When you’ve worked decades to build an agency, it’s important to plan how you’ll leave your small business—and turn over your legacy—when you retire. Developing a succession plan is one of the biggest decisions you’ll make in your career as an insurance agent. And experts say, the sooner you start planning, the better.
More than half (56 percent) of agents don’t have a solid succession plan, according to the 2021 State of the Senior Market Independent Agent Survey. Perhaps even more alarming is that 44 percent of agents over age 50 don’t have a plan.
Of those who do have a plan:
There are many reasons to create a formal succession plan. In addition to planning for retirement, it’s important to consider the unexpected like a serious medical issue or losing a partner. A smooth leadership transition is essential for maintaining customer relationships and continuity.
Here are some tips and ideas to start the process:
Agency principals don’t need to have all the answers when it comes to succession planning. Set up your plan with guidance from an experienced accountant, a tax specialist (who also may be your accountant), an attorney with experience with succession planning for independent insurance agencies, a valuation specialist, and other industry professionals. Another option is to hire a consultant to review your small business and provide guidance.
Be sure to find out:
It’s believed 43 percent of agents plan to pass their small businesses on to family members. This isn’t shocking, since independent insurance agencies are often family-owned businesses. Here are some tips for turning over the keys to your kids:
Nearly one-third of agents said they plan to sell their small businesses (2021 State of the Senior Market Independent Agent Survey). If that’s your plan as well, formalize your intentions in writing. Experts say that buyers often hope that an agency owner doesn’t have a succession plan so they can step in and leverage that lack of preparation. Here are some tips for planning to sell your business:
The last option, and the one that experts recommend the least, is not to have a plan and just let the agency limp along until customers fade away. In this scenario, the agent doesn’t do anything: they don’t follow up with their customers, they don’t schedule annual reviews, and they just let their business die a natural death.
While it’s easy to do nothing, experts say it’s a terrible way to treat your customers—and the reputation you’ve worked so hard to build through the years. And, if you do decide to sell, you’ve devalued your business before even starting negotiations.
Your best option is to have at least some plan in place.
Once you or your agency complete legacy planning for the business, it may be time to let your staff know. Experts say it’s important to keep staff informed about the agency’s long-term strategic goals. Unless a confidentiality agreement binds you, you should let your key staff know you’re planning to transfer the business.
If you don’t plan to sell the business, knowing that information can help keep the staff motivated, according to experts because they won’t be as worried about their job security. Also, be sure to explain your plan to your carrier partners. In short, head off rumors with open, honest communication.
Lastly, make sure you’ve thought about your life after the agency. Going from a leadership position that requires working every day to suddenly leaving all of that behind can take an emotional toll. So while a well-planned exit strategy provides a roadmap for the future of your small business, it should also reflect the quality of life you want after your name is no longer on the front door of the agency.
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