How can we enjoy the benefits of our agency’s value but not leave it?
The answer is a mindset change that will permit senior agents to sell down their interest in their agencies but still stay active in the business. Most buyers (except, in some cases, long term participants in the agencies) desire the old owner to stay for some period to transition the customer and carrier relationships to the new owners. Many new owners would even welcome the continuing participation of the old owners in service and relationship maintenance roles to maximize retention and earnings capacity. However, the keys to the retention of the old owners are the transition of decision-making roles, the level of activity of the old owners and the compensation expectations of the selling owners.
Make no mistake about this — The main block for having old owners stay with their agencies after a sale is EGO. The old owner has been in control for decades. If his ego cannot stand the transition of decision-making to a new owner, he must either continue in an ownership role or he must leave the agency. And this means that those high-ego owners may never personally realize the value of their agencies. Selling the agency and still retaining decision-making authority in the old owner is a recipe for disaster.
If, on the other hand, you can assume an “emeritus” position and continue maintaining relationships with your clients while the new owner makes the decisions and operates the agency then you may have an on-going role in the agency that is both productive and rewarding. Identify a specific book of business that needs your participation and the value of that role to the agency. The agency’s new owner will probably enjoy your active participation in retention (and in growth) of the agency’s book of business. Identify the appropriate value to the role and don’t expect a compensation level (and perks) equivalent to that earned while you were an owner. Your value should be equivalent to what you would pay to hire an experienced person to fulfill the role assigned to the selling owner – no more, no less.
Be Wary of the R.I.P.
Many agency principals feel that they have “paid their dues” and have earned more time off, additional perks, and leeway in their business dealings. While they are business owners, they are right. After they sell their businesses, they are described as R. I. P., Retired In Place. In the armed services we described short-timers who no longer adhered to the rigid rules of behavior as R.O.A.D., Retired on Active Duty.
Neither the armed forces, nor the independent businesses in the U.S. can afford participants who are R.I.P. or R.O.A.D. If your desire to remain in the business stems from the desire to remain active, to continue to serve your clients and to support the next generation of agency owners, it is commendable and should be pursued. Financial issues should be considered because value received is equivalent to value paid. But if you seek a continuation of your compensation (or its equivalent) without your active commitment of time and effort to the company, please reconsider your position.
No, Retirement is not a Requirement. It remains an option for agents who are tired of the “grind” or can no longer abide with the clients, the carriers, the employees or the vagaries of the industry. If they are still energetic enough to be active in the community, they should sell, retire and seek other avenues for their continued activity and mental well-being. A new career and community service are examples of fulfilling directions that take agents out of the insurance industry but doesn’t put them in a rocking chair.
If you feel that you’ve just “hit your stride” and are finally at the point that you no longer worry about the next sale, you may be better served (and live longer) by remaining active in the insurance agency – as long as you don’t get in the way of the new owner’s direction for the agency.
If you can neither afford to retire or have no potential successors, you MUST continue working through your later years, but you don’t have to concentrate on growth. Many agents have taken the decade after they should have retired to reduce expenses and time in the agency and wean the agency down, enjoying greater returns during those years than when they were forced to fund personnel, systems and business growth. It can easily take ten to fifteen years to wear an agency down to a pure service level for the existing client base. This may be considered for agents in circumstances in which the sale of their agencies would not return sufficient funds to sponsor their lifestyles for their expected lifetime.
Call Agency Consulting Group, Inc. for your Succession Planning and Perpetuation Planning needs (800-779-2430).
Reprinted from The PIPELINE, the national newsletter for agency principals. The PIPELINE is published by Agency Consulting Group, Inc., a leading consulting firm for independent agents in the U.S. for over 30 years. Call 800-779-2430, E-mail email@example.com, or visit www.agencyconsulting.com for information about the content of this article or PIPELINE subscription information.