How to Find the Right Buyer for your Brokerage
If you’ve been contemplating selling your brokerage due to an approaching retirement, a desire to capitalize on appreciating valuations, or to accentuate your business’ future growth potential, deciding when to sell and to whom can be both complicated and overwhelming.
This decision is often compounded by conflicting advice you’ve received from your business advisors, making it that much more difficult. That’s why it’s imperative you take an objective approach to selling your brokerage, completing the necessary due diligence to fully understand the options available to you.
Seller’s Market Offers You More Options
The first thing you should know before entering into discussions with prospective buyers is that we’re very much in a seller’s market right now, putting you firmly in the driver’s seat. A declining supply of brokerages, coupled with growth in available capital over the past few years and the resulting increase in buyer demand has given broker owners a decided advantage in the selling process.
You should take full advantage of this situation by pre-planning your preferred outcome, identifying the ideal set of parameters that will ultimately satisfy the needs of your stakeholders - you, your clients, community and employees - enabling all to flourish. If possible, try to distinguish between the “need to have” items versus the “nice to haves”, as this will allow you to evaluate the offers you receive more effectively.
What to Look for in a Buyer (or Partner)
There are a multitude of factors to consider when looking for the optimal buyer for your brokerage. And while price might be at the top of your list, there are several other factors to consider that could impact not only price but your stakeholders.
There are several different types of buyers interested in purchasing your brokerage, each with their own unique characteristics, strengths, weaknesses and nuances. Private equity firms, other insurance brokers and larger insurers are the most common suitors. Deciding which of these buyers is the best option will often require a thorough due diligence process on your part.
Culture and a Lasting Legacy
Culture may be one of the most critical non-financial factors to evaluate when it comes to prospective buyers. Why? Because melding the buyer’s culture with yours is a crucial step in the long-term viability of your brokerage, and ultimately, in client and employee satisfaction. One question you should be asking yourself is how satisfied these parties will feel a year or two after the sale has been completed.
There’s no doubt a compatible culture will go a long way to making the transition a successful and smooth one. Any mismatches in culture, business style and the overall operation of the brokerage could be magnified down the road, leading to dissatisfaction, lost business and other repercussions.
While this may be irrelevant if you and your family members are permanently exiting the business post-sale, you may want to reflect on the legacy you will be leaving behind. For example, if you want your business to continue to support your community and employees for the foreseeable future, anything that would diminish this would negatively impact that legacy.
Questions to Ask Prospective Buyers
The following is a list of questions you could use when interviewing prospective buyers. They are not listed in priority order as this will change based on your unique needs and circumstances. We recommend you rank these questions from most to least important when completing your buyer assessments, adding any additional criteria you deem to be important.
What price are they offering you, what are the terms and conditions of the sale and how flexible are they on any and all of the above? Can you or your family retain any shares/equity in the purchased company?
Will all, some or none of your employees be retained in this sale? If it’s some, who will be deemed redundant and why? Will the retained employees keep their existing compensation and benefits? (i.e. vacation/sick days, benefits plan, etc.) or will they have something similar?
What service levels will the buyer commit to, and are these similar to or better than your existing client service standards?
What technological and other operations and service enhancements (i.e. online account access) will the buyer commit to? Will these be implemented at the sale’s completion or thereafter?
What other resources will the buyer commit to, such as additional marketing assistance, risk mitigation through enhanced underwriting practices, improved human resources support, etc.?
Will the buyer retain jobs within the community and other community support (i.e. sponsorships, fundraising) post-sale? If so, to what extent?
Will the brokerage’s name and branding (logo) continue after the sale, or will this change?
To what extent will the brokerage be integrated into your existing business?
Is there a role for the current owner post-sale? Will he/she be able to retain their management role in the brokerage if they wish to?
The Collectivfide Difference
Brokers looking to sell their business will experience a unique approach when they deal with us, one that sets us apart from our competitors. That’s because we’ve intentionally designed our program to focus on elements that we feel are missing in our industry.
For example, not only do we emphasize the importance of local communities, but we also give you the autonomy to run your brokerage as you see fit post-sale, if you decide to stay on. We will also retain your existing brand, company name and employees, maintaining the status quo on three key elements of your brokerage. Additionally, we provide you with a number of back office resources, supporting you in all facets of your operations so you can better serve your clients while optimizing the bottom-line.
To learn more about how we can partner to add more value for your clients, employees and shareholders, please contact us at info@collectivfide.com