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Analysis of Agencies with Revenues
Between $5,000,000 and $10,000,000
P
ERPETUATION
“We are well positioned for perpetuation
of the agency, both financially and
operationally, because we have invested
significantly in young production
talent.”
“Our lack of a younger generation of
talent will make it likely that we will
seek a larger partner within the next
five to ten years.”
“Remaining privately held remains a
key goal for our organization. As long
as there are key people interested in
owning the stock of the agency, and the
selling shareholders accept a reasonable
price for their shares, the profitability of
the company should support ownership
transfers.”
With the large number of owners typically represented in agencies
of this size, agency perpetuation becomes far more complex than
with smaller agencies.
With more than simply one or two owner’s objectives to consider,
perpetuation planning becomes even more critical to the long-term
survival of the agency in a fashion consistent with the desires of the
agency’s owners. At a time when both internal and external
perpetuation options abound, it is critical that agency owners work
to ensure a unity of purpose.
The
Best Practices
exhibited by agencies in the area of
perpetuation include: developing of a formal perpetuation plan
(including buy-sell agreements), maintaining open and honest
communications with partners and potential partners, using of
Employee Stock Ownership Plans (ESOPs), staying committed to
leadership development, planning financially well in advance of any
major ownership transitions, maintaining appropriate levels of key
person life insurance, keeping up-to-date on agency valuation
trends, obtaining annual appraisals of fair market value, and
continually seeking out and communicating with potential
perpetuation partners.
B
USINESS
P
LANNING
“The key to good business planning is to
stay on top of the annual plan and keep
the key priorities in front of people
constantly.”
“We do an annual planning retreat with
the owners and business unit managers.
Experience has shown that a simple plan,
that is well communicated, can be an
invaluable management tool.”
“A good business plan must be a work-
in-process at all times, updated whenever
necessary to take into account changes
that are occurring.”
Very few
Best Practices
agencies of this size find themselves
without some type of a formal business plan. Given the sheer size
of these organizations, the numbers of employees, markets, and
customers they serve, and the myriad competing business
opportunities and strategies that exist, success without a well-
developed plan is virtually unthinkable.
A majority of these agencies have formal plans that are updated
(and tracked against) on a frequent basis. Other business planning
Best Practices
are: including key carrier partners in the planning
process, using third-party business plan facilitators, incorporating
feedback from all levels of the agency in the planning process,
communicating the plan throughout the organization, keeping a
perpetuation plan up-to-date, establishing and tracking against
operating budgets, and attending large agent roundtables to solicit
peer feedback.
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