2001 Best Practices Study

Analysis of Agencies with Revenues

Between $1,250,000 and $2,500,000

ERPETUATION

EADERSHIP

EVELOPMENT

“We used to just assume everyone would

naturally want to be an owner and

would be willing to pay for it. Not

anymore – there are too many other

good investment options out there for

them. Now, we have a actual

presentation we make to prospective

shareholders which focuses on the actual

economics of the deal – what it will cost,

what the benefits are, what kind of

growth to expect, what kind of

investment return to expect, that kind

of thing. Once they understand

ownership from an investor’s

perspective, it’s a much easier concept

for them to get excited about because it

really is a great thing.”

“We have a plan in place to eventually

move all the agency’s stock to the

ESOP. We started out by buying 30%

of the owner’s stock and should acquire

the rest over the next 10 years…The

ESOP is a tremendous benefit and is

also a real competitive advantage in

hiring new employees.”

Perpetuation planning continues as an area of critical concern for

Best Practices

agencies. Although the sales and mergers of

insurance agents to and with third parties continue at a pace seldom

seen before, many independent agencies remain firmly committed

to internal perpetuation.

Regardless of whether an agency’s perpetuation objectives lie

internally or externally, the best practice for any perpetuation

scenario remains the development of a formal perpetuation plan in

which perpetuation objectives and means are laid out in detail.

Once a specific plan is in place, a number of best practices follow:

the development of a formal buy-sell agreement, managing the

business with the end perpetuation strategy in mind, developing the

next generation of agency leadership, and revisiting the

perpetuation plan frequently with involved parties to ensure that the

plan remains current and viable.