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If you are looking to buy an insurance agency in Florida or anywhere else in the United States there are some very important factors that you will need to take into account.  Awareness of these factors can increase the probability that you will end up with a great buy and be completely satisfied with your acquisition of an insurance agency.

It should be apparent to you that the financials of the business are amongst the most important aspects you must consider when you want to buy an insurance agency or any other kind of business. You need to ask yourself careful questions.  For example, what is the real reason the owners have agreed to sell such a valuable asset with a recurring revenue stream?  On some occasions they may reluctant to give you the whole truth.  In this case, you will need to get the information for yourself.  The financial records always tell a story and will reveal a lot about the business situation over the past several years.  It is good to start with a bit of skepticism.  Keep in mind that often, there have been financial difficulties or future fiscal troubles envisaged that led to the decision to sell. The timing of the sale is hardly ever an accident or coincidence.  You will need to be as careful as you possibly can when you start to look the company over and sift through the financials to look for trends, expenses and income.

One of the very first things you will need to do is a cash flow analysis of the insurance agency. Cash flow is one of the best ways of getting a clear picture of the true valuation of any business.   Fortunately, it is also a very difficult thing to mask or represent inaccurately. There must be clear documentation about the circulation of funds, corroborated by bank statements and tax returns. As a potential acquirer of the insurance agency you will need to pay special attention to new insurance policies issued via the agency, as well as renewals rates and commissions paid by the insurance carriers. Make sure to examine each and every revenue-generating source in the business. This will give you the whole picture about the present and future long-term earning potential of the insurance agency. Recurring expenditures like rent, salaries and advertising, amongst others, should also receive your attention. The reason for your interest in these company expenses should be apparent.  It will give you a good idea of exactly where reductions and cut backs can come into play almost immediately so as to ensure that profitability is on the rise shortly after you acquire the business.

It is also advisable for you to look at the financial and tax return records of the insurance agency over a period of three to five years.  This will allow you to discern trend lines regarding commissions, carriers and expenses that may provide key insights into the future of this insurance agency. The quality of carriers and your ability to retain those carriers after you’ve acquired the agency are fundamental considerations in determining the fair valuation of an agency.

Naturally, not everyone is experienced or skilled at deal structuring, due diligence and accounting. Since most buyers will not know precisely what to look for, it would be highly advisable for them to seek the services of a business broker with experience in the buying and selling process.  He or she can act as your quarterback by leading the process, providing priceless insights and helping you assemble the right team of professionals to evaluate a potential business acquisition opportunity. There is an art to consummating successful transactions and you want the artist on your team to be a master at his craft.

Other areas you will need to carefully analyze when you are considering whether to buy an insurance agency are the current marketing and advertising strategy and the contracts the agency has currently committed to. What do they have running in the yellow pages? What about billboards, website SEO, DBA name?  Apart from the obvious fact that you might be taking over responsibility for the payment of these contract advertisements, you will also need to take careful note of the telephone numbers and other key branding and identity elements you will be acquiring.  Contact telephone numbers, e-mails and websites are vital assets to take into consideration during the purchase process. Many who want to buy an insurance agency miss out on such small but essential details and focus only on the larger items. Failing to account for small details can come at a great cost to the purchaser.

By the time a potential buyer has been through all these key factors, you will have a pretty good idea of whether you want to go forward with the acquisition or not.  At this point, you have looked over the key information and are hopefully still very much interested. You will need to examine the agency management system of the business you want to buy. Is it up to date? Is it accurate? Can you build and grow this agency with this management system?  A very important area of management systems will be the client data and the kind of policies they hold. Poor management systems lead to customer service issues and the loss of prime marketing opportunities.  It can even impact customer retention during the insurance coverage renew period and/or cross selling other insurance products.  Next, the buyer must understand the quality of the staff and whether you’ll be able to retain some or all of them with the acquisition. This will be a critical subject that needs attention if the buyer is going to make a successful acquisition as well as transition the customers.

Other factors that could be very important are the location and lease terms of the insurance agency you want to buy.  The location of a business is very often a significant factor in its’ success or failure. If you must change locations, it is difficult to predict how many customers will be lost, gained or retained because of the move.

I’m happy to answer any further questions as these are only some of the areas to consider when preparing to buy an insurance agency.  As you can imagine good insurance agencies are in demand.  This means you will probably need professional help to locate, negotiate an agreement and close on a quality agency because these days the demand exceeds the supply.

Edward Valaitis, CBI – The Certified Business Intermediary designation is your assurance of the highest level of training, expertise and integrity in the business intermediary profession. Mr. Valaitis has more than 25 years of experience building, managing, and leading commercial lending, CPA and consulting firms. Merger,  Acquisition and business broker services provided throughout Florida. 800.975.3198  ed@marketchief.com     www.marketchief.com  Serving marketings including Tampa, Sarasota, St. Petersburg, Clearwater, Orlando, Tallahassee, Pensacola, Panama City, Fort Walton Beach and Destin, Florida.


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