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What to Do When an Owner Retires

Author: Al Diamond

If the retirement of an owner is not planned and prepared for, both the retiree and the business could find themselves in critical positions, floundering to achieve a balance from which each can continue their respective life cycle. A successful prepared retirement, whether it involves selling a business to an outside party or internally perpetuating it, will always yield better results to the retiree, the new (or remaining) owners, the agency, and its clients.


Whether an owner is the sole proprietor and agent or the president of a multi-location insurance corporation, a retirement is a life-changing occurrence both for the retiree and for the business, and, if the retirement is not planned and prepared for, both the retiree and the business could find themselves in critical positions, floundering to achieve a balance from which each can continue their respective life cycle.

Retirement should never be a spur-of-the-moment decision, even if the temptation is frequent when carriers, customers, or employees push an owner's "buttons" once too often. NEVER, NEVER, NEVER, yield to the temptation and just throw in the towel. That does not mean that you are not ready for retirement, it simply means that in the "heat of battle" you are never actually prepared for retirement.

A successful prepared retirement, whether it involves selling a business to an outside party or internally perpetuating it, will always yield better results to the retiree, the new (or remaining) owners, the agency, and its clients.


1. Plan for perpetuation - or your perpetuation plan simply becomes the sale of the agency. If you are a partner in a firm and do not plan for perpetuation, you are at the mercy of the remaining owners. The Plan, in this case, is a Buy-Sell Agreement or a Stockholders' Agreement that includes provisions of how to establish a price and other provisions for the terms of any retirement stock buy-back.

2. Make sure that you are not indispensable - very few agents are so skilled (or have employees so unskilled) that others could not assume their duties. I know of no agencies that fell apart when owners went on vacation, regardless of its duration. However, some agents make themselves indispensable by not telling others what they do (in general or for specific clients). In this way, if a client calls regarding some question on his insurance, no one understands the management of the account but the key producer/owner, requiring a call to that person, wherever (s)he is. This is generally a foolish position in which some agents place themselves.

3. Pick your successors - this could involve an internal perpetuation plan or a decision to sell to someone outside the agency. In most cases, it is best to tell your successor and prepare them, as well. Whether you have a date in mind (i.e. in two years, when I reach 65 years old, or when we achieve $X revenue) or are creating a Succession Plan (i.e. If something happens to me, I want you to own the agency.), talking it over with you chosen successor will let you know if your Plan coincides with that of the expected successor.

I know of two agencies that recently experienced a sudden change in perpetuation plan. In one case, the chosen successor decided that the agency was going in the wrong direction and he could not wait to assume control until the agency owner retired. He left, rather than waiting. In the other case, the agency owner presumed that his chosen successor knew his intention. Being a very poor communicator, he never expressed his expectation and was surprised when the young man took another opportunity.


If you want to achieve a strong value for your business, do not stop investing in the future and promoting growth as you approach your retirement.

The value of an agency is determined by its FUTURE earnings potential; that future earnings potential is (at least partially) determined by its recent historical growth and profit path. If the new owner is already a part of the agency, the historical growth and profit is very important, since he will, most likely, continue the agency's operation.

Even if the new owner is another agency, it will base its value potential on the growth and profit recently achieved more than on its "hope" for enhanced growth and profit once it assumes control. If the new owner will simply buy the book of business and manage it in his own operation, the selling agent's operations is less important, but the size and profit of his book of business is still a key issue in its potential value.

Sometimes this is very difficult since an owner's first indication that retirement should be considered is often a growing feeling of boredom and indifference to the agency. If you feel yourself falling into this trap, consider giving some of the decision-making authority and responsibility to your successors before your actual retirement date.

Planning for retirement by off-loading operational responsibilities permits the agency to feel the impact of the new owners before they actually take control. In many ways it is a test to determine if they are ready for management responsibilities. The retiring owner is still there to provide guidance and leadership, but must slowly step out of the way to let the new owners control the future of the agency.

This is a very delicate process. The old owners are almost always 'controller' personalities and want the agency managed in the way it is most comfortable for them. If the new owners want to take the agency in a different direction, they must understand the difference between their assumption of leadership and management and their assumption of ownership. Management authority is given. Leadership is earned. Ownership is paid for. The retiring owner should gradually yield management responsibilities to the new owners. If the retiring owner is following the process, any time a management decision is to be made, he will yield the decision to the new owners (with some input, if requested).

Leadership is achieved by the new owners depending on HOW they manage the agency while the retiring owner is still in place. Asking questions and considering the retiring owner's opinion is a sign of strength. The retiring owner assumes the position of counselor while still owning the agency. The employees, companies, and customers realize that the new and old owners are in partnership through the transition. This is a very healthy approach.

When the retirement date finally arrives, the transition is a natural one and the only change that takes place at that time is the ownership of stock. Unfortunately, some management, leadership, and ownership transitions are made poorly by either the retiring owner or incoming owners, and this inevitably leads to stress, anxiety and crisis.


1. The owner can't/won't give up control - the ego drive of owners is legendary. Some owners find it difficult to yield control of their agencies to others, even if they understand the logic of management succession. If control is held until the ownership change takes place, the new owner will have potential crises arise quickly as employees, clients, and carriers provide challenges testing the owner's resolve and decision-making skills. This has been done thousands of times as businesses transition, but can be avoided with transitionary management sharing before ownership changes.

2. The owner gives up those management functions that he does not like anyway but continues to be the decision-maker and arbiter of any problems. In this scenario, the new owner is never given the chance to show his leadership skills until after the ownership changes. Neither the new owner nor the old owner can be convinced that the decisions of the new owner are sound if he is not given the chance to make any while the retiring owner is still in place.

3. If changes to the organization are not made gradually through a transition process - young or new owners have a tendency to change many things quickly after the ownership changes. This "change everything syndrome" causes uncertainty in the organization and many changes made at once are less likely to succeed than changes made slowly, one-at-a-time.

4. The final crisis is when retiring owners try to "rule from the grave." This term has been applied literally to owners who, upon their deaths, leave detailed instructions and conditions to the transition of their agencies. When an owner retires he cannot presume to assure continued employment for his staff, continued relationships with his carriers, or even guarantee that customers are treated the same way. These are the prerogatives of the new owners. If the retiring owner has chosen wisely, the new owners will care for the employees, clients, and carrier relationships as well as the old owner - but probably differently. However, some changes are natural when ownership and management changes occur, personnel may change, clients who were close to the retiring owner, but not to the agency, may leave, and carrier relationships will change according to the personality of the new owner. These changes are natural and should be expected.

The key to a successful retirement is to prepare oneself, prepare the organization and prepare the successor sufficiently that the transition is anti-climactic. If this occurs, no transition crises will occur and the organization will continue on its created course.

Copyright 2001 by Agency Consulting Group, Inc. Used with permission.

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