Here are 5 things you can do in advance to help maximize the selling price of your agency:
1. Have your accounting books in order. If you don’t already have a bookkeeper, get one and make sure your books are reconciled on a monthly basis. If you are a sole proprietorship, never comingle your agency finances with your own finances. If you use one account, immediately open a separate account, hire a bookkeeper and have a least a one-year track record with the two accounts before you sell. Always make sure your books are in sync with your tax returns. Having your books in order is huge, as this can be the basis for the offer. A buyer will not likely offer as much for your agency if its bookkeeping records are poor.
2. Make sure your agency management system is up to date. Since you will have to supply statistics and reports on your book of business, make sure that everything is up to date and that all policies that don’t download are entered into the system. Always make sure the premiums are entered into the system and that inactive manually entered policies are deactivated, if they are no longer in force. Always keep notes and follow up tasks on all clients, which will ensure that, once you transfer your system, the new buyer will have all the information required.
3. Review all of your producer agreements. See if there are any requirements needed to transfer these agreements. Also make sure you have a great record for each producer so that there is no issue when your ultimately transact the sale of your insurance agency. If you don’t have agreements, immediately contact your attorney to get them in place, because not having agreements that protect your producers can be a deal breaker. Also make sure that your staff have signed non-piracy and non-compete agreements.
4. Review your agency office lease. Some buyers will want to take over your lease while others will not want nothing to do with your lease. Start working now on making sure you have good flexibility to deal with all scenarios, especially with the challenges of COVID and the changes in the marketplace that COVID has caused.
5. Have a really good website in place. Nowadays, the image of the agency is no longer the office; it’s the website. People do judge a book by its cover. An informative website allows clients to use it as a tool for communications and information. This is the image that potential buyers are looking at to view what your agency is about. Don’t overlook this, as it is a piece of the puzzle.
Selling an agency can be like selling a home in some ways. People are much more likely to make a lowball offer if they see that things are not in order, just like they will if a home is falling apart. Having great records in place shows that the agency is run well; not having these may be a red flag for potential buyers. If you impress the buyer pool, they are likely to bid up, and you are likely to have more offers.