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How to Start Your Agency Perpetuation Plan Now

Are you one of the many agents without an agency perpetuation plan? Many insurance agencies have just one owner, which makes having a perpetuation plan in place even more critical. If you don’t have one yet, now is the time to start planning!

Read on to learn how to start your agency perpetuation planning.


Start Your Agency Perpetuation Plan Now

If you haven’t created your perpetuation plan yet, follow our steps to get started. And if you do have a plan, take a moment to review it and make sure you have covered all the important aspects of perpetuation planning.


A perpetuation plan protects everyone

Having a sound perpetuation plan in place for your agency protects everyone. It is a wise investment in the future of your business and can be an important part of your strategic plan. If something unexpected happened to you as the agency owner, your business may suffer while others scramble to manage it in your absence. But with a perpetuation plan in place, your agency can continue business as usual even in unexpected and stressful circumstances.


Answer some basic questions before starting your plan

Creating your agency perpetuation plan will take some time. It is not a weekend project — you will need to do some research and consider the answers to some basic questions before you can start planning.

  • When do you want to exit the business?
  • Will you stay involved after your retirement?
  • Is it important to continue your agency with the same name, products, and employees?
  • Are you considering selling or merging with another agency or do you have heirs who want to take over the business?
  • If you have more than one owner, are all the owners aligned on their expectations for timing, funding, ownership transfer, and other critical details?
  • Who is your ideal future owner?
  • What resources will I need, and which professionals do I need to consult with, like accountants, bankers, and attorneys?


What to include in your agency perpetuation plan

Your plan should outline how you will transfer ownership of the agency in a clear, systematic way. Include these components when drafting your plan:

  • List the people involved in the transaction
  • Describe the events that will trigger your perpetuation plan
  • Determine the valuation method used to calculate the value of your agency
  • Define the insurance requirements, funding sources, and share transfer eligibility
  • Review how you will handle tax issues
  • Decide how to resolve disputes
  • Write down the process to dissolve or modify the perpetuation plan

You may want to have life insurance for each principal to protect the business. You should also have a buy-sell agreement in place. A buy-sell agreement between owners gives surviving owners the opportunity to buy a deceased owners’ shares to continue the company if one principal dies unexpectedly.


Keep adding value to your agency as you plan

In the meantime, make sure your agency is running efficiently. Keep your systems up to date and manage your data effectively. Maintain your profitable book of business and continue improving the agency as you create your perpetuation plan. Make your retention rate a top priority since this will be a critical metric for buyers in the future. Upholding and increasing the value of your business will help when you eventually execute your perpetuation plan.

One thing to keep in mind as you think about the future is to be realistic. It is human nature to think highly of ourselves — and you likely have a higher value in mind for your agency than others will. It is important to remove your emotions from the facts — and keep working to grow value as you go.


Use Your Network For Support During Perpetuation Planning

Now is a good time to lean on your network for support, guidance, and expert referrals. You may need someone to help with various aspects of your plan, like a financial professional to help you value your agency. This is when your strong professional network comes into action — reach out to ask for advice!

Consider joining a membership organization dedicated to helping independent agents and brokers thrive, like the American Agents Alliance. As a member, you have access to a network of insurance and risk management professionals. You also will find educational resources and discounts on great products to run your business once you join.

Become a member of the American Agents Alliance today to see how we empower independent agents and brokers to thrive!

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