InsuranceNewsNet July 12, 2018
By Bryan W. Adams
The facts are
undeniable. The insurance industry is aging. A few years ago, a report from
management consulting firm McKinsey & Co. reported the average age of a
U.S. insurance agent was 59. This set the expectations for an entire industry that
a quarter of its work force would retire around 2018. Retiring or not, the
aging of this industry brings up an important truth: Many agents who’ve built
successful businesses are now finding they must put a plan in place to
guarantee their agencies will continue to grow and thrive when they want to
spend less of their golden years working.
Succession Planning
Isn’t Always Easy
There are so many
reasons for having a solid, thoroughly vetted outline in place when the
agency’s principal wants to step down — but it’s not always as easy as you’d
expect. Agencies don’t always have a natural successor in mind, and sometimes
when they do, their heir apparent may not yet be of age, licensed or qualified
with the right amount of agency product, operations management, human
resources, accounting and marketing knowhow. Another big consideration - it’s
important that the successor has the resources to assume the business.
It’s why many
agencies have selected a different route. Here’s an example.
In May, Minneapolis-based
GoldenCare USA joined Integrity Marketing Group. GoldenCare’s founder, Lenny
Anderson, chose Integrity for its similar partnership philosophy and the
decades of history he has had with many of Integrity’s partners.
Why A Merger Can Be A
Smart Succession Plan
One of Anderson’s
most significant succession planning concerns was how his legacy would continue
to grow, how he could take some of his equity out of the business, and that he
wanted to stay involved with his company and its management.
As for his legacy,
Anderson can now claim that the company continues to operate nationally under
its existing brand, and all employees have remained in their current roles —
including Anderson, who became an owner in Integrity.
In this type of
succession plan, although Anderson was not yet ready to retire, he was able to
taste the “first bite” of the apple, with the financial security and liquidity
of the business he worked so hard to develop over 41 years and not step aside
until he desires. This model allows him to take some of his chips off the
table, but stay in the game. As an active investor and leader in the company,
he also has a chance at a “second and third bite of the apple” on a larger
scale and in the form of upside opportunities that arise with the new team and
partnership.
Economies Of Scale
These kinds of
mergers serve as a positive succession planning option because they provide
sellers with the opportunity to benefit not only financially, but also
strategically and operationally. This option allows the focus to be on growth
and best practices, instead of on operations.
·
Strategically, agencies that enter into this sort of model of
succession can benefit from shared carrier relationships and product
development, aggregating volume across top carrier contracts and
products. They can leverage sales and marketing capabilities, best
practices and centralized technology, such as carrier and agency management
systems that can help streamline business processes and drive new business.
·
Operationally, the agencies move their financial books to a
centralized accounting function, so they get managed by a team. The
consolidation allows for a more efficient approach to back office functions
such as company finances, audit and payroll, including improved employee
benefits and tax administration. By centralizing this information, the company
does a better job of budgeting, financial planning and financial analysis for
the company than the agencies could ever do for themselves.
Sometimes going a
non-traditional route and forgoing the typical plan of leaving your agency to
heirs means reaching a higher potential than an agency owner could have ever
imagined.
Bryan W. Adams is
the cofounder and CEO of Integrity Marketing Group. Bryan may be contacted atbryan.adams@innfeedback.com.
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