Buying an existing agency

[insureitnow]

To be blunt you don't have the money to buy anything, unless you failed to mention the other $2mil in reserves or under the mattress.

I assume there is a reason you do not work (like 5 kids). He needs some steady income - don't gamble your small nest egg, you can not afford the risk, especially buying a book of Insurance business which takes a LONG time to recover your initial investment let alone make a profit.

I agree. Too much risk.
I have started agencies from scratch and do not want to do it again. I have bought and sold agencies before and probably do it again. (Want to sell your P/C agency in Central Fl? Let me know.) Setting up a P/C agency in a busy shopping center and relying on walk-ins will put you out of business fast. There is money out there to finance agency acquisitions, even in the credit crunch, but not likely he would be considered for it with little to know experience.

 

[johncm]

I agree. Too much risk.
I have started agencies from scratch and do not want to do it again. I have bought and sold agencies before and probably do it again. (Want to sell your P/C agency in Central Fl? Let me know.) Setting up a P/C agency in a busy shopping center and relying on walk-ins will put you out of business fast. There is money out there to finance agency acquisitions, even in the credit crunch, but not likely he would be considered for it with little to know experience.

Who has the money to finance agency acquisitions. I am currently looking.

Also, what is wrong with CA. not everyone is loosing there home. The ones that are, still keep their cars.

 

[Anne]

I am very familiar with a particular line of insurance (I used to be more active in this field.. am getting back into in by the fall or early next year) where the commissions are anywhere from 20-80% -- yes, I did say 80%. I would say for a "policy" as I will call it .. if it is written for $10,000 then the commission for this line (in this case) would be around $8,000.00. Total time involved would be anywhere between 30 minutes to 1 hours worth of work. I used be the main recruiter for this line. (very hidden in the industry) What I mean by hidden is that most "agents" do not consider this a line of insurance to sell, nor do they consider it an option when looking. : )

Few things to think of and a main question I would have for you -- what state are you located in and county?

Also, how many counties do you border and what is the distance between the counties?

I am asking because we have agents across the country and I try not to "step" on the toes of another agent that I have placed in an area.

I know other carriers "say that an agent will not have competition" .. but I am sincere when I say this and I refuse to step on an agents toes. My motto has always been -- if an agent that I have placed some where is making a ton of money -- why give that agent competition when they will stay with me or the company longer and every one is happy.


We have a few programs available -- start up costs are no where near the 60,000 that you posted. I have a friend of mine who has been in this line for over 10 years. She has made well over 1 million and averages between 5,000-20,000+ per month.

One program is where you would purchase the agency -- we would set you up with everything that you would need (computer, supplies, signs, yellow pages advertising, local marketing tips (from myself--how you can market), phone line or lines, desk/office supplies, marketing and paper work support etc. etc.)

Another program is where you would just go in and write "under" another agent -- you would still make a decent living but this is where the lower % of commissions would come in to play. Your main agent of course would make the majority of the commissions on business that you would write.

No cold calls!!! This is huge for someone that wants to make insurance "agent" money but not pick up the phone to make an outbound call. Basically you just need to pick up your phone when it rings and answer it in a timely manner!!! I can not stress that enough. When the phone rings.. if you are not available you will not make money. Of course there is flexibility in this industry.. unlike other areas of insurance.

I say this because we do NOT want you to write every person.. I can explain why at a later time.


Not much travel is involved -- just in your county of residence and the counties you wish to do business in providing that the areas are open.

You would still need an insurance license (obviously) and since state laws are different your residing state will determine how long it will take for you to get the needed study material and take the test if there is a test required.

I averaged "recruiting" 4-6 agents per month.. which is decent for this industry. Some months I would interview 20 people -- just to get down to the final 2 or 3 that would make the cut. Not trying to scare you -- but this line is not for everyone.

Keeping all of this in mind -- if you are interested in hearing more -- Feel free to send me an e-mail reply -- providing me with your state and counties, and a phone number. Also, let me know when a few good times would be to reach you this week -- as I am getting ready to travel and I will call you with more details.

 

[RayGroupInsurance]

In the real world.... this actually works, but not for everyone.

I'd look at going captive. Starting up a P&C agency from scratch is a pain in the @#$#@, especially with no background, no experience, and no sales skills already developed.

If you look at State Farm, Farmers, Allstate, they all have methods to help you financially at first, while you get settled into your new lifestyle. The help isn't enough with 5 kids, but it is a big help. They also provide you with a lot of resources that you don't realize you need, such as being able to pull MVR's for drivers, clue reports for insureds, accord forms, etc.

