Trust the Process in Insurance Agency Sales
By: Tom Sukay
In the last year, we have represented companies in a wide variety of marketplaces. These agencies have had revenues ranging from less than $1.0 million to $7.5 million. We announced a deal in Long Island and just announced another one in both Delaware and New Jersey. We are working on two other deals. One is in a major metropolitan marketplace and one has a broad national scope. Several of these deals have had things in common and some are very unique.
How Many Buyers Should You Contact?
One of the interesting differences in these deals is the number of parties that we contacted to market the company. It would seem to make sense that the larger the company, the larger the number of potential buyers. I believe that this is essentially true that the larger that your agency is, the more potential buyers you will be able to locate. Is more always better?
The last question would seem to indicate that this answer is no. Our experience is that more is always better. Our job is to work with the potential buyers. We do the vast majority of the work with potential buyers. If that is the case, let us earn our fee.
Buyer – “I Don’t Want to Get Involved in an Auction.”
I recently had a buyer ask me if we were conducting a “process.” I wasn’t sure how to answer that question or why they cared. He explained that they don’t get involved in an auction. When I hear that, I usually just conclude that they aren’t usually competitive and that they expect to lose to someone who is willing to pay a market price for the agency. They want an exclusive and they want their proposal to stand alone. I would be very leery of any party that was afraid of a little competition. The largest and most sophisticated buyers have no problems with a formal process. They know that they will win their share and lose their share. Since they are mostly responsible for establishing the pricing for the market, a loss usually indicates that someone was very aggressive in their pricing.
How Many Times Will You Sell Your Agency? Get the Best Price
Very aggressive pricing is never a bad thing for the seller. The market for quality agencies is very strong today. Buyers have become more aggressive. We like to conduct a very thorough but fair process. Every party is given an equal chance. We want someone to be very impressed by our client and decide that they want to price the deal to win. If the agency demands a premium, why not get the highest possible premium? I’m sure that informed buyers will agree that most successful deals are judged as successful because of the agency’s success after the deal. It is never based on whether they could buy it cheap.
Take Meetings With Buyers Very Seriously
The final decision is heavily weighted by price. Let’s not kid ourselves. However, we have also found out that meetings between the buyer and the seller are also critical. Take these meetings very seriously. We like to say that they are like a first date with a very attractive person. Do your best to be the most attractive party. Focus on the critical issues. Leave the small operational matters for another time. Focus on chemistry. If you are the buyer, don’t forget that everyone likes to feel special. After you have had a positive meeting, remember that most sellers clearly are impressed by a strong competitive financial offer.
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 free insurance agency valuations for those who qualify. Click below to apply.