Our 7th and last factor in valuing an independent insurance agency is the one we all try to avoid and that is death.
7. DEATH
No one likes to think about it, but death does have a major impact on the value of an independent insurance agency. Owning and running a successful agency takes a lot of time and dedication. Having spent countless hours and energy growing the business many owners find it hard to let go. This is understandable, but waiting until it is too late will cause a major devaluation of the agency especially when there aren’t any written backup plans. In addition, no one wants to put their spouse or family in this position.
Sunset Insurance Group has seen multiple transactions where an unexpected death occurs and everything falls into chaos. Some of these ended up selling for thirty to forty percent less than what the true market value was prior to the owner’s death. In other cases the agency was handed over to employees or young family members that had no experience in running an independent insurance agency. Many of these started losing business due to poor management. These agencies are now either a fraction of its original size or ended up being sold for less than half of what the agency could have sold for prior to the owner’s death.
We are not trying to create or horror story. There have even been cases where experienced family members have stepped up and continued to grow the business. However, these are exceptions rather than the norm.
The lesson to be learned here is to prepare a succession plan even if you plan on passing the agency down to a family member or partner. Death is a traumatic time for loved ones and is something we all will experience. Don’t wait until the last minute. After death will likely be the hardest time to quickly find a buyer and these buyers will expect a much lower valuation than they would have prior to this sad event.
7. DEATH
No one likes to think about it, but death does have a major impact on the value of an independent insurance agency. Owning and running a successful agency takes a lot of time and dedication. Having spent countless hours and energy growing the business many owners find it hard to let go. This is understandable, but waiting until it is too late will cause a major devaluation of the agency especially when there aren’t any written backup plans. In addition, no one wants to put their spouse or family in this position.
Sunset Insurance Group has seen multiple transactions where an unexpected death occurs and everything falls into chaos. Some of these ended up selling for thirty to forty percent less than what the true market value was prior to the owner’s death. In other cases the agency was handed over to employees or young family members that had no experience in running an independent insurance agency. Many of these started losing business due to poor management. These agencies are now either a fraction of its original size or ended up being sold for less than half of what the agency could have sold for prior to the owner’s death.
We are not trying to create or horror story. There have even been cases where experienced family members have stepped up and continued to grow the business. However, these are exceptions rather than the norm.
The lesson to be learned here is to prepare a succession plan even if you plan on passing the agency down to a family member or partner. Death is a traumatic time for loved ones and is something we all will experience. Don’t wait until the last minute. After death will likely be the hardest time to quickly find a buyer and these buyers will expect a much lower valuation than they would have prior to this sad event.