I'd skip the shopping center idea, until you are comfortable with the expense. This concept ties you to the office, you have to be there, and the quality of business tends to be lower (high value customers tend not to drop into an office at random, people with 'issues' do). You can get extra business this way, but you have to have a book with residuals to help cover the expenses.

Rule of thumb...
Figure out what you need to make monthly.
Divide it by 10, thats the number of policies you need on the books.
Divide the number of policies by 2.5, thats the number of households you'll need.
If that number doesn't scare you, you are in good shape.

For example, I want to make $10,000 a month.
I'll need a 1000 policies (avg commission on an average P&C policy is somewhere around $100 a year, or $10 a month, and yes, I know that isn't the same amount, but close enough).
1000 policies at an average of 2.5 policies per household means I have to know 400 families.

You are in good shape if you add in some commercial policies, life policies, umbrellas, etc.

It can be done. Go to work. Unless you are in California, than it doesn't work, go away, move to another state, and have fun!

Dan

Don't forget that out of that $10,000 you will have to pay for rent, phones, internet, postage, staff, advertising, leads and possibly more but those are my main expenses.

 

[RayGroupInsurance]

I'd agree that going captive might be a good way to start. That's what I have done and I am glad I did because the company gives me a lot of support. I had no experience before this though. With 16 years experience your husband might be more comfortable with the business.

Allstate is who I went with, they were the only company I could find that would let you buy an existing book (for captive agents).

This site Agencies4sale.com lists a lot of Allstate agencies. I'm sure there are more sites out there, you can also call a local agent and ask him for his MDL's name and number. The MDL is the person that provides support to agents as well as recruits new agents. The MDL could tell you what agencies are for sale in your area.

 

[RayGroupInsurance]

I forgot to mention, I don't know that being in a shopping center will make a huge difference. Most of the walk-in customers I get are people that just got pulled over and need insurance before they see a judge, or they just got a letter from the state telling them they would lose their car if it wasn't insured by the end of the month. Most of them make a down payment and then you don't hear from them ever again.

Maybe others have had more success with it but I don't rely on it. I am across the street from a Wal-Mart and I don't get much walk-in business. Maybe if I was inside the Wal-Mart it might be different but I think the quality of business would still be the same.

If you do go into a shopping center and get a lot of walk-in traffic be sure to set them up on some kind of auto pay. That is the only way I will write walk in customers now. They have to give us a checking/savings account number or credit card number to set up recurring billing. Even then half of them don't make the second payment but it helps.

 

[Guest]

I forgot to mention, I don't know that being in a shopping center will make a huge difference. Most of the walk-in customers I get are people that just got pulled over and need insurance before they see a judge, or they just got a letter from the state telling them they would lose their car if it wasn't insured by the end of the month. Most of them make a down payment and then you don't hear from them ever again.

Maybe others have had more success with it but I don't rely on it. I am across the street from a Wal-Mart and I don't get much walk-in business. Maybe if I was inside the Wal-Mart it might be different but I think the quality of business would still be the same.

If you do go into a shopping center and get a lot of walk-in traffic be sure to set them up on some kind of auto pay. That is the only way I will write walk in customers now. They have to give us a checking/savings account number or credit card number to set up recurring billing. Even then half of them don't make the second payment but it helps.

When I had my agency in a busy strip mall, I had to practically dedicate one CSR to handle the walk-in business. And Ray is 100% correct: they were motivated by law to get some insurance, and 95% lapsed after the first payment. It will end up costing you in the long run. Locating an office in a nice section of town away from the bus line and fast food joints is better. The best clients will find you.

 

[xrac]

When I had my agency in a busy strip mall, I had to practically dedicate one CSR to handle the walk-in business. And Ray is 100% correct: they were motivated by law to get some insurance, and 95% lapsed after the first payment. It will end up costing you in the long run. Locating an office in a nice section of town away from the bus line and fast food joints is better. The best clients will find you.

Good post! Good information we all need to know. Thanks!

 

[RayGroupInsurance]

The company that financed me is Oak Street Funding (Oak Street Funding : Commission-based capital lending for insurance professionals,insurance lending). I had very little for a down payment and very little experience and they financed me. I am paying a lot of extra fees and theres a big early payoff fee but it got me my agency and gave me a chance.

There are other companies out there that will finance you depending on your situation. Allstate gaurantees to pay you 1.5x annual commission at any time that you decide to walk away. The banks know this and it is a little easier to get financing for an Allstate agency because of this.

 

[saieddie]

Do you have any additional info on Oak Street Funding? Insurbanc referred me to them as the agency I'm buying is still too small for me to get a loan through them.

I understand they have higher fees than a SBA loan, but have better programs for insurance agents.