For insurance agency owners, a well-conceived and properly executed perpetuation plan is a great mechanism for harvesting the value generated through their dedication and commitment to building their business. If planned properly and structured correctly, it is possibly the most rewarding and efficient method of harvesting value while allowing successors the opportunity to grow and yield value for themselves down the road.
While a sale of the business to an aggregator or public enterprise may appear to be lucrative for the seller up front, it forestalls the same opportunity for the next generation of owners, including the owner's descendants. Further, an ownership transfer through a perpetuation takes place when the timing is right for all involved rather than relying on the vagaries of the market or “which company is looking to buy right now.”
Perpetuation is an option, however, only for well-run, profitable, and growing agencies. If your agency is not a good performer, it is unrealistic to expect your younger producers to “bail you out” with an offer. However, businesses with reliable, recurring revenue will almost always have an opportunity to improve their operations if they are professionally run and managed with a daily focus on growing value.
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