As you are looking to purchase an agency or book of business it’s common to have the conversation about who on the agency team is staying and or leaving. 

For some agency owners may want to stay for a few years to help with the transition, or for tax and or retirement purposes it’s a requirement for the deal that the owner stays. 

There are some pros and cons to keeping the current agency owner through the transition. In this blog, we will outline how to identify the right fit for your agency and the seller. 

At APP we have seen some very successful transitions and we have seen some absolute disasters. We believe what you know in advance you can prepare for. 

On paper, keeping the agency owner may sound great! You get their knowledge, retention of top accounts, and the ability to make a slower transition. However, on the flip side, it’s very hard to go from owner to employee, and for many sellers the buyer is operating very differently than their current agency operations. 

Pride and ego can make for tense relationships, this coupled with new systems, standards, and procedures can be a recipe for disaster. 

However, armed with the information in this blog will help you identify if you want to keep the owner and if so how to make a smooth transition. 

Understanding What You Are Purchasing

The first step in identifying if you want to keep the current agency owner is to review their current operations. I like to play a little game of putting yourself in their shoes. 

Imagine you are going to work at their agency – how much of a culture shift would you have? Now, many agency owners have a very positive outlook and new technology and resources invigorate them to go out and produce. 

However, remember that many of these agency owners are heading to retirement, and learning a whole new way to operate may be outside of their intentions. 

Here are some questions to ask yourself if you were going to work at their agency:

• Technology: How many logins do they have vs. your tech stack – This can be a steep learning curve

• Leadership: Imagine going from an owner to a team member 

• Carriers: New carriers may be very attractive but if you were in your last years how much would stay with your current comfy carriers vs. new ones (and how many carriers the current owner has do you want to feed?)

• Agency Standards: Does your agency take cash? Or take walk-ins or even write non-standard or state minimums? If you were the new team member and you had to have difficult conversations with long-term clients how would you feel?

• Service Processes: In many agencies, they may overservice some accounts which may be a change at your agency. 

• Documentation: This can be a steep learning curve to learn how and why you need to document in a different and often more thorough way. 

To identify how steep of a curve this may be you need to identify how far your operations are apart. 

Understanding What the Current Agency Owner Wants

In some instances, the owner staying on is part of the deal. Some owners may only consider deals where they can stay on board. 

There are many private equity firms where this is their model and it’s very successful. However, these companies have a very specific agency profile they target and a structured plan with goals that the owners must hit.

Agency owners may want or need to stay on for financial reasons, tax purposes, or difficulty letting go of what they have built. 

You must understand the agency owner’s motivations for staying on. 

In many instances owning an insurance agency has been a very big part of their identity and provided a great lifestyle. 

Company trips, flexible schedule, community recognition and honestly it’s been a huge part of their lives for decades. Their friends are clients, they have deep professional relationships and due to the flexible nature of the business they often have a great lifestyle- but you can’t own the agency forever. 

In my personal experience, the agency owners who are staying on for identity reasons can be the hardest struggle. For these reasons, it is personal, not a business transaction. These can still be successful but you must be upfront and clear on the following:

• Exit strategy
• Job description
• Be clear on who they report to
• Be upfront about who the staff reports to
• Review the agency standards in advance 
• If there are goals or requirements make sure that are discussed

Our other big suggestion is to get this in writing. When there is money on the table people can often miss some details that become critical as you move in together through the purchase. 

 

Benefits of Keeping the Current Agency Owner

While the struggle may be real on the transition from owner to team member there are some positives that you need to identify and weigh out on keeping the current agency owner. 

Many times you can have a successful transfer with the right plan and expectations and this includes keeping the past owner on track with a plan to successfully integrate the new agency and team with the existing clients and agency team. 

If you are buying an insurance book of business this will be critical to nail down. 

Preserving Existing Client Relationships and trust

One recommendation we always have is to segment the new book of business by size and premium. There needs to be a successful integration of the top clients since they will drive the most value to your agency. 

