The 7 Point Guide in Buying an Insurance Agency

Each day the list of for sale insurance agencies of high quality gets updated. With so much to choose from and more added daily, the task of finding the agency that perfectly complements to you is truly a time consuming and complicated one. Whether you want to buy an insurance agency for the first time or you are on the hunt for a merger and acquisition of opportunities, you surely will find a bunch of prospected agencies which will furnish your needs. And after this comes the true challenge of knowing which one is the best for you. Before you buy an insurance agency, here are 7 starting points on how to buy a business that must be taken into account in course of scrutinizing and evaluating each one of the prospected ventures.

Location: The first thing to look for is the location. If you are to buy an insurance company which is offering life insurance, then you better look for one that is within proximity to the residential area or near a hospital. Location has always been a key player to the success of a business and when you have the best one, you will surely be able to reach more clients. The possibility also of having to relocate must be taken into consideration as this imposes threat of losing current customers and affect retention rates. For those who are renting make sure to check the expiration of contract and negotiate to ensure that no increase will occur on the coming years.

Financing: A good start-up question is on where to get the finance in buying the insurance agency. You must consider the possibilities of seller financing, self-financing using your assets, and lending options. For seller financing, you must thoroughly examine the terms to avoid future disputes. Assurance is surely needed when you are using your assets to buy an insurance agency thus you must make sure that you are investing in a business that is progressing and not regressing. Having to borrow the money for the purchase, it is better if you will be able to find a company that specializes in lending to the insurance industry. Finance is the most important part when setting-up a business and to ensure success having an expert help you along the way is always beneficial.

Cash Flow Analysis: The main reason why you must be concerned in cash flow as you buy an insurance agency is that it shows you a clearer picture of the company's performance. Understanding how much the agency did earn after deducting the reoccurring expenses will surely bring you a correct business valuation. As the buyer, you need to review the records on new policies, renewals, commissions and other revenue generating areas of the agency. On the other, a list of the reoccurring expenses including rent, salary costs and advertising among others is necessary to give you the idea of how much money goes out from the agency. Explore for possible alteration of expenses and consider the effects of the change in ownership on the agency's income stream. A rule of the thumb is to perform a minimum of 1 year cash flow for young agency and a multiple year cash flow for an established one to ensure thorough analysis. If you are not good on accounting, specially with regards to the insurance industry, tapping the assistance of a business broker would be a wiser choice.

Advertising: As you buy an insurance agency, you must also take a peek on the advertising contracts it is enrolled as you will surely shoulder the expenses for the remaining period. Knowing that current agency has yellow page or billboard advertising that is on a fixed term contract, you should factor in those costs as you will acquire the rest of those expenses. You must also be aware of the phone numbers, websites or emails that are shown on the advertisements of the insurance company as they are vital assets to consider with the procurement. Ask for assurance that those phone numbers and other contact methods are offered to be reserved with the agency. Factor in also the cost on updating information on websites and toll free number platforms as they usually come at great cost. Analyze the power of the existing marketing strategies and take them into account before buying an insurance agency.

Company Access: Before doing the actual buyout, check for the list of insurance companies that you are about to sell plans for and make sure to have appointments with them. This will guarantee that you no longer need to check the underwriting requirements and you will uphold the current accreditation given by the insurance company. Unable to set appointments with all the present companies will cause you to potentially lose customers as you will need to rewrite them to different insurance carrier. Setting your foot one step forward, you must make sure that you are able to get appointments for insurance companies that the agency does not currently offer. Doing so well let you factor out those companies and be able to compliment them to your services.

Management System: What management system is being imposed by the agency and how is the organization of customer records being implemented? Is it possible to have the current management system stay intact with the acquisition of the agency? What is the assurance of having no compatibility issue when doing data migration as you may utilize and prefer a different management system? An array of software applications is available to help you in migrating data and in maintaining compatibility between management systems. As a buyer, making sure that you thoroughly understand this part is a must as most client related issues are due to poor data management.

Seller Assistance: Last point to consider is on the possibility of having the seller train the new owner and to have a smooth transition plan for an adequate period of time. Reputable and established agency owners commonly answer the possibility on holding training and transition of ownership. Corporate Ventures are good vendors as when they sell a business, they usually work with transitioning the ownership. If you are buying your first insurance agency, then make sure that your seller is willing to help you to transition the business as smooth as possible keeping the current customers and employees. A six month transition time is generally enough to make sure that you are ready to stand on your own. The help of the seller will surely make the transition a positive event to both your employees and clients so make sure that you are able to bring this up during the negotiations.

