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Why Every Agency Perpetuation Plan Needs a Helping Hand

When well-conceived and well-executed, a succession plan will allow you to enjoy retirement while leaving your business and clients in good hands.
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why every agency perpetuation plan needs a helping hand

Insurance agents often advise clients through the lens of retirement planning. Similarly, agents will ask their clients in their 20s and 30s to look ahead and ensure their lives are arranged in a way that will make them happy 40 or 50 years later.

Agents need to take their own advice. Business succession plans go deeper than just financial decisions. A thoughtful plan will account not only for you and your successor but for your clients and employees as well. When well-conceived and well-executed, a succession plan will allow you to enjoy retirement while leaving your business and clients in good hands.

Generally, succession plans fall into one of three categories:

1) Buy plans. These involve selling your business to another person or firm, or buying another firm to take over the management of your business.

2) Build plans. Here you'll choose a successor, bring them into your firm and train them so they're ready to take charge when you retire.

3) Lease plans. These are similar to build plans, except they involve a financial sharing agreement with your successor that works similarly to rent-to-buy contracts.

Once you select a plan type, bring in a team and get to work.

If you choose the buy route, you will likely need outside help to identify either a buyer for your firm or another firm for you to buy. If you choose the build or the lease paths, you may still need help identifying the best possible successor for your firm.

For all plan types, you and your successor will need attorneys to draft and document the succession contract. Buy plans also usually require an accountant's or appraiser's services to determine the fair market value of the firm you are selling or buying.

Finally, retain the services of a coach or counselor. Retirement is an emotional process for many people, especially small business owners who built their firm from the ground up. A coach or counselor can help navigate the personal and emotional aspects of a transition that a lawyer or accountant can't help with.

No matter which route you choose, develop a communication plan for employees and clients, as both groups will inevitably have questions and concerns. If you have a large enough firm, there may also be a role for a HR department.

Buy plans cannot be announced until the day of, so communication must be swift and efficient. For your most important clients, call them personally to express your gratitude and reassure them that your successor has the skills and experience needed to take good care of them.

Build and lease succession plans take longer—in these cases, you do not want to announce everything right away. It's best to make sure your successor stays, is a good fit and all the kinks are ironed out.

Just like our clients, we must engage in timely preparation for the future. With a solid business succession plan in place, you can rest assured that your work and your legacy will last beyond your lifetime.

John F. Nichols is a nationally recognized disability benefits consultant. He serves as president of Disability Resource Group, Inc., an insurance agency he founded in 1999. Nichols serves as the current president of the MDRT Foundation and is the current nominee to the MDRT Executive Committee.

Friday, May 13, 2022
Perpetuation & Valuation