I Want To Purchase My Book of Business - Need Advice

[ApexConsultant]

Some realy good advice and ideas.

What do you guys think about this (a blend of a few ideas from above)

I will go to the owner and discuss that I really desire opening my own benefits firm.

My offer will be for them to let me go start my own agency however we will keep the $500K in revenue with them. They will continue to pay me 40% of the revenue for a 24 month period. Thus in 2 years they would keep $600K.

At the end of the 2 years, my non-compete would be over and all customers would be asigned to my new agency.

This would be similar to them agency financing this acquisition. I would just have to work out the logistics of the commission. Who will get the commission for the existing customers and who will be paying who.

This block of business is primarily Group Medical with a mixture of Group Dental, Disability, Colonial Work Site, and Group Life.

Please keep the ideas and comments coming.

 

[briko3]

So what are they getting out of the deal? It doesn't seem like they HAVE to give you anything and what is their motivation to do so if you're starting a competing business?

 

[ApexConsultant]

So what are they getting out of the deal? It doesn't seem like they HAVE to give you anything and what is their motivation to do so if you're starting a competing business?

You are correct. They don't have to give me anything. However if I decide to up and walk out, this agency would be set to lose $500K in revenue awfully quick. They do not have the ability to manage my book of business and renew or service the accounts.

I currently handle the majority of the service of my accounts including Ebenefits, UnitedEservices, COBRA, as well as other value added services. I handle it. The two prinicples nor any of the P&C customer service reps wouldn't have a clue how to service roughly 80 Group Health Customers. If they don't agree to my purchase, they would get nothing. The brokers around here would feast on my accounts and they would be gone in the snap of a finger.

I would not be a competing agency by the way, they are 95% Commercial P&C, not a benefits firm. Did you read the full post?
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By the way, they keep 60% of my revenue. What exactly do you think they GIVE me for that 60% outside of a 12x12 office and a phone?

It sure as hell is not referrals from P&C clients. As I said, they are comfortable with their books of business (which I might add are terrible group health prospects), so it's not like I have some endless referral stream coming in the door.

I have grown organically on my own. It is my own fault that I did not have the clearvoyance to negotiate ownership in my book 7 years ago at age 26.

 

[briko3]

Good job on your success. I think you have a pretty strong case after your explanation. Unless they're willing to put a lot more work in to it than they probably want to, why not let you service their clients and send them part of the check. I would just make sure that you get it in writing that you're doing this DURING the noncompete clause out of courtesy for them and that the next two years do not constitute "working" for them. The last thing you want is for them to say at the end of the two years that the noncompete is in affect from THAT point since you've been "working" for them all along.

Good luck!

 

[ABC]

I think if what you say is true and you build the block up on your own you have the upper hand.

The only thing I question here is the revenues the block is bringing in.

If the block is worth $500,000 with 80 groups you avg size group is around 20 lives. That is a really good block in this economy. When the economy turns that block could increase by 30%.

If I were you I would look at each case to how many members they have currently. Most blocks have have dropped over 25%.

 

[ApexConsultant]

I think if what you say is true and you build the block up on your own you have the upper hand.

The only thing I question here is the revenues the block is bringing in.

If the block is worth $500,000 with 80 groups you avg size group is around 20 lives. That is a really good block in this economy. When the economy turns that block could increase by 30%.

If I were you I would look at each case to how many members they have currently. Most blocks have have dropped over 25%.

The block has dropped, roughly 15%. Two years ago my block was around $570K. So if the economy does rebound and I see my groups hiring back, then the block will be worth more than the $500K.

I receive all of the commission statements prior to having or admin staff break them down. So I have a solid handle on the revenue stream.

 

[ABC]

The block has dropped, roughly 15%. Two years ago my block was around $570K. So if the economy does rebound and I see my groups hiring back, then the block will be worth more than the $500K.

I receive all of the commission statements prior to having or admin staff break them down. So I have a solid handle on the revenue stream.

That is impressive. My group block is down 27%.

I give you credit for building a very solid block of clients.
Your block is very rare right now.

I am curious how are you prospecting to pick up your clients?

 

[ApexConsultant]

That is impressive. My group block is down 27%.

I give you credit for building a very solid block of clients.
Your block is very rare right now.

I am curious how are you prospecting to pick up your clients?

Thanks for the compliment. Honestly, I do it the old fashion way. I cold call. I don't have the old boy network on my side. When I need new business, I crack open a list of phone numbers and dial for dollars. It sucks, but it is the only way I know. I am terrible at networking.

The toughest challenge is knowing that I did not have a previous relationship with the customer, so I have to work extremely hard to earn their respect.

So, for everyone that has followed this thread, how should I bring up this topic to the primary owner? We have a good relationship, but he is a business man at the end of the day. I want to be respectful. My biggest fear is I approach him with my offer/request and they say thanks, but no thanks. Now I have showed my hand and in the back of his mind, he is going to think I'm not on board with his agency 100%.

I have a family to feed, so I can't risk it. Very tough situation right now! Advice on how to go about this anyone?
Thanks!!!

 

[erikcg123]

Ask for profit sharing on a % basis to make it worth your while to continue to grow organically. Tell them you are not 26 years old anymore...

 

[saieddie]

My offer will be for them to let me go start my own agency however we will keep the $500K in revenue with them. They will continue to pay me 40% of the revenue for a 24 month period. Thus in 2 years they would keep $600K.

At the end of the 2 years, my non-compete would be over and all customers would be asigned to my new agency.

The straight buy out with a SBA loan makes more sense than this idea. If I was the owner of your agency, I'd take my chances with letting you go and hiring a couple of new people at a lower salary to service your business. The way the economy is, theres plenty of experienced insurance people looking for jobs. Theres bound to be some lost clients, but i'm sure the new guys can keep enough on the books to justify their salaries.