Following this guide will also be good for those who want to know how to sell an insurance agency or how to sell an accounting firm. In fact, it practically is applicable on any form of business regardless if you are the seller or the buyer. With these things in mind, you will surely have a good starting point of considerations when you buy a business. Make sure that you take them all as one and search for the offer which possesses them all. Learn to negotiate and get expert advice to make sure that you are investing for the right one.

Rhonnel Alburo is an active blogger which has great interest on talking about technological trends. His blog The Legendary Blog of Alfore [http://blog.alfore.info] is a personal portal to which he shares his thoughts on various topics. He also maintains a websites The Legendary Alfore which he shares about technological trends and his interesting thoughts about the world.

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How To Turn 1,500 Insurance Prospects You Already Have Into Clients

"I have 200 clients and 1,500 prospects." This was said to me by a financial advisor recently - one who understood what it's all about! I suppose it depends on your definition of a client, but to me it's one who pays a large annual premium and generates referrals.

So the philosophy is that there are 200 "clients" who are segmented into A and B based on value. These are talked to and mailed regularly, as any client should be. Then there is the need to add new (high value) clients, which he does by using a range of sources. These are (in no particular order):
- Referrals from existing high value clients (he never asks a low value client for a referral)
- Centres of influence, notably a lawyer, a mortgage broker and a real estate agent
- His own list of 1,500 semi-qualified prospects

It's this last source that is the most interesting. Where did he get the list? Some advisers may choose to call them "clients" as they are all his C clients. Let's face it, they aren't really clients; they are simply a list of semi-qualified people (semi-qualified in that he knows their name, contact details, age and a single low value product they may have purchased many years before).

In many cases he hasn't talked to them in over 5 years or in some cases over a decade. You must treat them as prospects just like any other first time contact.

Don't believe me? Think of it this way - suppose you buy a client base from someone else. You go about contacting them methodically, with a script aimed at introducing yourself and getting an appointment to address a particular issue or opportunity. Almost always you can do better with that prospect than the selling advisor, as it's a new voice with a new message and new approach.

So if you can do it with a so-called 'client' from someone else's base, why can't you do the same thing with your own (client) prospect list? After all, you have no doubt changed your approach in the last 3-5 years and now have a lot more to offer.

The most frequent question I get asked is "how do I get more clients?" when the asking adviser has 1,500+ on their books already. They then follow this with "I've done my own base to death; there's no more potential in them." Really?

And it all starts with contact. Put them on your high frequency (monthly) newsletter list for a few months and then start to phone them. The three or four newsletters sent first will reintroduce you to them and restart the relationship. This works better than almost all other prospecting techniques.

Paul Watkins has helped financial advisors grow their businesses for nearly two decades. The secret to growth is not a single silver bullet but appreciating that the best techniques are simple, small, inexpensive activities that can mostly be put on auto-pilot. Paul has more details on his web site http://financialadvisormarketingtips.com

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How A Bank Took Over The Relationship From My Financial Advisor

I had a call from my 'personal banker' Steve a few yeas ago. He said: "Can I practice a new sales approach on you please?" "Sure, why not", I said. "I've just been through a financial planning course and we were told to phone a couple of friendly clients or mates to practice a new type of approach on."

"Can I start by asking what your short-term financial goals are? What I mean is do you anticipate making any large purchases in the next 2 to 3 years such as a new house or car or overseas holiday?"

"Yes," I said in surprise at the question. "I intend buying a new car early next year and taking an overseas holiday later in the same year." "Great," came the response.

"Now can I ask you what your 10-year goals would be? Is there any one significant change that may occur such as kids going to University, you going into a business venture or changing houses?" "Yes, I suppose 10 years from now we might look to change houses."

"Now, can I ask you how much longer you will probably be actively earning before you retire?" I was impressed with this new approach and replied: "I imagine that I'll be working for about another 20 years."

"So in summary, you will be buying a new car and going overseas next year, changing houses in about 10 years and want to retire in about 20. Do you have a written plan as to how you would achieve these at all?" "No" I said, very curious as to what he would say next.

"I would be keen to make a time to sit down with you and your wife to work though a plan so that you can achieve these things. Your mortgage is with us, so we have a recent snapshot of your financial position as a starting point. What is a good time for you both?"

