With the average age of insurance agency principals/owners now at 54, it’s not surprising that succession planning is a hot topic. There are lots of resources to help you with the nuts and bolts of the succession process, but I’d like to suggest that before you begin planning your succession strategy, seriously think about what YOU want from your succession.
Knowing what you need emotionally from this major life event is at least as important as knowing what you want financially from your exit plan. Having a solution that aligns with your goals will make letting go of your business and embracing what comes next less stressful and more fulfilling.
The First Step
A great place to start is asking yourself why you took on the role of agency owner in the first place. What was your WHY, as one of my favorite thought-leaders Simon Sinek likes to ask? Next, consider whether that WHY is still what drives you to get out of bed each morning and tackle the challenges of agency ownership. (Goals change over time, of course.)
Once you’re clear on WHY agency ownership matters to you, you can start exploring succession options that match that WHY. You’ll still need to do the work to get your agency, your team and your clients to the point where your desired outcome is a realistic option, but at least you’ll know where you want to go. That’s a lot better than having to pick the least objectionable option that market conditions thrust upon you if you keep putting off this decision.
Looking for a great resource on how to prepare for selling your agency? Check out The Art of the Insurance Deal, by Jeff Arnold – and listen to his Spot On Insurance podcast .
A Few WHYS and Their Implications for Succession Planning
To be successful
We all want our businesses to be successful; but for some people, this drive runs deeper. Their career isn’t just what they do – it’s a big part of who they are. If you’re one of these folks, losing that part of your identity can be traumatic.
How you reckon success can play a big part in determining what succession solution will be most meaningful. If money is how you keep score, you’ll want to prepare your agency so you can get top dollar for it when you sell. If power or influence mean more, you may want to develop a deal that frees you from the day-to-day responsibilities of agency ownership, but lets you keep a hand in the industry. That might be an agreement that gives you a seat on the board or a cash-rich deal that allows you to transition to a venture capital role. If industry recognition drives you, craft a deal that will give you the resources to remain active in industry organizations or become an educator and/or mentor. This can also have implications for non-disclosure/non-compete agreements.
To realize my entrepreneurial dream
Talk with any group of young insurance professionals and before long someone will say, “Well, when I start running MY agency ….” Our industry is ideally suited to entrepreneurship, and insurtechs are only increasing the opportunities. Moving away from your current agency doesn’t mean that entrepreneurial drive goes away, and Baby Boomers look forward to decades of healthy, productive years after the traditional retirement age.
If you’re looking forward to your next entrepreneurial venture, that has profound implications for how you need to structure your succession. Smaller payments over time may not give you the capital you need to realize your new dream. And if you’re really not interested in taking the reins of another company, but still feel that entrepreneurial fire burning, consider mentoring newer business owners or even formalizing that relationship as a consultancy.
To help people
So many of the people I meet in our industry have a deep desire to help others and serve their communities. If this passion drives you, retirement is a great opportunity to expand your philanthropy. As with the entrepreneurs above, though, you’ll want to ensure that the structure of your buyout matches your future goals.
To create a legacy (for my family)
The insurance industry (more than most) nurtures family businesses. It’s not uncommon to meet second, third and even fourth or fifth generation insurance producers and/or agency owners. If your goal in starting or taking over your insurance agency was to create a legacy, selling your agency out to a faceless conglomerate can feel like selling one of your children.
But what if you don’t have kids or they aren’t interested in taking over your agency? If you’re in this situation – and a lot of owners are – you’ll need to consider your options. Is there someone on your team you could groom to be your successor? Even if there’s no one suitable on your team, there are lots of agents eager to own an agency. Connect with one who shares your values and establish a mentoring relationship. Remember, though, that you’ll need to ensure that your successor develops the financial resources to take over the business as well as the professional skills.
Of course, these are only a few of the many WHYs that motivate people in our industry. They are as unique as the individual who own/run agencies and the agencies they create. Hopefully, though, this will get you thinking about what you want for your future and keep you motivated to do the work needed to achieve your next goals.
Photo by Braden Collum on Unsplash