Acquiring another book of business is a great way to quickly grow your independent insurance agency, but before you make the purchase, it’s important to ask a few key questions. Here are some things to consider:
- What type of insurance policies does the book of business consist of? This is important to know because it will help you determine whether the policies are a good fit for your agency and whether you have the necessary expertise to handle them.
- How long has the book of business been active? This will give you an idea of the book’s overall health and the potential for growth. A book of business that has been active for a long time may be more established and stable, while a newer book of business may have more potential for growth.
- How many clients does the book of business have? The number of clients can give you a sense of the potential revenue and profit from the acquisition. It’s important to keep in mind that a smaller book of business with loyal clients may be more valuable than a larger book of business with less engaged clients.
- What is the overall value of the book of business? The value of the book of business will help you determine whether the purchase is financially feasible for your agency. It’s important to carefully evaluate the value of the book and compare it to the selling price to ensure that you’re getting a good deal.
- What is the retention rate of the book of business? The retention rate can give you an idea of how likely the clients in the book of business are to stay with the agency. A high retention rate may indicate that the clients are happy with the service they’re receiving, while a low retention rate may indicate that there are potential issues with the book of business.
- Are there any potential issues or risks associated with the book of business? It’s important to carefully assess any potential issues or risks associated with the book of business, as these could impact the overall value of the acquisition. This could include things like a high number of claims, a large number of policies that are due for renewal, or potential legal issues.
- What is the selling price of the book of business and is it negotiable? The selling price of the book of business will play a big role in your decision to purchase it. It’s important to carefully evaluate the price and determine whether it’s reasonable given the value of the book of business. It’s also worth asking whether the price is negotiable, as this could give you some wiggle room to negotiate a better deal.
- What is included in the sale of the book of business (e.g. customer lists, policies, contracts, etc.)? It’s important to know exactly what is included in the sale of the book of business, as this will determine what you’ll be able to do with the book once you’ve acquired it. For example, if the sale includes customer lists and policy details, you’ll be able to easily transition the clients to your agency. If the sale does not include these things, you’ll have to work harder to retain the clients and maintain the book of business.
- Are there any non-compete or other legal agreements that come with the book of business? It’s important to carefully review any non-compete or other legal agreements that come with the book of business, as these could impact your ability to operate the book once you’ve acquired it. For example, a non-compete clause may prevent you from competing with the previous owner in certain areas, which could limit your ability to grow the book of business.
- How will the acquisition of the book of business impact your existing operations and business model? It’s important to carefully consider how the acquisition of the book of business will impact your existing operations and business model. For example, if the book of business consists of policies that are very different from what your agency currently offers, you may need to make changes to your business model in order to accommodate the new policies. Alternatively, if the book of business is a good fit with your existing operations, the acquisition could help you grow and expand your business more quickly.
Overall, acquiring another book of business can be a great way to quickly grow your independent insurance agency, but it’s important to carefully evaluate the book of business and ask the right questions before making the purchase. By considering the factors outlined above, you can make an informed decision about whether the acquisition is a good fit for your business and will help you achieve your growth goals.
Doug Meacham
President, COO Midwest Insurance Agency Alliance, Inc.
[email protected]
Connect on Linkedin
MIAA has helped hundreds of startups and existing independent insurance agencies grow and prosper in any type of market. Find out how we can help you.