I was in stunned silence at this point, not knowing if he had really been 'practicing' on me or if this was a genuine sales pitch. After a second or two, he said, "are you still there?" "Yeah, sure, sorry, I was just thinking."

"Well Paul, do you think that this approach would work with many clients?" As I put the phone down, I could only be impressed with this most un-bank-like sales approach to my money. The point that struck me most was when he said "Your mortgage is with us, so we have a recent snapshot of your financial position." This puts the bank in a very strong position to extend its reach into the financial lives of its clients.

It clearly reinforces the need for you to have a strong client contact management plan to ensure that this approach will NOT work with the bank's clients. The rules have changed. Quarterly newsletters won't cut it anymore. Contact must now be monthly. NOTE: If that was only a practice run for young Steve, what is he going to be like in a few months after he gains a bit of confidence?

Paul Watkins has helped financial advisors grow their businesses for nearly two decades. The secret to growth is not a single silver bullet but appreciating that the best techniques are simple, small, inexpensive activities that can mostly be put on auto-pilot. Paul has more details on his web site http://www.financialadvisormarketingtips.com

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The Four Fundamentals of Starting an Insurance Agency

Striking out on your own as an independent insurance agent can be a fulfilling, exciting and lucrative experience.

Insurance is a relationship business. There's satisfaction in protecting individuals, families and businesses from some of life's calamities. Insurance sales can also be lucrative. By recruiting associate agents, you build residual wealth while offering income opportunities to others. And the freedom and flexibility as are unparalleled.

As with any commission-based business, you must get your agency off the ground quickly. Following are four fundamental steps that will give your insurance agency a strong start:

Obtain the Necessary Licenses (if new to the business)

• Books, online courses and training professionals can help you prep for your state's insurance exam.
• Separate exams are required for life and health and for property and casualty.
• Uniform licensing standards and reciprocal licensing between states are becoming more common, allowing you to get licensed in more than one state fairly easily.

Part Ways Gracefully with Your Existing MGA or Captive Agency (if already in the business)

• Determine whether your agreement included a non-compete clause. (An employment law attorney can advise you on whether it is actually binding. Many times, such clauses are not.)
• Find out whether you own, and can take with you, any portion of your book of business. If so, this becomes a good foundation for your own agency.

Set Up Your Own Agency Business

• Decide on an official business structure (corporation or LLC) and file the appropriate paperwork with your state.
• Find an accountant to help you with commission breakouts and other bookkeeping aspects of your business.

Select the Right Master General Agency (MGA)

MGAs provide administrative, marketing and sales assistance to hundreds, sometimes thousands, of independent agents. A good MGA can help you grow your businesses faster. That's because they provide access to large, well-known insurance companies and top commission rates.

Be selective about who you partner with. A quality MGA should offer you:

• Broad product portfolio, with multiple insurance lines to meet your clients' personal and commercial needs.
• Contingency bonuses, paid to the MGA by carriers for producing large volumes of business. Not all MGAs share these bonuses. Confirm the MGA's willingness to split contingency bonuses with you, or find someone else who will.
• "Same team" philosophy-The MGA should not allow agents within the same geographic area to compete against each other. Your fellow agents should feel like teammates.
• Carrier appointment paperwork-With some applications running 40 pages in length, your MGA should handle this cumbersome paperwork on your behalf.
• Marketing support/digital and traditional-Leading MGAs provide turnkey systems for both traditional marketing and digital marketing (e.g., e-marketing, social media, website development, SEO and pay-per-click campaigns).
• Business coaching-MGAs have a wealth of industry expertise, and they should be willing to share that with you. They can help you avoid start-up pitfalls and maximize your income.
• Fully integrated technology-The best MGAs have invested in agency management systems that make you more productive. Their system should include a comparative rater for quoting multiple carriers, e-mail marketing system, lead generator, online training and more.

With the level of automation and support available today, there's never been a better time to be an independent insurance agent.

About the Author: Pamela McCann is partner and chief operations officer of Alliance Insurance Group, an independent insurance agency based in Golden, CO. Her current responsibilities include streamlining Alliance's insurance agency management systems. She also spearheads Alliance's Master General Agency initiative, recruiting independent agents who are interested in starting an insurance agency. Throughout her 30-year career, McCann has held a variety of corporate financial roles, ranging from chief financial information officer to controller. In those roles, she was responsible for negotiating business insurance and employee benefits. She is a licensed producer in the state of Colorado.

