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12 Reasons YOU Should NOT Sell Your Own Agency (Part 4 of 4)

Author: Howard Candage

Have you ever bought or sold an agency? Did you use a consultant to structure the deal or did you do it yourself? If the latter, there's a good chance you might have left a considerable amount of money on the table and didn't even know it. Good mergers and acquisitions consultants don't come cheap but, in this article, Howard Candage explains how a consultant will usually save you money far beyond his or her consulting fee. If you're thinking about buying or selling, you MUST read this article!


Several types of purchasers exist and each is willing to pay a different amount for your organization. When accountants and attorneys get involved with transactions, they tend to think in financial or legal terms. Very few of them understand the strategic implications of mergers and acquisitions in specific fields. A consultant can ascertain many strategic reasons for a purchase or a sale and can position both parties to maximize value. As a seller or a purchaser, you seldom can do this yourself. Neither can you create the leverage of instilling a sense of urgency and competition among potential suitors. A consultant can position both the seller and the purchaser to enhance the character of a sale to more than a financial transaction.

The consultant may have knowledge about both parties that will improve the ability for them to get together. The consultant has the tools and knowledge available to create willingness on the part of purchasers to pay more and realize more benefit from the transaction. Good consultants will have knowledge of programs designed to assist both parties to a transaction or may have knowledge of insurer programs to assist agencies. The consultant will enhance your ability to work with lending institutions to finance the purchase of an agency. Lenders tend not to understand the inherent value in a book of insurance expirations and will be hesitant to use them for security. Purchasers can have a multitude of motivators for purchasing an entity and the consultant will assist them in finding or creating more.

When you choose an intermediary, make sure the consultant chosen is a specialist in insurance mergers and acquisitions, with proper knowledge of the insurance marketplace. Don't use a business broker unless they specialize in insurance transactions. Several business brokers work with me to consummate sales of insurance businesses they are selling, rather than relying on their own knowledge. Find a specialist...the fee they charge you will always more than come back to you immediately.


8. Leverage

Your consultant can leverage your sale. If YOU try to leverage your sale, you will be scorned as disloyal and not negotiating in good faith. You will be looked at with disdain. The consultant can leverage your sale and the purchasers expect it! We are given the license to do what you cannot. Let the consultant gather several buyers and maximize your deal. Plus, this keeps the deal on track. If you have tried and failed on your own a couple of times, I can guarantee your sale price will diminish as people find out about these things! Trying it yourself and failing makes you a Wanna Be and astute purchasers eat Wanna Be's for breakfast!


9. Keeping the deal moving

Selling your agency is a bit like being pregnant. When you first find out, you think it is really great. When you are about half way through, you are starting to wonder if you have made a mistake. By the end, you just want it to be OVER!

Deals tend to run out of steam. People tend to run out of steam. People get emotionally tired of dealing with the details. It is difficult enough to keep the deal moving when it is your job. When it is you, negotiating with another party, the deal will keep stopping and starting. Irrational assumptions will be made and you will get in your own way. Most deals simply stop at some point. The consultant keeps things on track and moving. A large part of the compensation of the consultant is dependent on the closing, so they have a vested interest in keeping it moving. This is an extremely important role in the process.


10. Managing the emotions

Selling an agency, especially a family agency, is a very emotional process. I am convinced that this is the most difficult part of most deals. Too many times deals fall apart when some sacred cow is inadvertently slain. This is a very private and personal deal and the presence of the intermediary tempers and manages the emotions. If for no other technical reason, this reason alone is enough to make the consultant worth the fee. Selling an agency is like riding an emotional roller coaster. One day you are up and the next day you are down. One day the offer and the conclusion are right there for you. The next day it seems everything has fallen apart. When you are dealing with the emotions of the sale and have to deal with the on again off again nature of deals, it becomes intolerable at times. In some instances when a deal falls apart, a good consultant will be able to manage the people and the deal so the seller need not even know the deal fell apart.

After one deal I facilitated, the purchaser called me. I had been dealing with a particularly difficult seller. They called after the deal to give me two compliments. One, they said they were impressed by how I showed them the value of this purchase. I created a strategic reason for them to purchase and they told me they would have never have seen the deal that way and paid as much as they did without my input to the deal. I expected the second compliment to relate to keeping the seller out of the way. Instead they said, "We were so impressed by how you managed US!" They felt I had managed their perceptions and expectations so well that they were compelled to call me and thank me for managing THEM!


11. The role of other advisors

Traditionally, the role of advisors has been limited to attorneys and accountants. The consultant provides knowledge and ability that most accountants and attorneys have to find in reference books! Superior negotiating skill and extensive knowledge of the insurance industry are necessary to build deals. By and large, the attorneys I deal with are very pleased to be working with me. As we closed one sale, I extensively reworked the P&S with the purchaser on the phone. My client was the seller. The closing took all day. At one point in the final negotiations, my clients' attorney looked at me and said "You aren't a business broker are you?" I said, "Well that is the role I assume, what do you mean?" "You know so much more about how to put this deal together than I, you are really a consultant to all of us. And, you can talk to all the parties and make the deal work for everyone. We will work together again," he said.


12. Closing the deal

You read earlier about saving $60,000 at closing. The last deal I did, I spend the better part of a day running from conference room to conference room putting the final touches on a deal. The deals tend to close better, the expectations are clearer, and the check to the consultant is usually accompanied by a letter of thanks and a testimonial. The business manager for one of my clients was in a meeting where they were discussing an acquisition. When I told the principal my fee, the business manager about choked. The principal signed the papers and we proceeded with the acquisition. I prepared the cash flow spreadsheet for the bank and the seller put forth the additional financial information they needed.

he banker called simply to say, "Let me know when you want to close." After the deal closed, the business manager invited me to lunch. He brought me a letter of recommendation and a thank you. He said, "I about died when you said what this was going to cost. Now I have seen you work I would never buy or sell an agency without you!" To use his words, "You were absolutely stellar, plus, I was so busy running this business, I don't know I would ever have found the time to do this!"

Twelve Reasons:
1. Confidentiality
2. Cash flow
3. Seller security
4. Maximizing value
5. Knowing the agency market
6. Understanding the tax law
7. Understanding the types of sale
8. Leverage
9. Keeping the deal moving
10. Managing the emotions
11. The role of other advisors
12. Closing the deal

Well, I hope I have convinced you that consultants can have more value that using your watch to tell you what time is. People ask me why they should pay me. What makes you so smart? Well, I tell 'em, "I ain't so smart...I can just still see the forest...and the trees."

Remember: "Selling your own agency is like telling your clients they should buy their insurance over the internet."


Howard E. Candage, CPCU, CIC, AMIM, AII, AIS is an insurance industry consultant with over 20 years of experience as both an agent and a senior level insurance company manager. His consulting practice specializes in Business Appraisal, Agency and Insurance Company Sales, Mergers and Acquisitions, Insurance Training and Development and Litigation Support.

He and his Associates also specialize in Risk Management Consulting, self-insurance and Marine Risk Management. He is a prolific author and speaker with specialized programs on serving Insurance Customers, Product Innovation and Maximizing Agency Value

H. E. Candage, Inc.
2 Portland Fish Pier, Suite 214
Portland, Maine 04101
FAX 207-871-9015

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Copyright 2000 by Howard Candage. Used with permission.

​127 South Peyton Street
Alexandria VA 22314
​phone: 800.221.7917
fax: 703.683.7556

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