Strategic Resources for Your Insurance Agency

Selling Your Insurance Agency - Prepare Today!


You've worked hard for years or even decades in building your independent insurance agency and have decided to sell. The time has come to finally "cash in your chips" so to speak and enjoy the fruits of your labor. You're very excited! However, before you start talking with potential sellers, there are several "to dos" that you'll need to check off your action list. Otherwise, you may slow down the selling process or even aggravate potential buyers that could be a good fit for you and your business. Below are some "to dos" to consider:

Financial Statements - The number one item that will need to be in order and ready to share with potential buyers are your business financial statements. If you or your accountant don't have ready access to your financial statements, take time today to get copies of them. Most buyers will ask for a year-to-date (YTD) "profit and loss" statement (P&L) as well as copies of you last 3 calendar years of P&L's. Buyers want to get a feel for your income and expenses as well as the profitability of your business. A P&L is not the only financial statement you may have but it's the most important one. As a side note, unless a buyer is doing a "stock purchase" of your agency, they will not usually pay much attention to your "balance sheet" statements. The P&L is want they really want to see!

Home Page Logo Email Joel Farley Facebook Linkedin

Cash Flow Statement - A cash flow statement is not something normally that will be prepared by your accountant on a regular basis, however, it doesn't hurt to have one in-hand when you are selling. This statement basically shows the inflows and outflows of cash coming into your business and going out over time. Buyers like to see how much cash is left over at the end of the year. This is especially true with buyers who are borrowing significant amounts to fund the acquisition of your agency. They are most interested in seeing how much positive cash flow is left over during the year to pay their loan payments for the business.

Capital Gains - Well before you make the final decision to sell your insurance agency, you should have a pointed conversation with your accountant about how much (if any) you'll pay in capital gains taxes. Many sellers will wait until they are far along in the selling process to have this conversation with their accountant. Sometimes, the seller will suddenly decide not to sell after they understand how much they'll pay in federal as well as state capital gains taxes. Don't be that seller that wastes the time of potential buyers because you haven't figured how much you'll owe the government in taxes.

Carrier Reports - Reports from your carriers on the makeup of your business is very important to buyers as well. These reports will give loss ratios, retention ratios, a split-out of premiums and commissions sorted by each carrier as well as other important details about your customers. Most sellers will get these reports directly from their carriers or have in-house agency management systems to pull the details from. Be organized and have the reports at your disposal.

These are four common areas to focus your preparation time. The time spent on the subjects/areas above will make the selling or your agency a much more enjoyable process. Get started today!

If you have any questions about the process of selling of an independent insurance agency, feel free to contact us at Ron Christopher Co., Inc. We have been matching-up buyers and sellers of independent insurance agencies for 10+ years and work across the US.

Explore Agency Equity


Stay up to date with AgencyEquity

absolute absolute.gif absolute