Pamela McCann
Chief Operations Officer
Alliance Insurance Group
http://www.allinsgrp.com

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Secure The Insurance Sale With Pictures

What do you take to client interviews? What do you present when discussing the client's needs, the concept and the products? Using visual aids will make your job a whole lot easier. Consider the following US research on the subject:

If you use visual aids, prospects are 43% more likely to be persuaded; prospects will be willing to pay 26% more for the same product or service (this helps overcome cheaper competitor products); learning is improved by up to 200% (important, since your products are not easily understood by most clients); retention is improved up to 38% and the time it takes to explain complex topics is reduced by up to 40% (it has to be worth the effort for this one alone)

The bottom line here is to make everything as visual as possible. Think through each step of the sales process, from the initial prospecting letter, to the client interview, to follow-ups to on-going client relationships. What visual elements are you including at each step? Below are a few ideas:

Contact by post: Postcards have impact due to being heavy on pictures and light on text. Make the opening line in your letters very large (over 24 pt) to act as a visual element. Include drawings or cartoons if appropriate.

Newsletters: Newsletters should include pictures, graphs and charts. Cartoons work well.

The presentation: Use a structured presentation that takes the client through a series of fill-the-gaps pages in a booklet. Use charts and graphs. Blow them up to A3 or even larger when you present them.

'Word pictures' such as case studies in newsletters work well, because they build up a picture in the mind of the client. Successful use of analogies achieves the same impact.

Some advisors take this one step further, with graphic illustrations of getting the client from where they are now to where they want to be in the future. This just takes a little imagination. Some that are currently being used are pictures of ladders, a ship charting a course, road maps with milestones, climbing financial mountains and racetracks (retirement being the finish line).

You will have been to many motivational sessions where a very important message is to "visualize your dreams." The same applies to your clients. If they can visualize their financial lives or goals, they will relate to the relevance of the products far easier.

The key message in all of this - instead of saying to your clients: "I'll put that in writing for you," say: "Let me draw you a picture."

Paul Watkins has helped financial advisors grow their businesses for nearly two decades. The secret to growth is not a single silver bullet but appreciating that the best techniques are simple, small, inexpensive activities that can mostly be put on auto-pilot. Paul has more details on his web site http://www.financialadvisormarketingtips.com

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Six Common Mistakes Financial Advisors Make That Can Lose The Sale

So you have the prospect or existing client in front of you. It has cost a lot of time and money to get this far, so don't blow it! These are a few of the most common mistakes sales people make at the sales interview.

First, you talk too much! How can you sell something if you don't know what the client's needs are? This can only come from listening - not talking. As the saying goes, you have two ears and one mouth so listen twice as much as talking. As an idea, try taping the next conversation and analyzing the resulting interview. You may be amazed at the result.

Second, avoiding the beginning of the sale. Many start a conversation by picking up on a point made the last time, such as a personal or family event. This is important in the relationship building aspects of the sales approach. But this then carries on and the salesperson can't think of an effective way to start the sales presentation - so either doesn't or goes through it really quickly as all the time has been used up!

If you have an hour, give yourself 10 minutes for pleasantries and have a pre-rehearsed linking technique to start the sales pitch.

Third, working without a script. 'I'll wing it' is a common salesperson expression that often leads the interview nowhere and doesn't end up achieving a sale. If you are guilty of this, try using your laptop or tablet with a PowerPoint presentation on it. This will still allow for lots of ad-libbing, but ensure that all main points are covered.

The action of committing the presentation to PowerPoint (even if you don't use it) is an excellent way of gaining an understanding of the selling pitch structure and highlighting the key points to discuss.

Fourth is not having a 'Maybe Strategy'. If you can leave the interview with an open door for the next time, such as a "Can I think about it?" you must have a predetermined strategy already in place to secure the sale. Many prospects genuinely want time to think it over as it could be many thousands a year in premiums. This strategy is the subject of a separate article, but it involves immediate contact and then being put on a high frequency contact plan.

Fifth is become a free consultant. Many first interviews end with "don't make your mind up until you see what I can come up with". The next step is to present a proposal with a full financial or insurance plan. If no form of commitment has been gained at the first interview, you are simply a free consultant, as there is no guarantee of the second interview resulting in a commitment to you. But you have now told them everything about what they need - for FREE!

The sixth is not knowing your competitive edge. If I asked you, "why should I deal with you?" (as opposed to one of your competitors), how would you answer that? You need a good answer to this question.

Are you making any of these mistakes?

