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Set Yourself Up for Success Now

Whether you are in the early or late stage in your career, the steps you take towards your future should be deliberate and well planned.
Sponsored by Providence Bank Agency Finance
Set Yourself Up for Success Now

The new environment you have to work under given the impact of the COVID-19 pandemic may make planning your exit look more appealing than ever. If you've been considering retirement, transitioning your agency is still possible in the current climate. 

Perpetuation options generally fit into four categories: family, staff, peer or newcomer. Your kids can be great successors, as can loyal staff members. If those aren't options, look for peers in your community with the same values. A final alternative is selling to a newcomer or larger aggregator. Don't limit your search.

Identifying your objectives for your eventual retirement is important in determining which path may be right for you. If the highest valuation is primary, then selling to your family or staff may not be the right choice as those usually result in the lowest valuations. If consistency for your customers is primary, then transition to a family or staff member may be the best answer.

There are five keys to a successful perpetuation.

Can anyone replace you?

Although you should find a successor that shares your values and work ethic, remember that they won't be you. You grew with your agency, just like they will. The pandemic will likely have a major impact on how your agency is run in the future, whether that is with new technology or adapting to an environment where personal protection is a necessary step to keep your staff and customers safe.

Prioritize customers

Your customers want an easy transition so clear communication is imperative. Customers may be less inclined to meet face to face, so having video calls with large clients may be an alternative to face to face meetings. Either way, ensure customers feel comfortable about the transition.

Be realistic about the valuation

You will probably want more than the agency may be worth. Pouring your life into it doesn't necessarily translate to quantifiable value. Where you fall on the spectrum for revenue growth, retention rates, customer demographics and carriers will impact how much your successor is willing to pay and whether it's financeable. How you've adapted to the pandemic may also impact the valuation. 

Talk to your advisors

Engage your attorney, CPA and lenders early so that you understand the tax and legal considerations as you formulate your plan. It's likely that you won't want to finance the sale to your buyer on your own, so talking to lenders who understand your business is essential to understanding how the financing works and ensuring that your successor is financeable.

Plan, plan, plan

The definition of insure is to secure or protect someone against a possible contingency, which is what you do every day. Do the same for your business by ensuring that you have a backup plan that meets your objectives should your first alternative not work. It's never too early to start planning.

The full article can be found on Providence Bank's resource page.


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Monday, October 19, 2020
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