Succession planning: Begin with the end in mind

Succession planning: Are you there yet? That point in time when, after nurturing your clients and your agency for years, you’re considering other options? Possibly retirement? Relocation? Or a new adventure entirely? Whatever your motivation, the decision to sell a business that you’ve carefully cultivated is huge, emotional and complex.

I’d love to tell you that making the decision is the hardest part, but that would be misleading. Succession planning, too, is huge and can be every bit as emotional and complex. If you’re at that point, or think you may be there soon, you have much to consider and much to do. Starting now. Because, realistically, it can take several years to sell your agency.

No matter where you’re at as an independent insurance agent or financial advisor – whether you’re just starting out or you’ve logged double-digit years as an agent – now is the time to think about and make plans for what’s next. Here are some recommendations as you go about planning your legacy.

Don’t go it alone. Establishing a successful and seamless succession requires business strategy, financial planning insight, goal setting, marketing and administrative resources. Although you have many talents as an agent or advisor, it’s unlikely that you have all these skills – not to mention the available time – to handle all of these aspects while still serving clients.

If you currently contract with an insurance marketing organization or have a strategic business alliance with a larger firm, be sure to talk with those partners about succession planning services they may offer. If you don’t have any of these partnerships in place, seek out other agents and business owners in your community for resource suggestions. Your attorney can draft strong purchase agreements and noncompete documents. Your accountant can assess and explain the tax ramifications. Your IMO can recommend best practices for contracting and book-of-business transfers, provide financial documents and business data, and facilitate buy-out and commission splits.

Set timelines and deadlines. Establish specific dates for the transition period, book-of-business transfer, payments, and marketing efforts. Work with discipline to keep your plan on pace.

Understand and maximize the valuation of your business. “How much is my business worth?” is often the first question. And the answer, just as often, is: it depends. Every agency is different, and valuation is a mix of many variables including revenue; product mix; book-of-business age and health; reputation among carriers, clients, and within your community; assets, and efficient operating practices, among others.

Optimizing these variables increases value, which is why it’s a good idea to assess where you are currently and address what might need to change in order to achieve the best price for your agency. It’s a good idea to line up trusted advisors (for instance, an attorney, CPA, IMO, consultant) who can help you evaluate strengths, recommend enhancements, and make a plan — and a timeline — to accomplish your goals.

Take steps to increase your value. You can boost your agency’s value through recommended enhancements. If you own real estate, for example, make sure it’s functional, well-maintained and attractive. What about your customer service practices? Are clients and agents satisfied and loyal? Do you generate positive referrals and reviews? An impressive reputation is a key selling point.

Similarly, assess your business tools and operating processes. Is your technology current? Do you use a customer relationship management system to maintain accurate client data? Are your licenses, contracts, commission statements and records well-organized? Out-of-date technology and sloppy recordkeeping are big red flags for buyers.

And look carefully at the age and well-being of your practice. Is your product mix diverse in such a way that you have eggs in a number of well-tended baskets? Cross-selling a variety of policies - including individual, group, Medicare, life, ancillary options and annuities - can drive up your agency’s value. Product diversity matters, as does client diversity. Does your agency cater to a range of demographics such as age, life-stage, family structure, income and education?

Make a graceful exit. Once you’re ready to entertain offers, think about how the new owners will fit with your clients, downstream agents and employees. You’re placing your legacy in new hands. Make sure they are competent, capable and compatible. And when the time is right, remember to communicate clearly about the transition with your team, your partners and clients to reassure them and proactively answer any questions that might keep them from taking their business, or their talents and partnership, elsewhere.

Your agency is valued for its assets, its current and projected earning potential, and its market reputation. Take steps now to shore up any real or perceived shortcomings. Then work with your advisors to establish a purchase price. Setting the right price can involve a whirlwind of variables, assumptions, payment structures and tax implications, so you’ll definitely want to lean on your IMO, CPA and attorney for support.

© Entire contents copyright 2025 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

Aaron Neidorf is executive vice president of sales at IFC National Marketing. Contact him at [email protected].