Many people in the world of business dream big; the inclination to reach for the stars is part of what makes a successful entrepreneur. When it comes to finding a buyer for your insurance agency, however, this tendency may work against you. Often, buyers set their sights on acquiring an agency thinking they can easily secure the requisite financing, when truly they cannot. This is not merely an inconvenience, it costs the seller time and money, and they may miss out on other valid opportunities during the process.
The tendency of buyers to overestimate their ability to secure financing is one of the main reasons working with a Business Intermediary is so important. An intermediary who specializes in mergers and acquisitions for your size insurance agency can ensure that the buyers you are working with are the quality buyer you desire for your company and actually have access to the funds needed to purchase your business. If loans are desired they can leverage their network of specialized loan underwriters to secure appropriate financing programs, when necessary.
Short-Term Savings, Long-Term Loss
Many insurance agency owners think they can save money by putting together a deal without the help of an experienced intermediary. They assume that by sending out discreet inquiries themselves throughout their network, or by simply looking around online for buyers hoping to acquire an agency, they can dodge transaction fees and put more money in their pocket after the sale.
Sure enough, the initial feelers attract the interest of a prospective buyer who makes contact with them about acquiring the business. A meeting occurs, and the hopeful seller makes the common mistake of judging the prospective buyer on their manner and appearance; if they look polished and professional, the seller may assume the person has the funds to complete the transaction.
Sellers often consider it very poor etiquette to try to make the buyer “prove” that they have the funds to go through with the deal, so they shake hands in good faith, and begin to engage in the months-long process of finalizing the sale. This, of course, takes a lot of effort, negotiation and paperwork—all areas in which the agency owner likely lacks any expertise and may make costly errors. But eventually, the documents are all drawn up and set to go.
And then, mysteriously, the buyer’s funds for the down payment “vanish.” He or she can no longer secure financing from the bank, either. At this point, the buyer may ask the seller to finance the deal, leaving the seller no choice but to agree to the sell their company with their own money (Seller Financing), or watch months of work go down the drain.
The Benefits of Bringing in an Expert
Of course, most sellers would rather not make this choice. And to make matters worse, as all this has been going on, the best potential buyers have already gotten wind of the fact that your business was for sale and that a deal is pending, and as such, have moved on. If you start the search all over again, you will already have lost credibility with legitimate buyers or missed a key window of opportunity.
When it comes to working with an intermediary to sell your insurance agency, an ounce of prevention is worth a pound of cure. An experienced team that specializes in mergers and acquisitions for insurance agencies, such as Springtree Group (STG), can manage the process of finding a qualified buyer that has been operationally and financially vetted, saving you months of hassle and headaches, and dramatically improving the chances of closing a deal. What’s more, because news of your intention to sell can negatively impact your relationship with clients, employees and carriers, STG always maintains strict confidentiality during the process.
Springtree Group provides comprehensive support to qualify and match acquisition opportunities and buyers, including valuation analysis, deal structure management, and financial package development. In addition, STG will handle price negotiations and can provide access to custom-built loan packages for the insurance space through its group of specialty loan underwriters. In the final stages of an acquisition deal, STG facilitates operational and financial due diligence and legal review, bringing in technical experts as needed to ensure that there are no surprises at closing.
To get professional results and expedite the sale of your insurance agency, turn to an experienced broker, like Springtree Group. We will keep your details confidential, and align you with only those potential buyers who can successfully complete the transaction. To learn more or discuss your plans to buy or sell an insurance agency, please call (972) 395-8811 or contact us online. We look forward to helping you with your agency acquisition needs in the New Year.