Paul Watkins has helped financial advisors grow their businesses for nearly two decades. The secret to growth is not a single silver bullet but appreciating that the best techniques are simple, small, inexpensive activities that can mostly be put on auto-pilot. Paul has more details on his web site http://www.financialadvisormarketingtips.com

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War Stories From The Trenches That Financial Advisors Can Learn From

Here are two businesses whose lessons apply very well to financial services. These are from real businesses here in New Zealand that happened in the past twelve months.

A builder: This business had been static for some time, his advertising efforts being in all the normal media such as radio, press and directories. Wanting to grow the business, the builder analyzed the last 20 jobs and was stunned to find that ALL were from referrals! Until he had looked closely at them he just assumed that the advertising must have been generating the work.

So, he made up a list of potential and existing Centres of Influence, being architects, structural engineers, developers, the local authority staff, real estate agents and previous clients. He then arranged breakfast meetings with them in small groups. He called them (surprise, surprise) "Friday Breakfasts," so EVERY WEEK he invites two or three of them to meet informally with him and his staff over croissants and coffee.

Business has gone up 100% in just twelve months. His profit has risen as not only is he saving on advertising but he does not have to compete with as many when tendering. The staff love them as well and as an unexpected bonus, motivation and productivity have increased.

The lesson: What are the real drivers of your business - referrals, advertising, sponsorship or something else? If it's referrals, do you have a proactive plan for cultivating more of these? The builder in this case study has obviously found a low-cost and apparently very effective plan.

A consulting engineer: This engineer's clients are local government and large developers. Advertising to date was primarily in relevant industry journals. He undertook a small amount of informal research, which revealed that his clients did not know the range of services he offered. So, he created a simple monthly newsletter that went to his clients explaining the full range of services.

Issue #2 generated a phone call that lead directly to a $40,000 contract, while issue #7 generated a $120,000 contract! Both contracts were from existing clients who had not realized until then that he offered that particular service.

The lesson: Do your clients know what you do? There is a good chance they only know you for the single product you may have sold them in the past. What are you doing about this?

Nothing beats personal contact, be it by mail, email, phone or in person. The trick is the frequency. It must be very high and relevant to the recipient. I think this builder and engineer have shown some lessons here that are directly applicable to other professional service providers such as financial advisors.

Paul Watkins has helped financial advisors grow their businesses for nearly two decades. The secret to growth is not a single silver bullet but appreciating that the best techniques are simple, small, inexpensive activities that can mostly be put on auto-pilot. Paul has more details on his web site http://www.financialadvisormarketingtips.com

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Key Words That Can Excite A Financial Advisor's Prospect

I was at a BBQ and over a drink got into a conversation with two people about insurance and investment. The conversation raised the issue of where you go for financial advice, which developed into a rather interesting discussion. I encouraged the debate and treated it as a research opportunity.

Of note was learning about the importance of key words in motivating consumer behaviour - which I will explain. By way of background, the two I talked to have the profile of almost perfect clients. They both enjoy well-above average incomes and high levels of net personal wealth. They were aged 54 and 49 (I asked). The older one is a successful accountant while the other owns his own business and also sits on public and private boards.

Sorry to say, but both had somewhat cynical views about advisors in general, recounting stories of 'idiots' they had met. These were some of their comments. "I don't trust how they make their money. I have heard that they can make 150% on the premiums of some insurance products." "I hate the way they have to sell you something to make money. That must influence their advice." "I've got four life policies. Two of them are more than 25 years old. I should cash them in."

Clearly they were somewhat ignorant as to the way advisors work. Which means that neither of them have proper financial advisors in their lives. The real value from the conversation however was their reaction to some specific words. When I talked about how many advisers work, it was key words that made the biggest impact. Notable among these were:

"Audit." I suggested that a good adviser would be able to undertake an 'audit' of their financial lives, including their investment and insurance portfolios. This instantly got their attention. The word 'audit' has a powerful meaning to business people.

"Plan." They both felt that advisers had tried to sell them individual products, not any sort of financial plan that put everything into perspective.

"Fees for advice." They were both impressed with the idea of paying a fee for a financial plan, regardless of whether the recommendations were taken up. This seemed to overcome the issue of a plan that might favour an adviser's remuneration. Interestingly the accountant said "So, what would you pay? A couple of grand?"

"5-step process." This really hit home. I explained that a financial plan looks at the 5 key aspects of your financial life and how it was almost impossible to separate them. They asked what the 5 steps were but I told them to ask their advisor. As you can guess the accountant in particular loved the word "process." He had never thought of it as a process before, just a sort of 'sell-as-much-as-you-can' approach.

