Setting your Business Up to be Sold.
Collectivfide Whitepaper
Getting Maximum Value from the Sale of your Brokerage
It may be the result of a planned retirement, a desire to take advantage of attractive market conditions or a sudden illness that’s made the move to a part-time role a necessity. Regardless of the motivation, making the decision to sell your insurance brokerage can be a daunting one, particularly if you’re expecting to derive maximum value from the years you’ve invested in building your business.
To succeed and get the most from selling your brokerage, you need to be thorough and systematic when approaching it. In this whitepaper, we will provide you with the information and tools to guide you on the path to achieving an optimal outcome, and not strictly in terms of maximizing the sale proceeds. We’ll also address the non-financial factors you may be pondering in a sale, such as your employees, clients and other stakeholders.
Our goal is to impart the knowledge you’ll need to make informed decisions throughout this process, ensuring you ask the right questions, do the right activities and make the necessary decisions at the right time. We want to make sure you’re fully prepared when the time comes to sell.
It’s worth noting that while these guidelines are geared specifically to owner operators at independent insurance brokerages, they could also be relevant to a variety of small to medium-sized companies.
Motivations to Sell
There could be a variety of reasons why you want to sell your brokerage, all of which depend on your unique circumstances. The very first step on your path to selling your business is being crystal clear on your rationale for selling, making sure they’re legitimate ones you’re fully committed to[i]. If you’re doing it on a whim due to favourable market valuations or challenging business dynamics, this could lead to regret down the road, particularly if these conditions change prior to the sale closing.
Ultimately, turning back is often difficult once you’ve put the sales wheel in motion. And even if you can, changing your mind down the road could result in significant costs. It’s imperative you give yourself the time to review the pros and cons for selling, carefully assessing the benefits and risks of moving forward versus staying put. Which brings us to our first important point:
As you contemplate selling your brokerage, be sure you’re doing it for all the right reasons. With the exception of a couple scenarios, ensure it’s not being done under duress or due to some short-term problems. Confirm it’s the best option/solution for you, your family and any other important stakeholders, and that when you look back on it in 5-10 years’ time, you won’t have any regrets.
Reasons you May Consider Selling your Brokerage
Third Party Interest - A buyer has inquired about purchasing your business
Market Conditions = “Seller’s Market”
Other Business Opportunities Exist for the Seller
Capital Needs - You plan on buying a cottage, giving money to your children to purchase a home, etc.
Management Challenges – Current leadership duties are becoming too onerous
Business Risk – Growing compliance and other issues
Health Issues
Retirement
If one or more of these factors are currently impacting you, now would be a good time to think more seriously about the idea of selling your business. At minimum, you need to devote the time and energy necessary to investigate this further.
Getting Started - The Value of Planning
To get full value from the sale of your brokerage, it’s critical to engage your team of business professionals – lawyers, accountants, business coaches/consultants, etc. – early on, tapping into their expertise and advice to guide you on how best to structure your business that will garner the highest sale price.
That’s why it’s crucial you start planning for the sale sooner rather than later. The earlier you commence the planning process, the better off you’ll be, as it will give you the time required to identify any structural or related issues within the brokerage so you can address them, enabling things to run more smoothly.
Ideally, you should aim to be “Sale Ready” at all times, as you never know when or where a buyer may inquire about purchasing your business, or even put in an offer. If you’re always ready, you can do it at a time that best suits your needs and avoid a situation where your ‘back is against the wall’. Not only will this reduce the stress and risk associated with selling, but it will put you in the driver’s seat from the start.
Reasons to be Sale Ready
1) Ideally, you should start planning 2-3 years prior to your preferred exit/sale date. This extended timeframe will enable you to pre-plan for it, making key decisions in advance
2) You will be better able to ensure a good fit between you and your buyer since you can focus on that rather than the various demands emanating from the sale process, resulting in a better outcome for your clients, employees, and community
3) You will be ready to sell your business if and when the opportunity arises
4) Planning ahead will also ensure you receive the maximum price (and best terms) possible for your brokerage
Key Aspects in the Planning Process – The Basics
When planning for the sale of your brokerage, you must take a methodical approach, reviewing and evaluating all pertinent items.[iii] Make sure everything related to your business is in good order, updating items that are outdated or have changed.
This includes ensuring you can locate all necessary legal, financial, and related documents on the business since the purchaser will want to review them. You should also confirm that all your internal and external processes and procedures are up-to-date and in place, implementing any necessary changes to make certain you’re fully compliant.
Once you’ve reviewed and completed any necessary work to get these items current, you’ll be in a much better position to put your brokerage up for sale and get the full value for it.
Are you Sale Ready? Six Questions to Ask
Overall Assessment
Generally speaking, is the brokerage ready to be sold?
Office Facilities
Does everything look organized, professional and in good order?
Financial Review
Are all your financial statements up to date going back 5 years? Are they ready for a prospective buyer to review? (i.e. have you removed all non-business assets/debts, etc.)
Office Systems
Is your broker management system and related technology stack functioning properly and up to date?
Key Employees
Are they currently in place, or do you have any gaps in knowledge, skills, experience, etc.?
Corporate Housekeeping
Are items like your corporate minutes fully documented, up to date and easily accessible?
Once you’ve decided the time is right to sell your brokerage, the following questions may assist you in deciding the best course of action for moving this process forward.
Does it matter what happens to your brokerage after you sell it?
Are you okay with the brokerage shutting down, or would you prefer that it continues on as is, or in an altered (rebranded) format?
Do you have a family member or employee that may be interested in taking over (and buying) your book of business?
What would you like your role to be after the sale (i.e. full departure or retirement, retain a small book and work part-time, be a mentor, etc.)?
Is there a legacy component that needs to be taken into consideration when planning for the sale of your brokerage?
Selling Up - Optimizing the Value of your Brokerage
So you’ve made the decision to sell, and now you’re laser focused on maximizing the monetary value you’ll derive from it, and potentially the terms of sale as well. It’s now time to look critically at your business and determine if there are ways you can enhance it to maximize the dollars you will generate from the sale.
The following questions can help you get started. There will likely be a number of additional ones that are unique to your brokerage, so be sure to include these so you can assess your situation in a thorough and complete manner…
Request the full whitepaper and get information, checklists and questions to ask yourself regarding topics like:
Selling Up - Optimizing the Value of your Brokerage
The Value Driver Checklist
Getting your Documents Prepared and What You’ll Need
Stages of the Sale and the Required Legal Documents
Tax Strategies when Selling your Brokerage
Understanding the Legal Structure
Successful Case Study with TG Group
