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Bertha Said:

I am Buying an Insurance Agency. Need advice ASAP!?

We Answered:

I know a number of established agents in my area that activly pursue agencies for sale and would pay double what your paying..for a good book.

The fact that your friend is dealing with you and not selling for a better price speaks volumes. If no one want to purchase a book, there is probably a reason why. If there are sub-agents in his office why are they not buying? The terms are reasonable.

Do some furthur research: Any agency undergoing change is going to experience some run-off of existing business. To estimate how much will run off I’d do analysis by first breaking down the book of business:

Personal lines vs. commercial lines and access to both.
Preferred market vs. standard or high risk and again access.
Any life& health, group life, disability: what kind with who and how stable
Consider what types of business you want to write and see how competitive you are in those markets.

Other factors to consider:
Loss histories
Profitability
Retention

After crunching numbers, an analysis of current agency management would be in order.
Since you’re stepping in to replace existing agents, how are you going to do?
Are you replacing the most popular guy in town or an agent who’s been semi-retired for the past 5 years?
Is the book looked after or has it been neglected? High maintenance or on auto-pilot?
Are the principal or sub-agents moving to positions where they will compete against you?
Are you able to fill the shoes or are the shoes too small and you can do better?
Is the agency what your looking to build or are you using the appointments to grow in a different direction?

Any agency undergoing change is going to experience some run-off of existing business. Is current management working with you or against you to keep your business walking out the door? Are CSRs and other key personnel staying? What is their incentive to stay? What is the cost to keep them? Are you on the hook for their health plan, pension, 401K, profit sharing?

Since you're so inexperience, why not work for the agency for a time before purchasing? Six months as a producer would give you time to work in the agency and see first hand how good or bad things are; and teach you to run an agency. Good luck.

George Said:

how can i buy an insurance agency?

We Answered:

Be smart about it...if you have connections in the industry they should be able to point you to an agency that is for sale or is potentially for sale if the right deal came along. Of course the "right deal" is true for any business owner, anyone will sell if the right deal came along.

But anyways, what do you want to do within the industry? Primarily personal lines? Then find an agency that has a sizeable personal lines book of business for you to feed off of and has good markets for you. Primarily commercial lines? Again find an established agency in a locale you are familiar with and have connections in and has good contracts with carriers with a competitive commercial lines product. Health and Life? Again, find one.

Potential targets would be agencies with one owner that is getting close to retirement. Also an agency owner that has fallen sick is a potential target as they may need to cash in on what they have invested in. Also agencies in financial trouble are targets, but you have to be careful with this one so as you don't buy into something doom to fail, find out what the problem is and figure out if you can fix and how you are going to fix it.

As far as what you can bring to the table, all business owners are looking for the same thing, guaranteed cash. If you can't offer them that then it is going to be really tough for you.

Good Luck!