Recently, I went out and met with a potential client. We spent some time together and I explained our value proposition. We had two meetings and at the end of the second meeting, I felt that they understood what we brought to the table and that they were ready to move forward and hire us.
Two weeks later we received a call from the lead partner in the agency. The individual explained that they had two potential buyers that had expressed interest in buying the agency. They also believed that they knew the price that would need to be realized in order to sell the agency to either of the buyers. It was clear that they believed that finding the buyer and getting “their” price was our only value. They did not focus on any other value that we brought to the sales process.
After reflecting on our meetings, I thought that I really missed the mark in our two discussions. While the potential client focused on finding the buyer and achieving their transaction value goal, it appears as though they did not understand the true value that we brought to the sales process.
The Hard Part is Finding the RIGHT Buyer
Finding a buyer is not difficult. The hard part is finding the right buyer. There are so many buyers that it is hard to keep up with all of the new entries into the insurance brokerage space. We spend much of our time understanding our client’s goals. We also spend a large amount of our time understanding the goals of the buyers. The objective is to be sure that we are matching the goals of both the buyers and the sellers. We know that a large percentage of acquisitions fail to meet both parties objectives. The number one reason they fail is that the expectations are not aligned. We are always looking for the right buyer, not the best buyer.
The reason that it is important to find the right buyer is that the right buyer will have no problem getting to a price that reflects the market value of the agency. We acquire many clients after a buyer has approached them directly. Buyers often offer a fair price that is very often less than the market value of the agency. Financial Advisors know the difference between what is fair and what reflects the true value of the agency. Buyers want to structure transactions that are in their best interest. The best structures are the ones that meet everyone’s best interests.
The terms of these transactions are complicated and understanding the total value of the transaction can be difficult. We were asked to review an offer for a financially astute potential client. They thought they understood the proposal. When we looked at the details and explained the transaction, it was clear they did not totally understand the proposal. Our job is not only to get you a price that reflects the market value of the agency but to make sure that you understand every detail of the transaction.
The Most Important Decision You Can Make
There are many things to consider when making the decision to sell your agency. It is most likely the most important decision you will make in your career that will have lasting effects on you, your family and your employees. You should not make this decision without getting the best advice possible. The financial advisor should be someone you trust, has the necessary experience and who understands your goals.
For More Insight
The Value a Financial Advisor Brings
When assessing whether or not to engage with a financial advisor, make sure you truly understand the value they SHOULD bring.
Posted by Sukay & Associates on Thursday, July 12, 2018
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.
