Do You Think this is a Good Deal?

[AllstateAgent15]

Hi guys,

New to this forum. I'm a current Allstate agency owner and I'm looking to acquire another book of business. I have the opportunity to buy a small $350k bob. The agent who is selling wants out of the business as he has other ventures he wants to focus on (opening restaurant). He wants a valuation of 2 times, but his retention is at 75% percent which brings up a red flag. His LR is at 45% which is good in my eyes. He said he would consider lowering the valuation if I paid one lump sum. Any pros or cons there that you guys can think of? Any advice is welcome.

Thank you!

 

[Derrick]

I would get an outside valuation from a valuation expert, specifically for insurance bobs. You got to get a guy that works for YOU. Pay him the few grand to come up with a valuation and he'll give you the thumbs up or thumbs down.

I'd rather lose a few thousand dollars than a few hundred thousand dollars.

 

[RicFlairII]

The main con is you cannot buy any type of Agency except another
Allstate agency, which limits you as to what you can buy.

Allstate will fire agents who buy independents, even if the ownership
is not in the agents name completely.

 

[The Man]

2 times valuation is high given the small book size. The company will pay 1.5 so you need to find a median between those two multipliers. For a book of that size I would maybe do a 1.8 the annual revenue. So about $63k. It can also make a difference if Allstate is going to require you to keep an additional location or allow you to absorb the book since it is so small. The other agents tenure is also a factor. If he has been an agent for less then three years his vested interest is near nothing, so you can offer a lower amount. Once it has three years of tenure, that 1.5 from the company comes into play.

 

[MegaNEallstate]

To clarify you are talking about $35k in annual income if the agent is not a 9%? A multiple that small is worth 45 - 50k top to be nice if it is over 3 years old. Under 3 where the agent can't even get termination is typically bad business worth no more than 1 time. I have merged/purchased 4 books over the years. Just my opinion.