Buying a Book of Business, Confused

[lhpgators]

Hello again. Questions on figuring out some stuff. This is for P&C in Northern Florida.


1.) When you're looking at buying a book of business and said book is claimed to be $500K, that's $500K in premiums, right?
2.)Roughly speaking, how much does that $500K in premiums translate to amount of coverage? For example I found a calculation that to figure premium take Coverage amount x 1000 x $3.00 = your premium? If that's correct $170,000,000.00 in coverage would equal $510,000.00 in premiums?


Basically I would like to know how many and how much coverage/policies would need to be sold to get to a $500K book of business. I know amounts vary depending on location and such, I just would like to get a ball park idea.


Thanks

 

[djs]

Your best bet is to ask since it will vary DRASTICALLY depending on the agency blend of business. $500K isn't a lot, but the current owner should be willing to give you some basic details.

How many policies? If you are looking at personal lines and have an average premium of $1000 per policy (annually), then there are 500 policies on the books. If any commercial is involved, it could be 10 policies, or 500.

There is no answer to your question, you just have to ask.
Ask about retention ratios as well.
Ask about how many policies have renewed / average retention.

Get a sense for the health of the policies. If its personal lines, its small enough that you will get a pretty good rolloff (potentially) when the agent leaves. These will be his family and friends that signed up to help him out and no longer feel the obligation to stay there. Not all leave, but some do.

Dan

 

[Tkipper]

I'm also looking into buying an Agency. I'm worried about getting the loan because i don't have much capital to put towards it and but not much i mean only like 5k. I do have good credit around 750. I've been working for a captive agent for the past 3 years. I really want to go Independent, and would like to purchase a book or an established agency. Any advice would be greatly appreciated.

 

[fearsback]

I'm also looking into buying an Agency. I'm worried about getting the loan because i don't have much capital to put towards it and but not much i mean only like 5k. I do have good credit around 750. I've been working for a captive agent for the past 3 years. I really want to go Independent, and would like to purchase a book or an established agency. Any advice would be greatly appreciated.

Not to be the bearer of bad news but this will not be an option for you because I was in your exact situation a few years ago. Unfortunately no banks are lending so unless you have an investor willing to take the risk you will have to try another route. The only option you have which should not cost you any out of pocket money would be to team up with an independent agent. Good Luck.

 

[Tkipper]

Thanks for the insight Fearsback. the one agency i found for sale does say they are willing to finance the sale, But not sure how that works either. Do they keep the commissions the business makes until i fully pay what the sale price is? again any feedback will be appreciated. Fearsback if you dont mind me asking what route did you go?

 

[xrac]

Thanks for the insight Fearsback. the one agency i found for sale does say they are willing to finance the sale, But not sure how that works either. Do they keep the commissions the business makes until i fully pay what the sale price is? again any feedback will be appreciated. Fearsback if you dont mind me asking what route did you go?

You need to enlist a good accountant and an attorney to help you. You will likely screw this up without some serious help, much more than you will find on this forum.

 

[Tkipper]

Ok I will get in touch with the accountant and Attorney from my referral group. Xrac ive read a lot of posts by you , you seem very knowledgeable. what lines of business are you in? if you dont mind me asking

 

[NWWAIns]

Ok I will get in touch with the accountant and Attorney from my referral group. Xrac ive read a lot of posts by you , you seem very knowledgeable. what lines of business are you in? if you dont mind me asking

^^^
and, XRAC, do you actually sell insurance or do you just spend all day on the forum?

 

[xrac]

^^^
and, XRAC, do you actually sell insurance or do you just spend all day on the forum?

What is insurance?