“Al, if I knew last Fall what was going to happen this year, I would have taken your advice and perpetuated my agency in 2019…” these are the paraphrased words I have heard from dozens of agency owners in the last few months…
With all the complaining we normally hear about the state of the industry and the problems in our agencies, don’t you agree that things were pretty “sweet” through January and February of this year? Knowing then what we know now about the state of the economy, business in general, and our businesses in particular, we would have had few complaints about the state of our agencies.
But it’s hard to judge the state of the world from the inside of a tornado. Take my word for it – I’ve literally been there (but that’s another story altogether).
Many of the calls that I’m getting are from desperate agency owners trying to figure out what they have to do to stay in business and how to serve their customers during this crisis. Within five minutes the subject turns to how to get out of the business for many older agency owners who have been hanging on trying to make another year of income from the business before they let go (internally or externally).
Last year agency owners were riding high. With the exception of trying to find good quality employees and making their existing employees more productive, business was GOOD. When I suggested that this was the right time to trigger Succession Plans or to implement Perpetuation Plans the common answer was, “Why should I give up this kind of income while I’m still healthy? I can hold out for another year or two and generate more income for me and my family before I give up control of my agency.”
COVID-19, Corona-virus, – these words were unknown just a few months ago and would have been meaningless to us today if we treated it just like we treat the various forms of Flu that revisit us annually, constantly changing and defying our best efforts to create a vaccine against it. The revised, revised mortality numbers seem to show that most deaths are because of other complicating factors and threaten the elder community more than the healthy working class. 2 Million potential deaths have turned into 60,000 (or less) and we are quickly moving toward medicinal treatments and a vaccine faster than ever thought. Meanwhile we lost well over 60,000 to influenza in this last season but no one has ever considered closing our economy for that reason. The 1918 Spanish Flu Pandemic (sorry – we didn’t mean to slander the entire Spanish speaking community) infected 500 million, 28% of the world’s population (equivalent to infecting 2.16 Billion people today), killing 20 million including 675,000 Americans (equivalent to 2 Million today).
So, let’s NOT discuss the virus itself—or the politics that caused the economic shutdown – that has been discussed ad nausea (mostly for political reasons). Let’s discuss NOT OVER-REACTING in the middle of a crisis!
PLEASE, PLEASE, DO NOT CONSIDER SELLING YOUR AGENCY UNTIL THIS CRISIS HAS ENDED AND WE HAVE REGAINED OUR FOOTING WITHIN OUR BUSINESSES!!!
This is excellent advice for ANY business but double the excellence for businesses like insurance agencies who are going to regain lost ground quickly after we are permitted to open our doors again.
You are in the middle of the Tornado – it feels like the world is crashing down on you. Your staff is working (or are they?) from home. You’re beginning to feel the non-renewals of long-time clients who simply can’t afford the cash to pay premiums. You haven’t written new business in months. The cash crunch on agencies whose Working Capital is measured in days instead of in weeks or months may require actual lay-offs (regardless of the government grants (hand-outs) that are supposed to be in our hands already).
You are in a panic.
So, when that offer comes in to pay you to “merge” your agency with another, larger firm, the offer sounds very tempting.
TWO REASONS TO RESIST THE TEMPTATION TO SELL NOW –
- If you lose policyholders and have to regain your revenue position, the price set on your agency will inevitably be lower than it rightfully deserves. The value of an agency is greatly dependent on its cash flow because that’s what will be used to pay for the agency, either through self-financing or through bank financing. And no one will pay more for an agency than its cash flow will bear.
- The inherent strength of the U.S. economy before the crisis is still in place (as proven by the return of the stock market). If you wait out the crisis, you will be in as good a place for succession and perpetuation as you were at the end of last year.
Don’t sell at your weakest point.
(856) 779-2430 – That’s my phone number. I am in the same position as you. I cannot visit my clients so I am available to speak to agents about strategizing how they are going to survive and regain their positions (and value) later this year.
Politically, both parties would benefit from the economy opening before Election Day. The only question is the ‘optics’ (the public’s opinion and understanding of a situation after seeing it as the media shows it, and the possible political effects of this). Economically, if we don’t open for business within the next month or two many of your clients will not be able to recover at all and we will enter a Recession (or worse). Not wanting to sound morbid, the death rate of the virus is no worse than the flue every year. Once we have effective treatments if the virus is caught and a vaccine to lessen the chance for our most vulnerable people (older Americans with pre-existing complicating conditions), the best way to treat the virus is for everyone to either catch a minor version of it or avoid it through the powers of modern medicine. Either way, the political reaction to shut down our economy because of the fear of a virus was an over-reaction and we are now paying for that abuse of power.
Don’t further complicate and worsen the ramifications by giving up your business. You may have to scale back but the insurance business remains one of the best ways of earning a living supplying a service that is needed by all people and businesses.