Purchasing Existing Book of Business with Allstate

[7107]

Hello everyone,

This is my first forum ever. I am looking for some help and insight on the recent offer I have received on purchasing a existing book of business with Allstate. From my understanding Allstate gurantees a purchase price of $308,000 at anytime. I have had 2 meetings with the Allstate members and I basically have the position if I choose. The purchase price would be $400,000. The 12 month earning on the existing business is $1,970,848. I have several Customer satisfaction/retention/profitablity reports that show solid earnings, but this is all based on 15% lost business and 18 new policies the first 2 months and 33+ for the remaining 10 months of the year. If I were to make the purchase I would have classes and paperwork for the first 3 months with no income. I would move in Nov 1st and finally receive a bonus of $3,000 and finally begin being compensated during the month of December. I know I can not explain everything but any thoughts or advice would be greatly appreciated. I do not want to make a bad move in this economy but I do not want to miss out on an opportunity of a life time. Thanks again!!!

 

[Guest]

WOW, were does everyone start?

Allstate.........RUN
What State
Do you have any insurance experience?
Why arent you making money in the beginning?
You should receive full renewal commissions IMMEDIATELY!
Have you ever run a company before?
How many employees will you have or need?

Thats hould be enough for now

 

[7107]

WOW, were does everyone start?

Allstate.........RUN
What State
Do you have any insurance experience?
Why arent you making money in the beginning?
You should receive full renewal commissions IMMEDIATELY!
Have you ever run a company before?
How many employees will you have or need?

Thats hould be enough for now

Thanks for the insight. I am in Illinois. I actually have no insurance background but I have 7 years of sale expierence and am currently the General Manager of a large independently owned used car dealership. I do have a business management degree and my income has been over $175,000 for several years. I love sales and do think I would be very good at it. I could be wrong on the income part, that was just my understanding. I figured I would get more insight from people like you before returning for more meetings and explinations of compensation. My intial thought process was it would be nice to get out of the car business and move forward. Car business sucks but its a good income with NO OVERHEAD. I would only have 2 employees and unless I am mistaken I am probably not making money because I have to get licensed (should be very easy for me). Thanks for your feedback!

 

[Josh]

Contrary to RBA's assessment, I think it sounds like a decent deal depending on a few things. I would talk to some of the local Allstate agents and ask them for their thoughts. The purchase price seems about right and as long as the numbers on the book look good it might be a solid deal. The local Allstate agents will give you much better insight than any of us will be able to.

 

[Guest]

MPS, I kinda like the sounds of the deal, just wanted to know about the person buying it.

 

[Josh]

No, definitely. Those deals aren't no-brainers. I managed a small office once upon a time for about a year and it wasn't a good position, but mother Allstate is good to her agents when her agents are good to her.

 

[Guest]

My concern would be not knowing the business or insurance and jumping right into a high maintance book with no knowledge of insurance or how to run an agency cause it is different than a car lot.

If the office staff stays, then it might not be too bad, the CSR's hopefully have relationships with the clients.

If the office staff is new, he better be prepared for a run off of clients.

 

[Josh]

Allstate has a killer training program to get new agents up and running and a ton of support, both with 800 lines AND with area managers.

The CSR's probably aren't going anywhere. If he played his cards right he could probably even convince them into a pay cut (not suggesting it's a good idea).

 

[Guest]

and 1 very important thing he will have to learn.....listen to the CSR'S!!!!!!!!

We all know CSR's run the agency, he will need to let them train him on how to run it!
LOL

 

[IMO101]

7107, when you mention close to 2 Million in annual earnings, are you sure that's not annual premium? 2 million in earnings is a huge book, that would probably go for a lot more than 400k. If that were in fact earnings (2M), that would require a high overhead with staffing and expenses. Still, it would be a deal.

Usually those books sell for a year or two of commissions, sometimes even 3 or 4. Paying 400k for a 2million first year profit sounds too good to be true. If it is a 2 million premium book, then you are maybe looking at 200-300k per year in earnings, which would seem more realistic and properly aligned with reality. Keep in mind that if this is the case, you would have at least two employees to remain sane. After expenses, etc., you would be making a lot less than 175k per year. Maybe 100-150 best case scenario if you are working VERY intensely.

I know several Allstate Managers, who recruit new Allstate agents and help outgoing agents sell their books, and I have never heard of the 307k minimum purchase price. I know for a fact that books sell for a lot less than that. Some times they also sell for a lot more, depending on many factors.

3k doesn't seem like a great sign on bonus. They were giving 15k a few years ago. Make sure you negotiate that, in case there is something there that isn't being offered. Also keep in mind that many Allstate agents are getting out of the business. The quota structure is very intense, with requirements to sell everything to everyone (financial products, life, etc.). If you don't sell what they tell you to, things get very painful very fast.

If you are going to do this, study the comp schedule in detail (and it is very complex), and also the minimum production necessary to maintain your desired lifestyle. Keep in mind that the current book is great, but also comes with a massive servicing burden. Sometimes starting with a book is more a curse than a blessing, since you are forced into a high overhead, high maintenance situation. It makes it pretty hard to cut costs, and to focus on new production, which you will need to write regardless of the current book.

On a personal level, coming into an Allstate P&C business from the car business, or into any P&C operation (State Farm, etc.), I really think you may end up regretting it. It's also important to analyze why so many are leaving, and selling their books at what appears to be a very low price relative to value.

However all else aside, if you are really buying a 2 million per year earnings book, for 400k, I would do it, why not? How could you loose on that deal? You could always profit for a year or two and sell it to the next guy. If it is only 200-300k per year commissions, it's not as sweet a deal as it may appear.

Of course customers can change agents, and often when a new agent comes in, policyholders will move to other more experienced agents locally, so that is one more concern to keep in mind.

Allstate does have exceptional training however, so you would end up learning a lot, which is great.

You really have to study this in extensive detail, and talk to an expert to crunch the numbers (or another agent who you may know in the community). You could really end up loosing a lot, if anything is overlooked. Maybe they are about to impose a major rate increase for example, and you could potentially loose a huge block of business. There is a lot to consider.

If you really want to get into the insurance business, you could also save your 400k, and start your own business. Or if you really want to work with Allstate, you could join them as a new startup agent. There is much less risk involved in that scenario, since you can go into it with as low an overhead as possible, and also they provide added commission incentives to new agents building a book from the ground up.