Watch the reactions of client when you talk to them. Are there some words that seem to have a considerably greater impact on them? There will be, it's just a matter of recognizing them.

Paul Watkins has helped financial advisors grow their businesses for nearly two decades. The secret to growth is not a single silver bullet but appreciating that the best techniques are simple, small, inexpensive activities that can mostly be put on auto-pilot. Paul has more details on his web site http://www.financialadvisormarketingtips.com

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Questions About Selling an Insurance Agency

My firm works regularly with agency owners in the planning and execution of the sale of their business. Some key questions have been raised more frequently with the pending tax increases set for 2013, so I thought it would be helpful to address these to a broader audience in the dialogue that follows. The level of detail is significant but the intent is to provide a more complete discussion of such important questions. I hope you find this information useful in your business planning.

1) What are agencies currently selling for as a multiple of revenue?

While simplistic in nature, setting a value based on revenue is not realistic. The insurance distribution system contains a wide array of agencies and brokerages serving different market regions and segments. We have seen agencies sell for anywhere from 1.0 to 2.7 times annual commissions with an average guaranteed price range of 1.4 to 1.8. In our experience though, the value to a buyer is generally driven by pro forma earnings, risk and transaction terms, and all three are equally important. Multiples of revenue are generally the product of the expected price, and not the determining factor.

The pro forma earnings provide a buyer with a return on their investment and cash flow to cover any debt service. The risk assessment is a subjective measure of how well the buyer believes the investment will yield their desired return. And finally, the terms relate to how well the buyer can leverage their capital, such as when there is significant seller and/or third party financing, and also hedge any significant risks, such as with a portion of the purchase being paid on an earn-out contingent on maintaining revenue, earnings, accounts, etc.

The only way to ascertain a realistic market value of your agency is to have a professional valuation performed that is in-tune with your industry, the availability of financing and the market demand. Our firm averages 3-6 valuations per month in addition to completing a sale transaction every 1-2 months.

2) What steps can an owner take to enhance the value of their agency?

There are many steps that can be taken to enhance the value of your agency but they generally relate to maximizing the profitability and minimizing perceived risks to a buyer. Let's discuss maintaining or growing revenue first, as declining revenue generally erodes profitability. One suggestion that we often give to clients is to put in place methods to track sources of revenue. It could be tracking revenue created from different marketing or sales programs so you understand how effective your marketing dollars are being spent. Another is tracking new and renewal revenue by producers and product lines so you understand who/what is and isn't working for the agency, and perhaps what might be done to improve performance. The last thing to review under the category of revenue is your commission rates and contingent earning contracts with carriers. If the agency maintains low loss ratios, and high production and retention, there might be an opportunity to renegotiate your compensation with the carrier. It never hurts to ask and use a little leverage such as the hint that another carrier might be wooing your business with a better pay schedule.

On the expense side, personnel costs generally are the largest item and typically run an agency anywhere from 35-60% of revenue; therefore, it is important to keep a close eye on personnel and productivity waste. The most productive agencies leverage technology to improve workflow and minimize labor costs. They also develop performance-based compensation plans and weed out unproductive employees in a timely manner. The most profitable agencies maintain personnel costs at 30-40% of revenue. Buyers will typically discount the value of an agency if they need to come in and completely restructure the operation, staff and compensation.

Another major issue with personnel is addressing any ownership or vesting interest of employees or producers. If you don't own a book of business, then you can't sell it to an outside party. This can become a major problem if ownership with a producer needs to be settled during the sale process. The best solution is to either buy-out the interest before the sale process is initiated, or negotiate an equity swop in advance so that the producer will be paid on the sale.

There are many other minor expense items that can be shored up prior to executing a sale process. Such things might include renegotiating leases or contracts, canceling ineffective advertising and reducing any owner's discretionary spending such as personal meals, travel and entertainment.

On the risk side of the coin, you should address any specific revenue concentration issues with producers, carriers, product lines or accounts. Can business and account relationships be transferred from producers to staff members? Do you have good procedures in place for cross-selling and following up with clients before renewals? Are you over-exposed in any particular area that might be cause for a concern? Most likely any internal problems are known to the owner. The goal should be to round out the business and reduce your own risks, as well as that which might be perceived as one by a buyer.

3) How does an agency owner go about getting the best price and terms on a sale?

