When selling any business, timing is key. To maximize your potential profit, selling your agency in a strong market is always ideal. Predicting recessions is tricky, but here are some facts:
- The US has seen 12 recessions from 1945 to the present day.
- We average one recession every six years.
- The last recession ended 10 years ago.
- We can expect a recession in the next few years based on this data alone.
Today’s market for independent insurance agencies is strong. We are seeing agencies sell for increasing sums relative to their annual commissions. This rise in pricing represents a sizable increase from just four years ago, when the best agencies normally sold for about double their annual commissions.
When the US enters its next recession, we expect to see a decline in agency sales prices. If you are anywhere near retirement, now is the time to sell your independent insurance agency. Springtree Group will connect you to financed buyers so that you earn top dollar by selling at the right time.
Right now, we’re seeing trade disputes with China. Our government was recently involved in a trade dispute with Mexico. Employment is stagnating, with hiring rates decreasing since the spring of 2019.
While our economy has held strong, it’s possible that we are one incident away from a market free fall. Economists have begun to predict a 95% possibility that the Federal Reserve will reduce interest rates in the near future.
In the event of a recession, we may see agency prices fall by as much as 50%. If you aren’t ready to sell your agency now, how should you prepare to sell your agency in a recession?
Keep focused on the health of your business. Grow your market share. Train your best agents so that they are prepared for the transition. Make sure the new owners have full documentation of your processes and systems.
The best way to attract motivated buyers is by making your agency desirable in terms of continued profitability. Buyers are looking for robust agencies that have demonstrated their sustainability and stability despite fluctuations elsewhere in the market.
Today’s seller’s market won’t last forever. Even though our economy always recovers and pricing does come back up, it takes time. If you are planning to sell your business in the next five years, we strongly recommend taking advantage of today’s market environment.
Whether you plan on selling your agency now or in the near future, Springtree Group will help you prepare to secure the best possible price for your business. We understand the importance of timing when you’re looking for the perfect buyer. The best buyers will be able to sustain and grow your business, offer a positive environment to your employees, and make a secure retirement possible for you. Springtree Group’s experienced intermediaries will work with you to create a transition strategy that allows you to continue to care for your team while you also attract the right buyer. To learn more about our services or connect with an experienced business intermediary, email us today at service@springreegroup.com.
