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Don’t Plan on Selling Out—YET

Posted by James Wong on Mon, Nov 14, 2022 @ 12:00 PM

Things I learned the last 9 months after presenting 5 Signs it’s Time to Sell Your Agency and unveiling Escape Velocity—our 5 point platform for agency success. 

business person using a tablet

If you recall, we walked through the lives of two special individuals in our industry who created agencies that are well recognized.

Agency 1

The first one was a woman in her 60’s that had a change of heart during her daughter’s wedding that led her to see the Agency was no longer one that she loved, nor wanted—as it held her back from pursuing the retail side of the business and her passion for educating others on the benefits/features of our products. Well, I’ve learned that she isn’t rare but rather one of many that are going through this dilemma. 

If I could go back in time, I would have encouraged her towards committing 6 months to working on aspects of her business that would make her Agency more attractive to a buyer. Potentially unlocking a much higher price with more favorable terms. Through careful consideration, we’d look at the 5 areas (Talent, Technology, Model, Expertise and Marketing Funnels) to make reasonable improvements where we could. We’d tap into the power of marketing funnels—the most important area for business growth.

In our last blog, “What Our Industry Needs Most,” I shared how AI and machine learning are changing the industry, and why the timing of our messaging can have a big impact on the effectiveness of our marketing.

Marketing Funnels enable the industry to connect the need to the professional by offering guidance on products. The introduction of AI and machine learning will create stronger relationships both to the firm and product solution at a faster pace relative to traditional marketing efforts (mail, email, phone calls).

A faster pace is key here especially in this example because the agency is in a delicate time period where it must execute to maximize the terms of the agreement or purchase price. And trying to sell sooner rather than later.

Thankfully, we have technology helping us. Fintech and Insuretech companies all over are using data to better understand consumer behavior, determine where the best opportunity is, and achieve a greater ROI.

Outsourcing the funnel creation process to an organization who makes this their area of expertise is the best way to achieve deeper relationships and exponential growth. Both short- and long-term.

The conversations I’ve had with dozens of agencies confirms that this framework adds value to an Agency and sets them on a great path forward through the strategies we collaborate on.

Agency 2

The second Agency example from Blog 1, How to Find and Bring On the Best Talent in the Insurance Business,” featured an industry icon that I truly respect. He felt the due diligence process was cumbersome and impacted his team’s ability to perform their normal duties—causing revenue to decline.  No surprise, this impacted the offer that he eventually accepted because it was the only offer and the idea of looking for another offer and filling a data room was not something he wanted his team to do. 

I’ve heard this not once, not twice, but several times that folks weren’t ready for the process and found themselves accepting terms that were lower in upfront money with the potential for backend money contingent on the acquirer’s performance—and their own agency performance as a part of that.  This backend amount represents a great mystery and I’ve seen it work out greatly while also seeing the opposite. From my conversations this year especially, a good amount of Agencies will experience this journey as well.  What can be done about it?  Is there a way out of this?  What’s the path forward? 

Remember, this story is positioned a few years before the story of Agency 1—which means there is time to make the investments to change and command a better value. 

I’d start with reviewing the Escape Velocity framework and assess each area: Talent, Technology, Model, Expertise and Marketing Funnels. How are you doing there?  Which ones are you doing well? Not so well? Then come up with an action plan to tackle the ones that you find most meaningful if you were to put a value on the business.

If you need support, I’m right here. It starts with a 20-30 minute Discovery Call but it could lead to a company you love. 

Twelve months ago, I started this journey to share the Escape Velocity framework with agencies of all shapes and sizes. And I’ve discovered so many great people along the way that have made a big difference in their agent’s, employee’s and family’s lives.

They are part of a much larger group nearing the end of their career and wondering what their “reward” may be. Agency owners have great options in this environment still—hold, grow (using us as a strategic partner) or sell their agency.

I feel I’ve only scratched the surface of learning ways others have done things successfully—or not. And how to become more useful to other agencies. The groups I’ve connected with are seeing great results and have expressed they’re having more fun too. 

My advice—don’t plan on selling out—YET. There are more agencies out there that may end up as these two examples above did.

To guarantee it’s not you, let’s focus on the results of two additional agencies that I had the opportunity to work with for a few years before they sold. Here’s what they’ve shared with me about the collaborative work that was done together prior to their sale:

The first agency, a family business, sold to an investor that wanted to invest in specific areas to improve their business and provide a diversification strategy for their families long, hard work.

“Partnership pays dividends!  Every insurance agency at some point will go through the mental gymnastics required to make a decision on building it alone or working with an established partner.  We were fortunate to have worked with Partners Advantage for a few years prior to the sale of our family’s agency. Our relationship with Partners Advantage improved our position with several carriers, allowing us to invest back into the business with key staff and resources. Ultimately, when we were approached by an acquirer, the value of those investments were self-evident. We are excited about our future, our new partner, and the marketing opportunities ahead of us.”

The second agency needed the most support with their long term plan—beyond earn out. They sold to a firm who’s made significant investments in technology which paired nicely with their expertise in marketing funnels and operational efficiencies.

“We were able to receive strong support on accessing the marketplace of carriers, insights on best practices for setting up an IMO and coaching to focus on the most important aspects of our business that is critical for long term success. I believe having these priorities in cement helped us receive a really strong offer from the acquiring firm that we accepted.  Additionally, it helped us chart out a long term strategy with them as we take a tech-forward platform out to the industry’s best advisors and producers.”

As I reflect on each agency I have worked with over the years, I am driven to pursue more of these types of outcomes.

You don’t have to leave money on the table if you can spend a few months intentionally looking at ways to improve your agency for max value during earn out period. Or spend time learning how to prep your firm so you can negotiate more favorable terms that fit you.

Schedule a Call With James Wong

Plus, be sure to check out the Escape Velocity Resource Center. You’ll find so much great content on the 5 forces that are holding your agency back from reaching its full potential.


Tags: agency resources, insurance agency resources



This content is for informational and educational purposes only and is not designed, or intended, to be applicable to any person's individual circumstances. It should not be considered as investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action.

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