Are you planning to sell your insurance business? If you don’t know much about the process, consider enlisting the help of a reputable insurance agency consulting firm. Aside from ensuring a smooth transaction, you can also be confident that all aspects of the sale will be covered, from the sale preparation to the deal terms guidance. However, if you’re wondering about the common ways you can get paid when you’re selling your business, read on.
What are the 3 Ways to Get Paid When Selling An Insurance Business?
One Lump Sum
This proves to be advantageous if you really need to get the money all at once. Although this may make sense in such a situation, it offers the lowest valuation compared to other payment options. You’ll give more in taxes because the government is taxing the large sum rather than small installments.
With this type of arrangement, the buyer can pay for up to a certain number of years. In most cases, they would offer to increase the multiple if the payment is spread out more. However, what makes being paid over time more advantageous than other alternatives is that it’s a sure thing.
Even if the buyer eventually loses all the business, they’ll still be obliged to pay you the money over the agreed period. Although this may be risky for the buyer, and you’ll likely get a middle valuation, payment is guaranteed.
This option is a lot less risky for the buyer because if the business doesn’t make any money, they won’t pay. Conversely, if the business grows and expands, you, as the seller, can earn more. However, this kind of payment arrangement requires you to trust your buyer.
Are You Looking to Find an Insurance Agency Consulting Firm?
If it’s time to sell your agency, contact Energia Consulting Partners LLC to schedule an appointment. We are an experienced, independent consulting practice specializing in all aspects of the sale of an insurance agency.