Business Planning for an Indy Agent

[scagnt83]

A thread in another forum topic got me thinking more about my business for 2010..
It was about valuing an annuity agency, or book of business, for purchase.
This is something that almost no green agents think about, and few experienced agents think about it enough. (imo)
I posted on the thread about an agent with a huge book of annuity business, she had over 2000 VAs plus all the other products. Because she chose opt. 1 instead of 2 or 3 on all of the VAs, she received a small fraction of what she could have received (less than 400k). (because of the trails)


While I certainly have a short and long term business plan (and its even on paper! lol) Its not necessarily down to the dollar as much as it would be for a more traditional business. Although I feel its more than most agents probably do...who knows..


So who out there truly treats their business as a business and who treats it more as a sales job?

A sales job brings in some level of income for some amount of time.

A business builds value and becomes a separate entity that can be valued, in addition to providing income.


- How much is your business currently worth?
- Are you even in a position to transfer your book of business to a potential buyer? (captive or indy, vested in renewals/trails)
- How much do you make an hour? ie: how much is an hour of your time worth.
- How much do you invest in client acquisition/marketing per year?
- What is your cost to capture 1 client?
- Do you have a marketing plan for the year?
- However you may prospect, how much does an hour of it make you?
- How do you define your business services?
- What is your target market?
- What is your overhead?
- Do you know your net income after business expenses?
- Would YOU buy your business?


While all of these questions might not apply to all agents, most of them do.... whether the agent knows it or not.... "Is it worth it for me to go see that client who said they will "probably" be home?"
A question asked by many new agents. Well, how much money are you loosing by taking an hour to go out there if it is wasted? Will that hour make you more money by prospecting instead of going on a luke warm at best appointment?
Many questions can be answered by having a comprehensive business plan.



Thoughts on this subject????

 

[Guest]

I always wondered why someone would ever sell their business. Is it because you're just tired of it? And even so, especially if you look at it as a business, couldn't you hire someone to manage clients and continue to make the residual income? As in, couldn't you be retired unofficially? And don't you always lose money when you sell it? Over the long term compred to if you kept it and maintained it?

I'd love to hear the insight into this, maybe I'll retire sooner, lol, thanks.

A thread in another forum topic got me thinking more about my business for 2010..
It was about valuing an annuity agency, or book of business, for purchase.
This is something that almost no green agents think about, and few experienced agents think about it enough. (imo)
I posted on the thread about an agent with a huge book of annuity business, she had over 2000 VAs plus all the other products. Because she chose opt. 1 instead of 2 or 3 on all of the VAs, she received a small fraction of what she could have received (less than 400k). (because of the trails)


While I certainly have a short and long term business plan (and its even on paper! lol) Its not necessarily down to the dollar as much as it would be for a more traditional business. Although I feel its more than most agents probably do...who knows..


So who out there truly treats their business as a business and who treats it more as a sales job?

A sales job brings in some level of income for some amount of time.

A business builds value and becomes a separate entity that can be valued, in addition to providing income.


- How much is your business currently worth?
- Are you even in a position to transfer your book of business to a potential buyer? (captive or indy, vested in renewals/trails)
- How much do you make an hour? ie: how much is an hour of your time worth.
- How much do you invest in client acquisition/marketing per year?
- What is your cost to capture 1 client?
- Do you have a marketing plan for the year?
- However you may prospect, how much does an hour of it make you?
- How do you define your business services?
- What is your target market?
- What is your overhead?
- Do you know your net income after business expenses?
- Would YOU buy your business?


While all of these questions might not apply to all agents, most of them do.... whether the agent knows it or not.... "Is it worth it for me to go see that client who said they will "probably" be home?"
A question asked by many new agents. Well, how much money are you loosing by taking an hour to go out there if it is wasted? Will that hour make you more money by prospecting instead of going on a luke warm at best appointment?
Many questions can be answered by having a comprehensive business plan.



Thoughts on this subject????

 

[scagnt83]

I always wondered why someone would ever sell their business. Is it because you're just tired of it? And even so, especially if you look at it as a business, couldn't you hire someone to manage clients and continue to make the residual income? As in, couldn't you be retired unofficially? And don't you always lose money when you sell it? Over the long term compred to if you kept it and maintained it?

I'd love to hear the insight into this, maybe I'll retire sooner, lol, thanks.

Well, I guess it would all depend on personal circumstances. If you had an agency it would be more beneficial to sell as opposed to just a book of business. But still I guess it just depends on what you want.
With a successor agent working your clients and giving you a cut, you will still have a certain amount of maintenance work to do during the year to keep your L&H & Securities Licenses in good standing. But the maintenance work would be minimal.

Maybe because of health reasons or other business ventures...

But if you where to form your own LLC you could have that agent buy into the business that contains your book of business. Then the buy in amount could be formally included in commission splits, or be treated as a separate transaction... im not sure of the exact tax implications of each...
This might give you more leverage if anything...

 

[slushhhpuppie]

I know a few reps who sold their books after 20-30 years in the business. Their formula was similar to:

Downpayment = 25% of the Verified Annual Trail Income
Year One = Selling Agent written in for 50%
Year Two thru Year Five = Payout lowered to 25%


I think the thought was that it was important for the buyer to have the purchase price determined contingent on what he continued to earn from those clients. The seller is happy, because he gets steady income for five years and a 175% of the value of his business.