Three key ideas for agency owners: Grow, partner or move on
Now more than ever before is the time to focus on growth, partnership opportunities, or perhaps, moving on.
Agency owners know how to sell insurance. But when it comes to selling their business? These are uncharted territories, and most don’t understand the basics of mergers & acquisitions as they relate to insurance agencies.
I recently made the biggest decision of my career and partnered with the Liberty Company Insurance Brokers. I’m someone who aspires to be a servant leader to the insurance community. As I was going through the agency merger process, I thought what I learned could help others like myself in the future.
Looking at the current state of the industry, we are at a tipping point in terms of the changes that have occurred. Don’t get me wrong: Our industry is thriving. But change is inevitable. That’s why, as insurance professionals look ahead, it’s important to consider these three concepts: grow, partner or move on.
Becoming a growth engine is key.
The best insurance agencies are growth-oriented. And when I say grow, I mean in all areas. Grow top-line revenue. Grow new business. Grow bottom-line net income. Grow your team members. Grow as a leader. Grow, baby grow!
For many agencies, growth is hard. Margins are tightening. Commissions in certain areas and product types are being reduced. Inflation and labor costs are rising. There are threats on every front from the direct writers, captive agents, and of course all of your other friendly independent agents.
Growth, while challenging, can be simple. Either write more clients, write more premium, or a combination of both. It’s that simple, and that challenging. Some in the agency owner community love the challenges of sales, marketing and creating plans for growth. Others can’t stand it and would rather be operators than innovators. But as IBM Founder Thomas Watson once said, “Nothing happens until a sale is made.”
For growth-oriented folks who resonate with the above, one area that we can all improve upon is the “acre of diamonds” that lie within cross-sale opportunities. But, if we are honest, most of us don’t have a dedicated strategy for cross-selling our book of business, and that must change. Planning and strategy are key to achieving our growth goals. So stop, think, and be intentional with this.
A partnership model is crucial.
In the last 10 years, the amount of consolidation in our independent agency space has been extraordinary. Fueled by incredibly low-interest rates, the likes of private equity, regional players, publicly traded agency brokers and your friend down the road, have all thought about, been a part of, or completed a merger or acquisition.
The concept of partnering was especially crucial to my agency when we chose to partner with a large national broker. In doing so, we vastly increased our resources. Most other agency owners could benefit from this approach, too.
Local agency owners need to focus on access to resources such as information technology, human resources, accounting, marketing, carrier relations and payroll. Larger agencies inherently have teams or departments to help with these functions. This can be especially attractive to those who are particularly sales and marketing focused, and don’t want to deal with the back-office work involved with these areas.
In addition, larger agencies likely have access to carrier markets that you may not have — an area that can be challenging, especially in the larger middle-markets. You might even be losing a carrier to a larger agency. Thus, if the cultural fit is right, consider merging with a larger agency as a way to accelerate growth.
When it’s time to move on.
Like many professionals, there’s a time and a place to move on to greener pastures. It’s widely reported that our industry is one of the oldest out there with the average age of an independent agency principal being late 50s to early 60s. Of course that’s necessarily old in terms of today’s day and age. But at a certain point, it’s possible to lose the drive and fire it takes to run a thriving small business insurance agency. That’s when it might be time to retire and monetize your biggest asset while multiples are still at, or near, all-time highs. There are also those who have entered the insurance business and later realized it’s just not for them. It’s a lot harder than it looks, and it’s okay to move on. Just remember the importance of having a plan in place.
Overall, our industry is strong and vibrant. The independent insurance agency is not going anywhere, regardless of what predictions come. As Mark Twain famously said, “The reports of my death are grossly exaggerated!” That statement holds true today for the independent insurance agency space.
All in all, my message to you is this: Now more than ever before is the time to focus on growth, partnership opportunities, or perhaps, moving on.
Doug Levi (doug@getstrategicins.com) is Chief Encouragement Office of Strategic Insurance Services and Managing Partner of the Liberty Company Insurance Brokers. These opinions are the author’s own.
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