Tips to Acquire an Independent Insurance Agency
- January 14, 2015
People who are seasoned at making agency acquisitions understand that it takes a lot of effort. Those who only make a small effort or investment are unlikely to achieve good results. The main reason is that there is a lot of competition, especially from qualified and higher revenue preferred agencies. So here are some tips that will help you become a successful player in the acquisition space.
Being the highest bidder means nothing if you don’t properly sell yourself as a qualified buyer. This means putting together a profile about yourself, your existing agency or your relevant experience if you don’t have an agency. Ask to set up a personal meeting with the seller as this will help personalize yourself to the seller as well as build confidence that you are the right person to take over the agency. Many owners are very attached to their agency and their clients; they don’t want to leave their clients hanging and do want to find the best replacement they can.
Be Clearly Funded
If you don’t demonstrate you have the funds to acquire an agency, then the likelihood of making the acquisition is unlikely. Your competition is funded and cash is king; you need to show and document that you have the funds. If you don’t have the funds, get a loan preapproval letter that is current. Unless it is a non-standard book of business, you will not be considered if you don’t have solid funding in place.
Placing or Replying to Listings
Most buyer inquiries are only one or two sentences. This is also the case when buyers place “wanted listings.” This is not enough to get to know you; you need to introduce yourself and why you want to make the acquisition. Make it personable and don’t try to take control; most sellers do not like this. A reply should be a well-structured paragraph of at least five sentences. A wanted listing should include many details about you and what you are looking for, including how you are funded. Keep in mind that the sellers are almost always in control and you will have plenty of competition. Therefore, you need to personally connect to the seller to increase your chances of making the acquisition.
Making the Effort and Investment
Those who make acquisitions often make a huge effort and investment in locating acquisitions. It’s not going to happen while sitting at your desk and the phone is unlikely to ring asking you to acquire an agency; a buyer really needs to be proactive. Placing a “wanted” listing for only 3 months is not going to make it happen; a program really needs to have a continuous presence as landing the right agency can take time. It's like only having insurance for 3 months and cancelling their insurance policy because one never had a claim. Then when a claim occurs a year later, they missed the boat on using their coverage. Also think of the largest accounts in your agency; chances are these did not just land on your desk, you had to be extremely proactive, persistent and on top of your game. Acquiring an agency is not a lot different.
Using a Broker
A number of brokers do buy side engagements, which means that you pay them a fee to find you an agency. This is not a low cost service as there is a huge effort required. However if one acquires a $300,000 revenue agency and pays a $10,000 fee, this is about 3% of the transaction, which is not a significant given the future revenue stream. Short of connecting with a buyer who has their agency on the market, this can be among the fastest ways to acquire an agency.
Stepping up your acquisition campaign increases the likelihood of making an acquisition and have an advantage over your competition. An agency acquisition will be the biggest deal most buyers make in their lives so it’s best to treat it that way, especially when the seller in the vast majorly of cases is definitely in the driver’s seat.
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