We have had prospective clients tell us that “I can work with anyone and who I partner with isn’t that important.” This situation is rare. Matching the cultures of the parties is one of the primary responsibilities of an advisor.
- Price is Not that Important – There are many components to every deal including the projected earnings of the agency, the deal multiple, the payment at Closing and the ability to achieve an Earnout. The single most important component to most owners is the payment at Closing. Some owners focus exclusively on who the buyer is. They are only concerned about getting a reasonable price. Advisors should help maximize value. If you are only focused on the buyer, it isn’t hard to identify the most likely parties and an advisor is not critical.
Agency Valuations
As a firm, we believe answering the question “How much is my agency worth?” is part of our responsibility and the foundation of a great working relationship – even if that is further in the future. Because of this we, unlike most firms, offer insurance agency valuations for those who qualify. Click below to apply.
