After 31 years, I finally sold my agency to my successor January 1, 2016. It was an orderly transition thanks to Al Diamond and his folks at Agency Consulting Group, Inc. But I think the lessons I learned would help any other small or medium sized agency owner who is facing the same challenges. The following are my observations. Please use them to avoid the traps and pitfalls that I negotiated along the way.

I used the Agency Valuer, a product of Agency Consulting Group, Inc. that let us run several “What If” scenarios. We used it to determine the final purchase price. But I would only recommend the Agency Valuer to agents who have already had an appraisal done and have reviewed it and used it for reference. I previously had Agency Consulting Group, Inc. do a full valuation for me. The Agency Valuer worked well for us, but I don’t think I could have used it to its full potential if I wouldn’t have had the previous experience with the formal appraisal product.

Al, thanks for your help. You provided a valuable service to a small agency in rural Minnesota. I feel very good about how I perpetuated my agency using your appraisal and an internal plan. The best advice I got was when Al Diamond told me to hire my successor three years ahead of my planned sale instead of two years ahead of the sale. I found the right individual and it still took three years for both of us to reach the comfort level where we’re both ready to do the transaction. He’s had a chance to meet and work with every client in the agency and it’s gone very well. I’ve even had several companies that we represent compliment us on how we handled the situation. One company CEO asked me to help them develop an agency perpetuation planning guide to have available for their agencies. I told them to contact your office, Al.

I was at the agency for 31 years, 28 of them as sole owner, and was ready to pass it on to the next owner. Here are some general observations about owning and operating a small agency:

• Most owners wait way too long to even begin planning how to perpetuate the agency.

• Most owners think that their agencies are worth more than they are actually worth

• Many owners think that buyers will beat a path to their door when they want to sell

• Many owners underestimate the amount of time it takes to train their successor (3 years minimum)

• Most people who haven’t worked in an agency underestimate the time and effort it takes to do it well

• Too many agents think that their son or daughter is the best replacement and don’t consider anyone else

• When an agency owner has been in place too long, many clients are sticking with them out of loyalty and will jump at the first chance they can when this agent leaves.

• Older agents have a book of older clients who will die or sell their home, auto or business soon and will no longer be clients after anew agent buys their agency. This book of business is not worth much to the buyer

• Many agents think they will be welcome to stick around to advise the new owner and keep receiving a large salary and benefits. This only confuses the clients and doesn’t allow the new owner to really take over complete ownership

• A lot of small sole proprietor owned agencies (like mine) are being sold to larger agencies (or bank agencies in our area) and it doesn’t work well. Banks think it’s easy to operate an agency and often understaff it (or put their son or wife in there to run it). Then the bank gets sold and the clients don’t know the name of their agency anymore

• Insurance companies prefer having an owner/operator at each location

• I’ve had several clients compliment me and even thank me for turning the agency over to an ambitious young man who wants to keep a business open on Main Street in our town. Now they know who will take care of them for the next 30 years.

• Age isn’t the only indicator of when an agent should perpetuate. I think years of service and level of responsibility is a better indicator. I’m only 50 but didn’t pace myself well. I gave everything to the agency and too little to my family and self. I read an excellent article a few years ago titled “The Agents Rule of 55.” I googled it recently and read it again.

• Younger clients would rather work with an agent closer to their age, and older clients don’t seem to mind working with a younger agent

• I’m surprised at how many agency owners haven’t saved for retirement and need to keep working beyond their peak years. Their agency is their sold retirement savings plan.

• It’s much better to hire a good person and then teach them the insurance business than to hire an insurance person and then try to teach them to be a good person.

• When making a deal, there doesn’t have to be a winner and a loser, there is plenty of common ground where both sides can both be winners.

• The best thing I did as an agent was to pursue my CPCU designation early on. I can thank Al Anderson, CPCU from North Star Mutual for this. He was my mentor. It gave me the education, confidence and a code of ethics that provided me with the foundation I needed. It taught me how to learn.

The agency business has been good to me and I’m glad that it’s someone else’s turn now. Thanks to everyone and to Al Diamond and the Agency Consulting Group for their help – it was valuable.