Position Your Business for Future Opportunities

I have been a professional independent agent for nearly five decades. The job is challenging. But, I can say without hesitation that the compensation of running my own agency has extended far beyond the financial benefits, and I encourage anyone with an entrepreneurial spirit, the desire to truly help people, and the willingness to work hard, to consider becoming an independent agent.

That said, I’ve learned some lessons and gathered some from friends and col- leagues who have also built successful agencies that I think are worth sharing. Regardless of where they come from, these lessons are invaluable to anyone building a business:

Respect your field and those who you work with. It irks me when agents say they have customers. I never considered anyone I worked with a “customer”: I have always had “clients.” Direct writers have customers. We, as professional insurance agents, have clients. My clients always held me in the same esteem as they would their attorney and their accountant. Since we will get sued just as these would, we may as well consider ourselves professionals. I’ve never heard of a lawyer or attorney who had a customer. Those are for the direct writers.

Be careful what you put in writing in an email. Like most of our digital communication these days, email lives forever. If you are writing an important letter, it pays to have a person you trust review it before sending. If you are really angry when you are writing the letter, wait three days before you send it.?Build centers of influence. These will be the sources of future clients. In college, I had a professor who taught Economics 444, the culmination of all the classes we had taken. He had a book with snippets of wisdom, and in it was: “Be kind to the accountants and attorneys, for they shall inherit the earth. Boy was he right—a lot of my clients have come from referrals from this group.

Build a loyal staff. My staff was like an extended family. There are agents who believe that a corporate atmosphere means you don’t get close to staff. I believe this is a mistake. Knowing and developing a rap- port with your employees is part of being professional, and they will follow suit with their own loyalty and professionalism to you and your business.

Get honest feedback. Mayor Ed Koch always went to the public and asked “How am I doing?” This is a great philosophy. You can obtain honest, valuable information that can help you grow.

With these tenets, you can build a strong agency, with a book of business and referrals that allow you to maintain your position regardless of how big you choose to grow your business. As a strong agency, you will have the opportunity at some point to purchase, merge and/or sell the business that you have made your livelihood. Merger and acquisition opportunities arise at different points in a business’s lifetime. I have come to this crossroad a few times, and have some lessons to share about this as well:
Do your due diligence. Regardless of size, when we have the opportunity to buy a business, we negotiate with the current owners over price, employee agreements, etc. But, one thing often neglected is a review of the major accounts. When the merger occurs, inevitably claims or other problems on some of those accounts arise because such a review was never done on the individual clients. Have your under- writing manager or key underwriters review the accounts to be acquired to make sure they are written to the same standards that your current office maintains.

Don’t be absent. If you decide to open up a satellite office, make sure you have controls in place to monitor sales and all transactions, including monetary exchanges. Without reliable management in place, a satellite office inevitably will cost you a lot of time and money. Most agents are better off building a practice from their own location, unless they have strong management for their additional location(s). If you plan to manage more than one office, consider the distances you will have to travel to oversee them.

Get to know your partners before com- mitting. Young kids today have the right idea: Live with someone before you get married. When looking at partnerships, or even at just sharing an office with another agency, have a trial period beforehand. You won’t know what you’re getting until you’ve been with each other for a while. Just because you are friends on the golf course doesn’t mean you’ll make great business partners.

Plan for perpetuation. Most of us never think of our exit plan because we don’t think we’ll ever get there. But the truth is nobody is immortal or invincible. Perpetuation planning is important for the survival of any agency. The plan can be a strictly internal matter or involve another agent with whom you’ve had a good relationship. Develop a plan for your key personnel to take over, even if you don’t expect it to ever happen.

Be patient. Elvis said, “Only fools rush in.” Emotion, anticipation, and even anxiety can cause an agent to make hasty decisions. When it comes to negotiation, time is not your enemy … leading to the next piece of advice:

Don’t skimp on legal advice/consultants. You know what they say about an ounce of prevention. It’s so important to get the proper legal advice from attorneys who know the insurance business—and that also goes equally for accountants. Remember lesson #1? … Getting good advice is key for due diligence.

Do some honest soul searching. If you see fit to sell your business to a large national broker, in most cases the current stockholders or officers are given a con- tract for an agreed upon period of time. If you don’t meet the requirements of the buy/sell agreement, you have a good chance of being fired. Think ahead: Even though you may be able to meet challenges, there could be unforeseen circumstances, economic, weather or other conditions that force underwriting restrictions that make retaining your book of business harder than you anticipate. Think twice about the terms of the agreement and do serious soul searching. This is reality, not your dreams.?Use PIA. PIA’s staff of 80 includes several attorneys (as well as technical experts) reviewing contracts and answering agents’ questions. I, myself, have benefitted from PIA’s expert advice and I have always considered them a partner in business. Among the many relevant benefits it offers, PIA’s Industry Resource Center includes the Agency Transition Toolkit, which connects agents and brokers looking to sell, purchase or merge with another insurance firm. Through this program, PIA members can get in contact with the right people, with strict confidentiality, and allowing them a choice as to whom they wish to contact.

I believe the future of the independent agency system is good because establishing and growing an agency is one of the most rewarding endeavors I’ve ever known. I count my blessings for the path I chose and the good life my career has given to me and my family. I wouldn’t trade my career for the world.