Art of The Exit: Ensuring a Smooth Transition When It’s Time to Sell

• May 1, 2026

By Shawn Moynihan

While most agency owners are too focused on their current state of affairs to consider their endgame, the fact is there’s going to come a day when you hand the keys to a new owner.

Whether you decide to perpetuate internally, foster a funded business handoff to your successors, or go with an external sale, one thing is certain: There are several key steps you’ll need to take to maximize your agency’s value.

Get comfortable with the idea that your agency will—and should—outlive you. This is a good thing; it’s your legacy, and you deserve to be well compensated for the many years you’ve spent investing in it, both personally and financially.

The truth is, delaying your exit can be detrimental to your agency for several reasons. Scott Freiday, senior vice president at InsurBanc, points out that agencies with a longtime owner and no clear succession plan can suffer deteriorating revenue growth. They’re often in cruise-control mode, focusing only on renewals rather than investing further in the agency or expanding its book of business. Such agencies can also risk losing key producers over time if the business’s future remains unclear.

“It’s a systemic issue among small businesses,” Freiday says. “You need to have a written, explicit succession plan in place.” Then, you need to “develop your plan and memorialize it,” he says.

Further, a lack of planning doesn’t just affect day-to-day performance—it can also limit long-term independence and value.

“Delaying perpetuation planning threatens a firm’s ability to remain independently owned,” says Keith Schuler, president and CEO of InterWest Insurance Services in Sacramento, California.

“Perpetuation and succession planning are inseparable, and should inform all major decisions,” Schuler says. “Firms with a clearly defined perpetuation plan have more options and typically achieve higher agency value.”

There’s also the chance that an unfortunate incident could suddenly befall you, in which case your family will be left holding the bag. That’s hardly an optimal situation for anyone involved, and a rushed or uninformed sale will result in your heirs receiving far less than they would have if you had a thoughtful succession plan in place.

“Regardless of age, agency owners have to realize they could walk across the street and get hit by a truck,” says Al Diamond, president of Agency Consulting Group Inc. in Cherry Hill, New Jersey. “They need an actionable plan for their agency if something should happen to them.”

Making mindful decisions about how your agency will endure doesn’t mean you can’t stay active. It simply means you’ll be protecting your most valued asset while you decide how and when you’ll exit.

One Foot Out the Door

The first step is to recognize that your retirement and the perpetuation of your agency are two very different, but related, subjects. “The agency principal has to sit down and do their own estate and financial planning first,” says Diamond.

To inform your decisions as you craft your exit strategy, consider:

• How much money will I need for retirement to support the lifestyle I’ve grown accustomed to?
• How many years do I want to continue working?
• Do I have other interests outside my agency that I want to focus on?
• Ultimately, who would be the best person to lead my agency into the future?

Knowing how long you want to continue working will help you decide whether to pass the baton to someone else—either an internal candidate or someone you’ll bring in for that purpose—or sell to an outside party. Your exit plan is twofold: It needs to address both the expected length and quality of your retirement years and who will own and manage your agency.

“Determine your goals and your timeline,” Freiday says. “What does your runway look like, and what would your life look like post-sale?”

Both Diamond and Freiday have stories about principals who decided to retire, sold to an outside party, and only months later discovered that retirement was far more boring than they ever believed it would be because they had no outside interests.

“If you don’t know what to do with your life outside your insurance agency, then stay in it and decide what you do want to do,” Diamond advises.

What’s Your Agency Truly Worth?

The truth is, selling your agency isn’t that difficult. Chances are, you’ve probably received some offers already. Savvy owners know, however, that a well-structured payout will win you maximum returns.

Just because you’ve spent decades running an agency doesn’t always mean it’s worth what you think it is. Engaging a firm dedicated to insurance agency valuations is key. They will review your financials through the lens of potential buyers.

Forget what you may have heard about the value of your agency being several times the amount of your annual revenue. The value of a business is two things: how much cash you have in the bank—and any other “liquid” assets—and how much you can sell your revenue stream—your renewal cash flow—for.

