Tips for Preparing to Sell Your Insurance Agency

Tips for Preparing to Sell Your Insurance Agency


Article By: Kimberly Bunce


As an independent insurance agency owner, you've worked very hard to build a profitable agency. It is exciting but can be intimidating to move forward with the decision to sell your agency. If you are thinking about taking that next step, read the tips below to make sure you are prepared for the buy/sell process. 

Collect Accurate and Up-to-Date Financial Information

The first step to preparing to sell your insurance agency is making sure your financial information is in order. Clean balance sheets and financial statements prepared by a reputable CPA firm make it easier to determine the agency selling price and make for a quicker sale. Having accurate and reliable financial documents will make your agency look more favorable to the buyer. Strong internal accounting is important and a well-known outside CPA firm will lend additional credibility. Additionally, the type of year end reporting that is provided gives a potential buyer more comfort in making their decision.

Be Aware of the Expenses Run Through Your Agency

Some companies choose to run non-agency related expenses through their income statement. To paint a true picture for any potential buyer, these expenses should not be included. Ideally, only agency revenues and expenses will show up on the agency income statement to show not only agency profitability but agency business value. From there, an accurate business cash flow and valuation is more readily determined.

Align With Good Carriers

Form contracts with quality insurance carriers and have a nice variety in your offerings. If you do not work with enough carriers, there is risk to you and your customers. A balanced spread of insurance carriers is best for your customers and your potential buyer. Also, maintaining a schedule of contingency revenues with each carrier over the past five years will give some consistency and additional comfort to the buyer knowing that this profit stream is recurring.

Consider Your Selling Options

In your perpetuation plan, it is important to consider to whom you would like to sell your insurance agency. You may choose to sell it to an individual or an agency that is expanding, to existing capable employees, or a private equity firm. If you would like to keep the agency running with the same staff, operations, and values, your best bet would be selling to existing employees or another agency with a similar culture.

Have a Strong Support Team

A business is only as good as the people supporting it. Having a strong support team will help in all aspects of the insurance agency sale. It is important to have knowledgeable customer service representatives on your team. It is an advantage if your CSRs are licensed to transact business. This will ensure efficient business handling and a greater customer experience. Accountants, attorneys, and bankers are all third-party firms to have employed before the sale. Accountants will help make sure all the finances are in order and determine your after-tax proceeds given different selling scenarios, and attorneys will look over all the legal documents associated with the sale. It is important to work with a banker that understands the insurance agency and the industry and is comfortable with the book of business as a source of collateral. 

Preparing to sell your insurance agency is a major undertaking. The five tips serve as a nice starting point for anyone beginning the process. For financial advice and guidance along this journey, Security Financial Bank lenders are here to help. They specialize in insurance agency financing and create a personal connection with clients when guiding them through their options. For more information on the financing process, call 888.254.0615.

Kimberly Bunce, a relationship manager at SFB, brings a fresh perspective to SFB's Insurance Agency Lending Team. During her tenure at the bank, she has been involved with a complicated, ever-changing partner buyout that morphed into a partner buydown over a five-year period. Kimberly's experience as a CPA and her attention to detail helped the transaction run smoothly.  Kimberly has since been involved in additional projects for the same owners as well as acting as a key advisor for other professionals.