Looking To Buy Commercial P&C Book of Business

[flagent12]

I'm currently looking to purchase the company I work for. I have a good reputation with all our clients, so I do not think there would be much issue with losing any clients. We are a small company. I'm trying to find out what is a good and reasonable offer for the business. Everything is still in the beginning stages of this decision, but just looking for how to determine a price. I realize that I will get a formal outside opinion, but just need some idea to see if it's feasible. I have run the office financially for the last 3 years, so I know all the costs of running and maintaining currently. Any advice would be great.

Thanks!

 

[Guest]

What are you willing to pay and what is the owner selling for.

Whats the GWP. What carriers, loss ratios........

Honestly, you might run the business, but it doesnt sound like you know ABOUT the business.

 

[flagent12]

Actually, I'm appointed and work directly with all our carriers, loss ratio is good. I currently write and have been writing about 80%-90% of all our policies. I also maintain all current client's policies and process all endorsements and account rounding. I already know roughly what the owner is wanting to sell for and how much I'm willing to pay. Mentioning that I run it financially was to help prevent a lot of statements about company stability, not to reduce my credibility about knowing the ins and outs of selling the insurance itself. The finances are only a small fraction of what I do. My main question was to see if there was some type of baseline to go by.

Thanks for your comment, but I don't see where it holds any truth or help.

 

[AgencyEquity]

I'm currently looking to purchase the company I work for. I have a good reputation with all our clients, so I do not think there would be much issue with losing any clients. We are a small company. I'm trying to find out what is a good and reasonable offer for the business. Everything is still in the beginning stages of this decision, but just looking for how to determine a price. I realize that I will get a formal outside opinion, but just need some idea to see if it's feasible. I have run the office financially for the last 3 years, so I know all the costs of running and maintaining currently. Any advice would be great.

Thanks!

You really need to get a valuation, there are a number of experts who value insurance agencies. Each Agency is different, valuations take into consideration the retention, the makeup of the book, the location, market conditions and a number of other things. It's really hard to throw out a value without knowing the big picture. You can find a list of valuation professionals on my website...
http://www.agencyequity.com/listings/insurance-agency-valuations-a-appraisals

I should also state to appease my friend in Arizona, this is self-promotion of my website, I am certainly not ashamed of this, I spend many many hours putting together a great site. I am never afraid to promote my services, neither should anyone else including RBA. Anyone who sells themself are on the road to success, if they have not already achieved it!

 

[djs]

There is a ton of stuff to look at besides the normal earnings, also a lot of things to keep in mind. Some examples:

- Is the book growing, shrinking or stagnate?
- What is the policy density per household?
- Is the local economy growing, shrinking or stagnate?
- Is the owner getting out of the business or staying in? Is this in the contract?
- Are you keeping the building/lease, furniture, computers, etc?
- How about staff?
- Can you get directly appointed with the carriers? This isn't always a given anymore.
- Are there other parties involved?

The list can go on and on....
Decent P&C books are hard to come by, so the owner can easily get what its worth. Problem is, there is no magical formula to determine the value that can be answered on a forum. The 1.5 to 2 x earnings is a decent start, but that lands you in the ballpark. You still have a lot of adjustments to do.

Dan

 

[AgencyEquity]

There is a ton of stuff to look at besides the normal earnings, also a lot of things to keep in mind. Some examples:

- Is the book growing, shrinking or stagnate?
- What is the policy density per household?
- Is the local economy growing, shrinking or stagnate?
- Is the owner getting out of the business or staying in? Is this in the contract?
- Are you keeping the building/lease, furniture, computers, etc?
- How about staff?
- Can you get directly appointed with the carriers? This isn't always a given anymore.
- Are there other parties involved?

The list can go on and on....
Decent P&C books are hard to come by, so the owner can easily get what its worth. Problem is, there is no magical formula to determine the value that can be answered on a forum. The 1.5 to 2 x earnings is a decent start, but that lands you in the ballpark. You still have a lot of adjustments to do.

Dan

All excellent pointers - one factor for those who don't own an agency and don't have agency apointments to consider is, many carriers do background checks, including a credit check.

 

[mmaedelins]

For the last few months, for the very few times I visit this forum, not one single post from RBA has been helpful. To the contrary, most are demeaning and/or chastising.

RBA, seriously dude, you need help. Psychological help. As matter of fact, I see that you are in Arizona and I happen to have a psychologist cousin in AZ that can charge you very little for consultation should you be interested. But I beg of you man, seek professional help before it is too late.

To the OP, if the BOB is in good shape and everything else checks out (list of carriers, loss ratios, and all of the other moving parts) the norm is either 1.5x to 2x the earnings, but again this could vary up or down on a number of other factors. The best thing you can do is hire a firm such as Marshberry for example for a professional evaluation. Good luck.

Ok, I know most newbies see RBA as rude and disrespectful to the others on this forum and there have been a few times when I thought so as well but, as much as we might not want to admit it, RBA is very knowledgeable in this business and if you can read between the lines on his posts, he actually does give very helpful and insightful information (most of the time). So I say just take his advice with a grain of salt and let's not turn this thread into a 'bash RBA' thread.

 

[dryheat]

when asking for advise, do we rely on those that have shown a successful track record of sales and creating large agencies or do we pay more attention to the actuary/underwriter type of agent that knows all the regulations and rules, yet has no track record of succeeding in their business? I'll give you an example- When I was a captive agent 6 years ago, I knew of this fellow agent who knew all the in's and out's of insurance. I mean this guy could tell you everything there was to know about insurance. yet he was one of our lowest producers in the district, worked out of his house and bounced around with various carriers (yet he knew everything about insurance). On the other hand, one of my mentors when I 1st started had a p/c book of over 9m yet this guy could not spell, could not remember anything and was horrible when it came to asking him underwriting related questions.

I would venture to say that the best people to ask and rely on are those that have a proven track record of success and not just knowledge of an industry- to me that is not impressive.

 

[Guest]

Heater,

You should listen to everyone, and take it for what you want, what works for me, might not work for the next guy.

True, someone could be great at selling, and talking to clients, but not know squat or how to run an agency....

You might need to take bits and pieces of everything, try it out, adjust it, and see what happens.

 

[mmaedelins]

Heater,

You should listen to everyone, and take it for what you want, what works for me, might not work for the next guy.

True, someone could be great at selling, and talking to clients, but not know squat or how to run an agency....

You might need to take bits and pieces of everything, try it out, adjust it, and see what happens.

See? Practical advice for the masses!