Selling your insurance agency isn’t always about money. In fact, very few sales start out as pure profiteering exercises and even fewer are decided entirely on the dollar value of the offer. While owners usually want to discuss the value, they may even think that money is their sole motivation; when you dig a little deeper you usually discover other factors driving the sale. These can range from a loss of motivation on the part of the owner, through to internal politics. No matter what it is, it’s vital that every owner fully understands his or her motivation for selling.
We work very hard, at the beginning of every client engagement, to define these motivations and help to set goals for the sale. In our experience, selling owners focus on the finances because they see that as an appropriate reason to sell. They don’t want to discuss the other issues and hope that they will be resolved as bi-products of the sale. Our job is to help selling owners to understand that there are many ‘right’ reasons for selling the agency as long as you get what you want at the end of the process.
In fact, many of these ‘secret’ reasons for selling the agency instigate the most successful deals. Selling the business is a chance to make a really positive change and that is a goal you should be happy to aspire to. Let’s take a look at a few examples of those positive changes.
Cutting Dead Wood
Motivation wanes, people lose their edge or simply get bored; it’s a fact of life. It happens in every business in the world. The problems arise when the person who loses motivation doesn’t realize it’s happened. They become complacent, even lazy, but still think they are providing a worthwhile contribution. This is most difficult when that person retains a share in the business. That share makes them almost impossible to remove, even as they continue to shrink the value of the business.
A sale can be a really effective method for removing that dead wood. A deal that allows the owner to remain in charge while buying out the underperforming shareholder will not only solve the problem but also create a positive future for the business.
Removing A Negative Atmosphere
Shareholders don’t have to be underperforming to damage the business. We have encountered many occasions where agencies are owned by two or more people who simply don’t get along. That kind of atmosphere is rarely sustainable. It often leads to leadership decisions that are delayed, diluted or undermined and a general working atmosphere that is counter-productive.
Once again, a sale in this instance can be the most effective solution, though it will likely be more difficult to achieve. Deals can be negotiated to favor certain shareholders financially to encourage them to leave, while compensating remaining shareholders through the position and control they retain. These kinds of deals are always in the business’ best interest.
Restructuring The Business
Positive changes don’t have to involve the removal of a difficult shareholder. Insurance agency sales also offer a great opportunity to rehabilitate or modernize a stagnating agency. Insurance agencies are living organisms; they grow slowly over time and rarely in a methodical manner. Departments, lines of business and producers are often added right on top of an existing structure without adapting how existing employees and departments work. That is often a recipe for inefficient procedures and confused business structures.
The sale of the agency could require a total restructuring as the business is absorbed into a larger entity. That means the new agency will have a clearer focus, greater administrative support and a far more efficient structure.
Selling an insurance agency isn’t all about making money. There are a near-infinite number of reasons an owner might want to sell. It’s important to understand that each one of them is a valid reason to consider a sale, especially those that would make a positive change in your business.
