What You Need to Know Before You Buy an Existing Insurance Agency
Buying a business can be a trying experience, especially if it's your first time doing so. Whether you're looking for insurance jobs and decide to strike out on your own or you have a successful insurance agency and you want to expand, there are many factors to consider before you buy an existing insurance agency.
Why Are You Buying?
Purchasing an insurance agency is a financial investment. If you live in the community where you invest, it's also a decision to commit to that community. Before you decide to buy, clarify why you are buying.
Your knowledge of sales, business management, and customer relations are highly transferable skills. Be sure that you want to manage a business when you're buying a business. Being the owner of an agency isn't the same as being one of the employees, especially as you increase the size of your business and the number of employees. The more your business grows, the more you'll focus on big picture business management.
Do You Have the Financial Resources?
If you're already in the insurance business, you have clients who continue to come to you year after year. These clients are valuable. They form a basis for your financial security.
If you're buying an agency for the first time or transferring clients, know that it takes some time to develop a base of clients. Insurance is a business built on a steady revenue stream, but you will need to work hard to build the groundwork for that revenue to come in.
Not only will you take over the business at a financial cost, you must make sure that you have the financial security to sustain the business. According to Agency Brokerage, "A buyer needs 20-25% of any potential purchase available in cash to cover the down payment and any operating capital to run the business." Make sure that you can buy the business and keep the lights on.
What Kind of Transaction Would You Like to Do?
Some people grow into a family insurance business and inherit it. Others work for the company and strike an agreement to acquire it gradually.
Do you want to purchase or lease a building and its assets, or are you primarily interested in buying the book of business from someone who's leaving the insurance field? Know how you'd like to buy, then prepare your financial case so that you can demonstrate that you have the ability to purchase the agency.
Get Professional Help
Get professional assistance to determine the best way to finance the purchase. Consider working with a professional firm that connects agencies with buyers. These firms can help you navigate the disclosures, exchanges of information, negotiations, regulations, and contracts that are involved with a purchase.
Get Ready to Make a Strong First Impression
You may be buying someone's legacy. You need to be prepared to make a positive first impression with the seller that you are committed to continuing that legacy. If the previous owner gave birth to the agency, he is, in effect, entrusting you with his "child" as well as his clients
We're here to help you develop your business. We understand the needs of independent insurance agencies because that's our business. Get to know your colleagues in the insurance industry, and learn more about the many membership benefits that we provide. Join American Agents Alliance today.