Owner Involvement, Agency Valuation and Irony
There are two types of owners who want to sell their agency. Either they want to:
- Stay involved in the business; or
- Sell and retire.
Let’s Dig In…
There are some owners who resist selling because they don’t want to be pushed out by the new owners. Others see the sale of their agency as their retirement fund. They build the agency and try to create the most value so they can have a long and fruitful retirement.
Agency owners who want to sell and retire will be focused on the agency valuation. On the other hand, owners who want to stay involved will be focused on the business and the clients in addition to the valuation.
Your Involvement Will Effect Agency Valuation
The irony is that when it comes to agency valuation, the owner who wants to retire is damaging the one thing he’s been focusing on which is the valuation of the agency. At the same time, the owner who is focused on the business and doesn’t want to be pushed out is reducing opportunities to grow the business.
Agency valuation can be based on many different factors. From a buyer’s perspective, future involvement by the current owner is hugely attractive. It ensures continuity of the business and can help it to grow. When you’re defining your agency valuation, your involvement can make all the difference. Far from losing your business, selling can make it stronger.
Owners Can Get What They Want by Adapting Their Approach
In our experience, buyers want the previous owner to stay involved in the business for a minimum of three years in order to provide that continuity. Buyers try to avoid taking over a business without the current owner. Planning to retire straight after the sale can really damage your agency’s valuation.
This is not to suggest that either approach is wrong. It’s understandable that an owner might want to retire or might be fearful of a buyer’s intentions. The important thing to consider is how much more successful both sides would be if they adapted their approach slightly.
Owners who are focused on agency valuation should consider staying involved for a period after the sale. This provides them with more value and a better retirement. Owners who are fearful of losing their business could find that taking the plunge is the best thing they ever did.
When it comes to agency valuation and owner involvement, the irony is that a lot of owners are pushing in the wrong direction.
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.