Does it Matter what Type of Business Broker you use to sell your Insurance Agency?
- September 10, 2014
There are many business brokers that purport to be insurance industry specialists. How do you select the right one for such an important decision? At a minimum, you should ask potential brokers questions such as:
1) How many insurance agencies have you sold in the past year, 3 years, 5 years?
2) What was the commission size of the agencies you sold?
3) What is your background / expertise in the industry and how long have you been doing this?
4) What references can you provide?
Business Brokers and Standardized Contracts
General business brokers often use standardized contracts that are not very different from a contract form used by a realtor, who simply fills in the blanks. However, these standardized contracts are not typically applicable to many of the unique aspects of insurance agencies. The sale of an insurance agency involves many different issues that must be addressed in the sales contract. For example, the contracts with the insurance carrier must be addressed and the expirations must be transferred. What if a carrier won’t appoint an agency or the contract doesn’t address the transfer of the expirations? No big deal right? Actually, it is big deal, because if these kinds of issues are not addressed and resolved before the sale occurs, the buyer is likely to encounter a serious dispute after the sale occurs and is likely to sue the seller.
An insurance agency is and should be considered a professional practice, not a basic retail store. Using an industry specialist can make a world of difference in a number of ways that can result in significantly higher net proceeds to the seller, a smoother transaction, finding quality prospective buyers, and reducing the likelihood that legal issues will arise during or after the sale.
This article included excerpts from the book Starting, Buying, Selling, and Perpetuating Insurance Agencies written by Jon Persky, an expert in Transacting Insurance Agencies. You may visit his website by going to http://www.optperform.com.
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