In short, by planning for the sale and executing a controlled sale process where multiple, qualified buyers are disclosed on the opportunity, provided with relevant details on which they can make a decision and encouraged to make offers in a short period of time. One thing to note is that when you lock into a negotiation with only one party, you end up negotiating against yourself. This is why it is best to provide accurate, relevant details in advance of receiving an offer so you can avoid an opportunity for the other party to renegotiate.

When representing a client in the sale of their agency, we conduct a pre-due diligence to flush out any issues and make sure the documentation is ready in advance. We also create a very detailed confidential summary of the agency that educates potential buyers about the operation and opportunity. Both of these steps add a great deal of value by speeding up the overall sale process and providing buyers with the information they need to feel comfortable in consummating a deal.

4) How do you find a buyer while protecting confidentiality?

There are two ways to solicit buyers: the reactive method and the proactive method. The reactive method involves placing discrete ads about the opportunity and waiting for prospects to inquire. The proactive method involves discretely marketing directly to potential prospects and asking them if they are interested. Obviously the former is much more effective than the latter and its best handled by a third party. When it comes time to solicit buyers, our firm has a database of over 1,200 pre-screened individuals and companies that have contacted us looking to acquire insurance agencies that we can contact directly.

Protecting confidentiality should be a top priority during the sale process as a great deal of damage can be incurred should your employees, customers or carrier reps learn that you are trying to sell. There are many would-be-buyers for insurance agencies, but only a small percentage are serious candidates for any given agency. Any prospective buyer should be required to sign a legally binding confidentiality/non-disclosure agreement and required to submit a statement of their financial worth, including cash available for a transaction, before receiving information on the agency. From an owner's perspective, it is very difficult to manage the buyer solicitation and screening stage while also running a business.

5) How long does it take to complete the sale of an agency?

The truth is that it can be as short as a few months to never depending on a number of factors including the agency, the asking price and terms, how buyers are solicited, how well the agency is prepared for sale and how well the process is managed. The buyer also makes a big difference. Some are inexperienced and unknowingly make promises that they can't keep in regards to how much they can borrow from a third party, while others intentionally lock the seller into a non-binding purchase agreement with the intention of renegotiating after due diligence is completed.

In our experience, after a purchase agreement has been signed by the parties, the sale process typical takes two to three months depending on the sophistication of the transaction and financing involved. The due diligence phase alone can take two weeks to two months, depending on the complexity of your business. In many cases, the owner will also need to stay on with the buyer for a transition period which can range from a few weeks to a few years. Our average time from executing an engagement with a client to closing on the sale is five months, and our success rate is very high because of our pre-due diligence on the agency and potential buyer.

For most agency owners, the agency business is their most valuable asset. Having not sold an agency previously, many owners are unaware of the value of their agency, how to initiate a sale process, the amount of time, energy and emotion that goes into it, and the potential issues that can arise. To yield the best return on your investment, it is critically important to the perform this process properly and choose the right advisors because you only get one chance to get the sale right.

Our firm has helped dozens of clients reach their goal of exiting their agency. Should you have any questions regarding this subject matter, please don't hesitate to contact me. Thank you for your time and best wishes for a prosperous new year.

For more details on selling your insurance agency, click here for my webinar "The Exit Strategy: Selling Your Insurance Agency or Brokerage" .

Michael Mensch
Agency Brokerage Consultants
Agency Valuations, Sales, Mergers & Acquisitions
Main Office:             (321) 255-1309      
http://agencybrokerageconsultants.com

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Red Flags And Costly Errors

The subject of property insurance and claims adjusting often leads to lead to blood pressure rising when speaking with home owners and Condominium Association Board Members. I have heard the nightmare stories. If you dig to find the source of the problem, it is a series of misinformation and errors that lead to costly errors and issues during the claims process.

These usually include:

• Paying too much
• Gaps in coverage leading to forced-placement by banks
• Errors and Omissions that impede the claims process.

Many times Boards are paying more than they should on their insurance premiums due to unnecessary coverage, mistakes on the appraisal and/or errors in the application by the insurance agent or the Board member.

Gaps In Coverage. Often when a Board unknowingly does not get enough Flood Insurance, the banks take notice and automatically force place their premium priced insurance on the personal home owner. This is an unnecessary expense and burden on the homeowner.

Errors & Omissions: The Board needs to understand exactly what is covered. Conflicts during the claims process can stem from the community thinking something was covered that was not, an error within the policy or false information in the policy. The Board usually does not learn about the mistake until a claim is rejected.

