Perpetuation Planning for Independent Insurance Agencies

Why You Need to Plan Your Insurance Agency Exit Strategy

September 20, 2022

You only get one chance to perpetuate your independent insurance agency.

This article is not a how-to or step-by-step guide on perpetuation. It is more of a wake-up call for those of you who have been meaning to get around to it.

A high percentage of agency owners in this country are 60 years of age and older. I have met with and spoken to thousands of owners in the past 25 years. The one thing that most of these very smart and savvy insurance people have in common is they have not given enough thought to their exit plan.

What’s The Worst That Could Happen?

Businesses have life cycles, growth cycles, ins and outs, ups and downs. Independent insurance agencies are no different. But most independent agencies have business structures that are closely aligned with their owners.

Most of the horror stories I have heard happen when an owner passes away suddenly or becomes incapacitated without a plan in place.  Examples of what can and does happen include:

  • Family members feel obligated to carry on the owner’s legacy without any insurance industry experience and the business suffers.
  • Customers go elsewhere over concerns they will not receive the same level of service they did in the past.
  • The courts decide what happens against what you would have wished.
  • Co-owners are left to decide what happens with your piece of the business against what you would have wished.
  • Family trusts, that were set up to protect family assets but don’t include a perpetuation plan, create family battles over ownership.
  • Family members lose thousands or millions of dollars due to poor planning.

Get Motivated. Do It Now.

I have a friend who is in law enforcement.  I always enjoy our time together because I get the download on all the crazy things he experiences on the job. The risks inherent to his job are the motivating factors for him to have his financial house in order.

As independent insurance agency owners, we deal with the effects of risk all the time. But real risk is not as omnipresent as it is for my friend. So it is understandable how we put off perpetuation planning.

The best time to make a plan is when you can still make a plan. I assure you, getting rid of all the “what-ifs” will give you piece of mind. More important, your family, co-owners and customers will thank you one day. Unfortunately, nobody can tell you when that day will be.

 


 

Doug Meacham
President, COO Midwest Insurance Agency Alliance, Inc.
[email protected]
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Doug has helped hundreds of independent insurance agency owners with perpetuation planning. If you have any questions on this topic please contact him directly.