“The ‘multiple’ is a fool’s errand,” Diamond says. “Your agency is worth what its future earnings will bring. No more.”

Tidying up your books, Freiday says, is critical when best positioning your agency during the valuation process. For example, if you’ve been taking money out of the agency and not reinvesting it into your business for things that provide real value, that will hurt your valuation. If you’ve got debt on the books from acquiring other agencies or books of business, that’s a different story.

Experts will tell you to stop borrowing money from your agency and pay off any money you’ve taken out. If it’s repaid, it becomes an asset. If you have borrowed money on your books, even though it appears to be an asset, any savvy buyer knows that it’s just a hidden liability.

Also, retain the services of a certified public accountant with experience working with insurance agencies and clean up nonrecurring expenses on your balance sheet. Overall, ensure your reporting is accurate and reconciles.

Freiday also recommends pulling your own credit report to make sure there aren’t any issues, such as late payments on credit cards. “Talk with your spouse. It’s going to be one of the biggest transactions of your life, so have a hard look at what your personal picture looks like,” he says.

Once you’re able to ascertain what your agency is worth, valuation consultants can assist with the sale and help you develop a confidential pitch deck.

Throughout the valuation process, you may discover that it’s not yet time to sell. If your agency has been declining for the last five years, it will be harder to find a buyer. In that case, you should continue to run your agency and focus on adding to its value as much as possible to make it a more viable acquisition target.

“You’ll make more money that way than by selling it,” Diamond says. “You have to build the value of your agency. Take your income and supplement your asset value, so that down the line you’ve got more to offer.”

Schuler advises that if selling becomes a viable path, “begin operating as if the agency has already been sold,” he says. “Decisions made through that lens will help maximize value.”

Internal vs. External Sales

Once you determine you want to sell, it becomes a matter of who you think your new owner might be and how many years you’ll want to spend managing the transition.

“The real decision is whether you’re looking to perpetuate externally or internally,” says Brent Phelan, president and CEO of Phelan Insurance Agency in Versailles, Ohio. “Once that decision has been made, you either organize your business and compensation using the pro forma approach and have real numbers for external perpetuation, or determine your exit plan and find the best way to match that with your preferred internal candidates.”

If you’re thinking of selling externally, the value of your agency can vary depending on the potential buyers, all of whom have different expenses and revenue flows and different plans in mind for what they’ll do with the asset once they acquire it. One agency can have five potential buyers and five very different values, each based on the cash flow potential for that buyer.

If a potential suitor is interested only in your client base, they may offer you a very attractive price in cash. But they may plan to close your office, let some of your people go and make a larger profit on your agency’s book than you did once your overhead and staff costs are eliminated.

An internal sale can provide more runway to transition your successor while you wind down your own level of participation. “If you know you have another generation of leadership behind you and you can retire from the agency in a slow process, that gives you two to five years of preplanning to do this the right way,” says Diamond.

Another advantage of an internal sale is that, if you negotiate properly, you can arrange a much longer payout and accept smaller payments over an extended period, as opposed to a larger sum received up front in an external sale. The extended payout period provides the seller with interest payments that increase the overall return. This also makes it easier for an internal successor to afford the payments with the agency’s cash flow.

Phelan says that if you do decide to sell internally, it’s often beneficial that the buyer bring some money to the transaction. “Otherwise, by the time they pay you, pay the interest and pay taxes, they are unlikely to see anything additional in their pocket for years,” he points out.

“If you sell to your son or daughter and you’re willing to give them 15-year terms, they can profit from the growth and management of the agency,” adds Diamond.

In either case, it’s wise to factor in the tax implications. If you sell to an outside party, that most likely will be an asset sale; they’re buying your assets from your corporation. In that case, you’re going to pay not only the capital gains tax, but also greater income tax on the revenue that you generated. On the other hand, an internal sale is often a stock sale, in which you’re just responsible for the capital gains tax.

What’s My Timeline?