Here are some proactive ways that will make the process of bidding and the possible claims process later easier and less expensive for the Association. Knowledge is power!

Steps towards having the Right Coverage at the Lowest Premium:

Due Diligence And Interaction From The Agent: Your agent should be reviewing the different policies with both the Board and the property manager so everyone understands coverage and deductibles. Has your current agent reviewed your Condo Docs for the insurance paragraphs? Is the new agent offering a quote without visiting the property or interviewing the Board or the Property Manager? Red Flag! How will they know if there is a mistake in the policy or discuss the insurance (decide if you want to renew with the current agent or start an interview process for a new one).

No Wind Mitigation Credits: this is one of the most expensive mistakes I find. If you are eligible for the credits and you do not have them, you are paying too much! There are buildings that are not eligible, always double-check them.

Incorrect Appraisals: Incorrect square footage, wrong construction type, missing buildings or items are all mistakes that can cost the association dearly in their premium or after a loss. Even a small error in a number could impact the entire policy. It is important to keep the earlier appraisal to compare and check to see there isn't an abnormal increase. I have seen an account premium go from $200,000 to $500,000 over 5 years because the new appraisal values had mysteriously jumped.

A major error on the agent side is when the building values differ in the appraisal compared to the policies. Your insurance agent show the board appraisal values and the values used on the policies. If it's not on the appraisal, it's not covered. Make sure the point person for the Board sees the new appraisal. Your agent meet with you and show you the list of values (aka the schedule of values - where the costs to rebuild that are listed) and walk through the property checking off each item. You might be surprised to find missing items.

Stay tuned for part II of avoiding costly errors and having a smooth claims process in the world of property insurance!

Sean Virtue is Regional Vice President of Mack, Mack and Waltz Insurance Group and also writes the Blog on condominium association Florida and insurance agency in Florida. In the last 15 years, Sean has assisted in the launch and growth of several Florida personal and commercial insurance carriers. Sean currently specializes in Condominium Association Master Policies, Commercial Residential.

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Generating High Quality Insurance Leads in the Real World

New technologies make life easier and more exciting. When it comes to business, we are constantly searching for the latest and greatest to make sure that we stay ahead of our competition. Ironically, when we become consumed by this fear of falling behind, we forget about the most tried and true traditions that established our industry in the first place.

Now let's take a look at lead generation in the insurance industry.

Anyone who sells insurance knows that if you cannot high quality leads, then generating sales is going to be close to impossible. The internet has done wonders for us as insurance agents looking to generate new high quality leads; however we should not let ourselves get so distracted that we forget about generating leads out in the real world.

In order to generate an endless stream of high quality insurance leads and have buyers hunting you down (instead of the other way around) you need to combine technology with tradition.

So how do you go about doing this?

* First off, you want to make sure that you have a fully functioning website. Make sure it is designed and crafted by a professional who is an expert in SEO (Search Engine Optimization).

Keep your website clean, simple, and easy to navigate. If it takes too long for potential customers to find the information that they need then they will go to someone else's website and buy from them instead.

Also keep the imagery on your website light in order to prevent people from waiting when they try to open it.

Find a reliable lead generator online, sign up and follow through with the instructions.

* Secondly (this is the part that most of us forget), you want to go out into the real world and start making connections.

When I say connections, I mean REAL connections. Don't treat everybody you meet like a lead. Make friends and serve your community. Go to church and get to know the people in your neighborhood. Go to your kid's baseball games and get to know the rest of the parents. Join a local bowling team and socialize with all the other teams in the league. The possibilities are endless.

Make friends with these people and treat them well. Do favors for them without expecting anything in return. Listen to them talk and take a genuine interest in their lives. See what you can do to help.

Sooner or later everyone is going to ask what you do for a living and you can tell them. "I sell insurance, yeah, if you ever need anything just let me know and I will hook you up, we've got some amazing deals going on right now". Then you drop the subject and ask them a question about themselves in order to turn the focus back onto them. Wait until next time to give them your business card.

It won't be long until everyone your community knows exactly who to go to when they need insurance. These people will be your most loyal customers and they will generate the HIGHEST quality insurance leads for you when they recommend you to all their friends and family members.

You will not only make a lot more money, but you will also feel good knowing that you are a valuable member of your community.

Jack Brinker has a passion for insurance and has been involved with helping agents generate insurance leads for themselves for over 10 years.

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