Why Every Agency Owner Needs to Think About Agency Perpetuation

You won’t be able to run your agency forever. Eventually, you’ll want to retire – but this doesn’t mean your agency has to end. By creating an agency perpetuation strategy, you can ensure the business you’ve worked hard to build continues, while you receive the value you deserve.

You May Need to Retire Sooner Than You Think

According to Zippia, only 11% of insurance agents are 20 to 30 years old, whereas 66% of are aged 40 or older. Using data from the U.S. Bureau of Labor Statistics, the U.S. Chamber of Commerce concluded that the number of insurance professionals aged 55 and above has increased by 74% in the last 10 years. It expects that 50% of insurance professionals will retire over the next 15 years.

Moreover, many workers are forced into retirement sooner than they had expected. In fact, a study from Edward Jones found that financial advisors say 40% of their clients were forced into retirement. A forced early retirement can happen for many reasons. Although layoffs are a common cause, business owners may also be forced to retire for other reasons.

For example, you may plan to continue working into your late 60s or even into your 70s, but an illness or injury could prevent you from working and cut your career short. Even if you’re still able to work part-time, you may need to cut back on your hours, which could require giving up the taxing position of agency owner. You may also want to scale back your hours and responsibilities to spend more time with your family. Family also becomes a cause of forced early retirement when agency owners need to quit or cut back on hours to serve as caregivers for loved ones.

The bottom line: You will retire eventually, and hopefully, it happens according to your best laid plans. Nevertheless, it’s important to have an exit strategy ready in case you are forced to retire sooner. Below are some important considerations.

What Do You Want to Happen to Your Agency When You Leave?

You’ve worked hard to build your agency. Understandably, you may have strong opinions about what will happen to it once you retire. You may be considering three options:

• Leaving the agency to someone you know. This could be a capable person who works at your agency or a son, daughter, or other relative who could take over the reins. Although this path may seem ideal, keep in mind that it may not work out exactly as you intend. For one thing, the person you want to take over may start his or her own agency before then, perhaps in another location. Inexperience with running an agency could also result in a difficult transition that puts the company’s reputation in jeopardy. Although a succession arrangement can work, it requires planning.
• Selling your agency to another agency owner. This type of perpetuation strategy may work well if you don’t have anyone in mind to take over or you’re looking to gain the best value for your book of business. However, if you’re forced to retire sooner than you expected and haven’t planned for this possibility, you may have trouble negotiating the best deal. Once again, planning is critical.
• Finding a partner that maintains the brand you built. If you sell to an existing agency, they could take your contracts but remove your branding. This can be disruptive to your clients. It may also be disruptive to your employees, who may even find themselves without jobs. If you want your brand to continue, you need to find an acquisition partner to support that plan.

A Succession Strategy That Works on Your Terms

You built an independent agency to do business on your own terms; your perpetuation strategy should also be on your terms. While the options above are quite common, there’s one more choice to consider: Selling your agency to your insurance network.
There are many advantages to this approach:

• Simplicity: Networks frequently acquire member agencies, so they have established tried and proven processes. They know how to help you navigate a sale while avoiding mistakes.
• Expertise: You know you’re selling your business to a company that knows how to successfully operate and grow – a stable option for your team and your clients.
• Trust: You’re working with a trusted business partner who has already helped build your business and has a stake in its success.
• Seamless transition. There may be options that preserve your brand and provide little to no operational disruption.

Heffernan Network offers two perpetuation strategies, enabling you to choose the one that better matches your needs.

1. Option One: Perpetuation That Preserves Your Brand. The Heffernan Network acquires your agency via an asset purchase and provides support for the new leader and transition, all with no impact on agency operations or on your clients.
2. Option Two: Traditional Agency Acquisition. We provide a merger solution with Heffernan Insurance Brokers, a national independent brokerage firm.

Are you interested in exploring an agency perpetuation plan?
Learn more about Heffernan Network.