We have all heard the expression that we shouldn’t sweat the small things. As a rule, that is good advice to follow. Recently, we closed another transaction where we represented a seller in the sale of their insurance agency. If you have done as many of the transactions as we have, you know that it is a long and at times, difficult process.
The details…
As we navigated the process to closing, it became apparent how much time we were spending on some subtle details relating to the various legal documents and schedules required for closing. The major terms had been established several weeks or months ago, we easily agreed on an EBITDA multiple and an Earnout structure that both motivated and rewarded the Seller. The employment agreement terms such as compensation and duties were also agreeable to everyone’s satisfaction.
In became even more apparent that our role as an advisor was much more than finding a Buyer and negotiating the key terms of the deal. It became very clear that our primary function was to sweat the small things. These are the areas where we could add real value. Each item on its own was not nearly as important as the EBITDA multiple but combined as a group they ended up being equally important.
We believe into our client’s bank account. After the Closing, we spoke with our client and exchanged thanks and gratitude for the efforts that were undertaken by each party to make the deal a success. Our client viewed this call as the end of our agreement. We mentioned that the deal hadn’t finalized. We had an Earnout that extended over several years and that we would provide whatever assistance we could to maximize that payment.
I’ve been vague to this point and have attempted not to list any of the small things in a deal. Here is one example. Many sales try to take advantage of consolidation opportunities. Buyers have hubs, and they try to buy add on agencies to make that hub grow larger. The transition from one location to another is not without its hurdles. The impact on staff and systems can be significant. When will that change occur? Will the employees choose to move to the new location? How is the Earnout impacted if the owners are distracted by the move and are not as able to focus on revenue retention or growth?
Sweat the small stuff!
Here is another example of how you should sweat the small things. Once it becomes apparent that the deal is going to close, the owner must make an announcement to their employees. This single step causes lots of anxiety for most owners. There always seems to be one employee who doesn’t handle change well. They hear about the deal and focus how the transaction impacts them including their compensation and benefits. These issues get resolved. In most cases, the employee’s concerns seem to become less critical within a few weeks. Everyone starts focusing on the goals of the transaction. Our advice, go ahead and sweat the small things. You only sell your agency once. We have dealt with all of the small things many times. We realize that although insignificant several years from now, these little things are critical in getting a deal done.
The Value of Your Agency
As a firm, we believe an accurate valuation 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!
