In today’s post we discuss the massive airbag recall by Takata and explain how proper guidance and careful planning can ensure your insurance agency sale goes according to plan.
Japanese airbag supplier Takata is struggling to cope with its biggest ever crisis. Its driver-side and passenger-side airbags were found to be faulty and have been recalled around the world. This was after the shrapnel that was spewed from the airbags during several car crashes claimed six lives worldwide and caused hundreds of injuries. The crisis worsened this week when the U.S. government decided to almost double the number of vehicles involved in the recall to 33.8 million — making it the largest recall in automotive history. Big car companies such as Toyota, Mazda and Mitsubishi are all expanding their global recalls. While Takata has downplayed the scale of the crisis claiming that internal testing over the past six months found that less than one per cent of recalled airbags had ruptured, itstill leaves 530,000 cars around the globe with dangerous airbags. It is estimated that motorists will have to wait up to a year for the airbags to be replaced as the supplier is inundated with replacement orders. Takata has become a multi-billion dollar company as the supplier of 20 per cent of the car industry’s airbags, but this incident has evidently caused it irreparable damage. It is not only set to lose millions of dollars in lawsuits and costs associated with the recall but also its reputation has been tarnished and will take years to rebuild. It goes to show how unpredictable life can be. Takata proved that that nobody can afford to be complacent. We cannot relax until the final whistle is blown. However, unlike sports games and singing competitions, which benefit from their unpredictability, businesses can suffer massive losses when things do not go as planned. My advice is to leave no stone unturned when preparing for the sale of your insurance agency. Make sure that you have carried out all of the necessary tasks required before putting your business on the market. We often state, “Run your business like it was up for Sale.” How is that done? During a sales process, it is inevitable that there will be a change in personnel at the agency. In most cases, the owners state that the employee does not need replaced. Why? Assume that the employee’s compensation and benefits equal $100,000. If the agency is sold for a 7 multiple of earnings, not replacing the employee will increase the transaction value by $700,000. A Buyer will need to make sure that you have the appropriate staff to service the existing customer base. You don’t need surplus staff, but you do need adequate staff. The goal is to find the right mix of staff, compensation levels and structure and other costs. We provide the guidance to allow you to make the necessary changes to your agency. Fortunately, those actions are helpful whether you are considering a sale or whether you plan to retain ownership for the foreseeable future. We love to get involved with agencies and help them maximize their potential. Unlike other advisors, we have been personally responsible for the operations and financial results of other agencies. We take the time to learn about you and your business so we can give you proper advice concerning maximizing the prospects of your agency.
