Do you have plans of purchasing an insurance agency? Since entering into a purchase transaction requires a great deal of thought, you’ll have to do some research. While this part may not be as exciting as actually setting up shop, it will help you break even faster.
Helpful Tips for Buyers of Established Insurance Agencies
Understand the Requirements
In terms of regulatory requirements, the process of acquiring an insurance agency is different from acquiring an insurance company. Insurance companies shoulder all the risk from the policies they write and pay claims. In contrast, an insurance agency is a business composed of multiple agents who are authorized to sell policies.
However, certain states require insurance agency buyers to notify them of an acquisition, and they have the authority to approve or disapprove an agency acquisition. For this reason, you’ll have to check the state’s regulations where you’re making the purchase.
Know the Local Market and Type of Insurance That’s In Demand
To find out if your prospective insurance agency will keep on growing even after your purchase, be sure to research the local market environment. While you’re at it, identify the customer types and products that are in demand.
For instance, if your area has a lot of construction, you’ll want to specialize in workers’ compensation insurance. Likewise, if your area has a lot of young families, you’ll want to sell life insurance.
Do Your Due Diligence
You’ll have to perform due diligence right after you find a prospective agency. Find out about the seller’s motivation, check their financials and their licenses, and the culture of the company.
Decide on a Target Price
Before you can decide on a purchase price, you’ll have to research other selling prices in your area. This should give you an estimate of the average multiplier insurance agency owners use.
Contact the Seller and Make an Offer
Once you’ve figured out your ideal price range beforehand, you can contact the seller and make the offer. You know you’re ready to buy when you and the seller agree.
Considering Purchasing an Insurance Agency?
At Energia Consulting Partners LLC, we specialize in all aspects of the sale of an insurance agency. Our consultants bring decades of experience in the industry with a proven track record of success. Contact us today to learn more about our services.