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Analysis of Agencies with Revenues
Greater Than $10,000,000
P
ERPETUATION
For these
Best Practices
agencies, perpetuation not only includes
the transition of ownership, but also the transition of the
management and operations of the firm as well. Of the two, these
agencies generally find the most challenging to be the perpetuation
of the operations and management of the firm. If an agent is able to
bring in and develop young talented managers and producers, they
have a variety of ways to perpetuate the ownership of the agency
(i.e., internal perpetuation, third party sales, mergers, etc.).
“Perpetuating the talent within this
organization is one of the biggest
challenges we face. We work hard at it,
but we’re not where we need to be.”
“We would not have been able to
successfully address perpetuation
unless we invested a lot of energy and
effort in preparing for it a number of
years ago. The advance preparation
gave us the ability to get everyone
onboard, build the organization, prepare
financially for the transition and
execute it on a timely basis. We are
evidence that internal perpetuation can
still work.”
“For us, the successful perpetuation of
this firm resulted from our sale to a
financial institution. Not only did the
financial interest of the former owners
get addressed, but we have a partner
that is in a position to provide
additional resources, including the
financial wherewithal to continue
growing and developing our
operations.”
On the other hand, if they cannot recruit and develop talent, the
options available for the perpetuation of ownership of the firm
become much more limited. Very few of these agencies would
identify their ability to perpetuate the operations and management of
the firm as a strength. These firms report a number of challenges,
including the difficulty in finding new employees, the difficulty in
training and developing future leaders and the difficulty in finding
individuals that have the desire and wherewithal to effectively run
the organization and transition its ownership.
Some of the most successful of these
Best Practices
agencies have
recognized that their ability to attract young talent into the
organization not only better positions them to perpetuate the
operations of the firm, but it is also one of the best ways to add
value. As was addressed previously, many of these firms have set
as a target and goal to be the employer of choice, creating an
environment where the most talented employees would like to
spend the balance of their careers.
The perpetuation of ownership has been handled more effectively
with some of these
Best Practices
firms transitioning the ownership
to third parties (i.e., financial institutions, insurance consolidators or
other agents and brokers). At the same time, others have
successfully perpetuated their firms internally, transitioning
ownership to deserving key employees through the use of a variety
of vehicles, including employee stock ownership plans. The ability
of these firms to successfully perpetuate internally came about as a
result of excellent advance planning, senior management’s
willingness to sell at a discount to the firm’s full fair market value,
and a buying group willing to assume some level of risk. As a result
of their ability to perpetuate the ownership internally, many of these
firms view private ownership to be a competitive advantage in
retaining key employees as well as to attracting new employees in
the future.
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