In addition, depending on how the sale is structured (if you are or not paying on retention) it makes sense for both parties to see a smooth transition. 

We recommend that the past owner work the renewal in tandem with the person who will be taking over the account. Depending on the size and complexity, 2 renewal cycles are ideal. 

In the first cycle the previous owner and lead the process and in the second year, they can be the co-pilot. The renewals must meet the agency’s process and standards regardless of past experiences. 

Continuity of Business Operations

This is another area where having the agency owner around may be of value. Things like bank accounts, carrier contracts, general operations, and or HR matters are all things that come up post-sale. 

Being able to make a phone call and get the update and get filled in on the history of the account, process and the team is very valuable. The goal must be to transfer this information to your agency and team and not hold anything back. 

Remember, when done right the previous agency owner will be departing so use it as an opportunity to get all the knowledge documented you can. This should be a key strategy when you are buying an insurance book of business. 

Mitigating Staff TurnOver When Buying An Insurance Book of Business

It’s a big change going from working with one owner to a whole new team. If the past owner can help be a brand ambassador it can go a long way. Remember that exercise from earlier in this blog where you put yourself in the owner’s shoes – it’s the same for the team. 

Many times the selling agencies team can feel like they are doing everything wrong. It is quite a bit to take in – new carriers, teams, systems, processes and more! 

On this topic, it can be a wild card on how the seller reacts. Some are supportive and some after the deal is over hold on dearly to the way they prefer to do business. 

You need to monitor the situation and be upfront on who the team reports do as well as make a big effort to build those relationships. 

Strategies for a Smooth Transition

If you decide the right and best thing for both parties is to keep the agency owner on board for a set amount of time we want to walk you through some of the ways to make it a total success. 

Create Open Communication and Commit to This 

Be upfront that transitioning from owner to team member can have some difficult moments. Identify how you want to best communicate and book routine check-in meetings. 

You do not want resentment to grow. 

Open Communication & Collaboration

Be mindful that the seller has lots of experience and maybe a wealth of guidance and mentorship. They may be able to mentor producers or help strategize on some accounts. 

They may even be able to crack open some doors of key accounts based on their network. 

Systems and Technology 

We all must realize there is an end date to their tenure. Some past owners are very tech-savvy and some still rock the flip phone. 

Be upfront with your team and the past owner on technology expectations. 

Staff Members 

Connect with the agency owner on who the key players are. You want to make sure their compensation is on par with your team. Sometimes it’s higher and sometimes it’s way lower. 

You want to identify how to keep these team members healthy and happy. 

Key Clients

You must be in alignment and learn about the key clients. Getting a plan upfront on how to integrate these clients will be critical. 

Challenges and Risks in the Acquisition Process

As you structure the deal of buying an insurance book of business with the seller we want you to consider a few important topics that may influence how you factor the price and deal. 

• Client retention: How tied are the clients to the owner will they stay or go? What is the average age you look at in an aging book?
• Carrier Relations: In this market carriers are holding on writing new business and in some instances cutting commissions will this impact your sale?
• Cultural and organizational clashes: How many of the team members do you need and how many do you think will be a cultural fit? You must factor this in
• Potential liabilities: are there any risks that need to be identified this may be having one really large client that skews the book or a percentage of the book you want to run off

Conclusion On Buying An Insurance Book of Business 

Don’t let this blog scare you from buying an insurance book of business or retaining the agency owner. Instead, use it as a tool to go into the purchase with a strong plan. 

Once the deal is done the real work starts of integrating 2 successful businesses. We have a saying, what you know in advance you prepare for – this blog helps you do just that!

When you purchase a book of business you instantly grow and you very rarely lose money over time. You can gain great staff, career clout, and scale. 

The challenge is having a strong integration plan. If you are going to keep the agency owner make sure to set up the plan and communication upfront – plan for the worst and you will only be pleasantly surprised. 

Find and clarify the value the past owner can bring to your agency and team. 

If you have purchased a book and are struggling with these items – that’s why we are here! Make sure to contact us.