Human Resources Issues
How familiar is the successor with the human resources laws that apply to your agency? Does he know how to interview candidates, do performance reviews on existing employees, and terminate problem employees? Lack of knowledge in this area can be devastating. Just defending yourself against an HR-related lawsuit can cost $100,000. A mistake in this area can cost the successor (as well as you) the agency.
Marketing and Client Issues
How familiar is the successor with the agency’s current geographic market area as well as potential new marketing opportunities? How will your key clients and centers of influence be transitioned to the successor in the event of your death, disability, or retirement?
Developing a Game Plan
Once you have identified your likely successor, you need to evaluate this person by applying the preceding questions to him or her. You also need to determine how long it will take to bring him up to speed in all the areas he needs to be knowledgeable in. How does this fit into your personal retirement plans?
If you want to retire at the end of the year and it is going to take your successor two years to reach an adequate level to run the agency, you have two choices: delay your retirement or sell to someone else. But retirement is an easier issue to deal with than your unforeseen death or disability. In those cases, you may not have the luxury of time to get the successor up to speed in all these areas.
This may necessitate a change in your perpetuation plan from selling to the successor to selling to a third party. But a third party may look upon your death or disability as a fire sale since there will not be a transition period. The result could be a lower sales price. Your best bet is to plan early and constantly review your plan. You may also want to bring in an outside consultant to help facilitate an agency perpetuation planning meeting and help develop your game plan.
About the Author: Jon Persky, CPA, CIC, PHR
Jon is the president of Optimum Performance Solutions, LLC (www.optperform.com), an insurance agency consulting firm providing valuation, merger and acquisition, agency perpetuation, strategic planning, and marketing and retention services to insurance agencies nationwide. Jon is the author of Maximizing Agency Value II as well as Managing Human Resources in an Insurance Agency). He is also a member of the CIC national faculty, Jon can be contacted at 813-835-7337 or firstname.lastname@example.org.
(This article originally appeared in Resources magazine and is reprinted with their permission).