Dedicating at least two years to preparing the firm for a transaction is ideal. “It’s not solely about valuation; staff readiness is equally critical,” says Schuler. “Buyers do not want to be responsible for elevating performance or enforcing higher standards, as that creates post-transaction stress for both parties.”

Phelan agrees that while two years is generally an acceptable time frame, “it really depends on where the agency is on Day One. If your agency is being run like a true independent business and not the alter ego of the ownership, you might be ready in 12 months.

“On the other hand, if personal expenses and above-industry-standard compensation and benefits are plentiful and blended into the financials, it may take a bit longer. Most buyers will either want to see a year or two with clean financials or they’ll discount the valuation if the date is sooner,” he adds.

Freiday says it’s never too early to start conversations with potential buyers once you know you want to sell. “That allows you to lay the framework for the conversation, and all parties to be part of those talks. Set your benchmark for the payout you want to achieve.”

Then, he says, start envisioning what your perpetuation process will look like. Will it proceed in stages? If you’ve already been grooming the next generation of leadership, you can step back into a chairman role, so you’re less engaged in the day-to-day operations.

To get the best deal possible, “work with experts in the insurance industry space—someone with a deep understanding of agency valuations,” says Freiday. “Do the same with a lender: Talk to an industry bank.”

Phelan cautions that in his experience, the best salespeople don’t always make the best managers; you may want to separate management from ownership, as in a corporation. Another common mistake he’s seen is when principals unwittingly set up their family members for failure, either by staying involved and not letting them be in charge, or by giving them control before they’re truly ready to run the business.

As Freiday puts it, “Not everyone’s cut out to be that owner/operator.”

“You have to transfer your responsibilities over time, get them involved with your employees, larger customers and carriers. Those are the three audiences who have to be comfortable with your transition before you carry it out,” Diamond adds.

Why You Need a Contingency Buy/Sell Agreement

Whether you’re 30 or 70 years old, if something happens to you and you have no succession plan in place, it could quickly siphon off the value of your business.

When a principal dies, the crisis point for every agency is the period between the owner’s death and the date of ownership change. Your agency’s valuation can dip between 30% and 50% or more in just a few months, says Al Diamond, president of Agency Consulting Group Inc. in Cherry Hill, New Jersey.

A contingency buy/sell agreement solves this problem. If you have other owners—or even potential owners—in the agency, you can execute this emergency plan with them.

With a contingency buy/sell, if you die, the co-signed parties in the agreement automatically take control of your agency the next day and continue to operate it to support your clients and staff. A key man insurance policy, which the agency’s successor pays for, gets triggered and pays your successor the full value of your agency, with a requirement to use that benefit to purchase the agency from the deceased owner’s estate. Your family is paid and your clients and staff are still taken care of.

Diamond notes that if you have no potential successor within your agency, a contingency buy/sell agreement can be executed with another agent, either one with a similar need for contingency perpetuation or someone you trust. The execution of the agreement provides sufficient insurable interest for each participant to cross-purchase life insurance on the other, to be executed if either party dies. “Identify another agent operating near you whom you respect enough to engage in this,” he adds. “It’s terribly important. Very few people have one, but they should.”

Meet the New Boss

Maintaining consistency with your clients and carrier partners is paramount throughout the ownership transfer process. Transparency goes a long way in maintaining those relationships.

“Don’t wait until you sign your purchase agreement to have those conversations with your carriers,” says Freiday. “Begin planning early, define roles clearly, and communicate your timeline to all parties. Make sure you’re talking to your carrier reps to make sure those appointments transition.”

Start early, communicate often, and lead with confidence in the next generation, says Schuler.

“Carriers and clients are remarkably supportive when they see continuity, preparation and a clear plan. What unsettles them is silence or uncertainty,” he adds. “Empower future leaders publicly, involve them meaningfully, and make the transition visible long before it becomes official. Done right, succession isn’t a disruption—it’s a sign of strength.”

Shawn Moynihan is associate at Aartrijk.