It’s a great time to be an agency owner. As the dust finally begins to settle around the Affordable Care Act, there’s a lot of positive impressions of the insurance brokerage industry. Especially for agency owners who are considering selling the business. According to a recent whitepaper from Business Insurance, now is a great time to consider selling the business, “in addition to the improved property/casualty market climate, brokerages are expected to benefit from employee benefits consulting spurred by the Patient Protection and Affordable Care Act.”
‘Extracting A Premium’
That whitepaper goes on to argue that, as a result, selling owners can now “extract a premium from buyers.” Agencies that are generating growth will see no shortage of offers in the short term, as businesses that can take advantage of both the ACA and the firming P&C market become hot properties. For the owners of these agencies, that probably sounds like an easy moneymaking opportunity.
However, nothing is ever that simple. While there are factors converging at the moment that will create both demand and a potential increase in value, there are no guarantees. These factors alone will not add value to your agency; you still have to do that yourself.
These factors will affect value because they make your agency a more attractive prospect to buyers. However, they aren’t the only things buyers look for in an acquisition. Whatever the economic or market factors, buyers will still look for the same things. They want to buy an agency that compliments the buyer’s existing business. Being a right fit is just as important in a hard market as it is in a soft one.
Adding Value To Your Insurance Agency
That means there is even less room for complacency in the current environment. While there may be a premium available to agencies that take advantage of both the ACA and the firming P&C market, demand is increasing too. Like any other market, an increased supply of agencies for sale could mean a fall in prices. The “premium” mentioned in Business Insurance’s whitepaper would be offset by increased supply, meaning adding value is still an important goal for selling businesses.
Adding value means providing top quality service to clients, developing growth opportunities wherever they appear, and working hard on planning the sale. You need to identify your key selling points, make them your priority, and make sure potential buyers can see the value you have to offer.
When considering buying or selling an insurance agency, market factors will always be a consideration. The will always create opportunities to add to you value with a well-timed sale. However, the most important value in an insurance agency sale is the value you add yourself. Whatever changes occur in the political, economic or insurance environment; that will never change.
