Should I Go Out on my Own or Stay?

[indienoise]

No hard feelings, you just seemed a little overzealous about encouraging the OP. Purchasing an existing agency as means of diversifying and starting a scratch agency are two VERY different endeavors. I'm not sure how close you've ever been to his situation, but prodding an otherwise unremarkable producer to leave a good gig to risk it all and start his own agency is setting him up for disaster.
To be honest, I wouldn't have had any business opening my own agency if it were my only means if income - I would've ruined myself and my family. I wouldn't have even thought about doing it. I'm all for entrepreneurial spirit, but I'm just not convinced it would be a good move for him. For me, I was only risking my fun money, but stand to gain a lot more. Unless there is more to this guy's story that we haven't heard, he isn't in that position.

Based on what you've told us, OP, sounds like you probably gross about 50k a year in commissions, so you're probably netting around 30? That's a decent NET income.
Given your current numbers, you're not going to be able to go it alone without a cluster or wholesaler, so your gross won't change at 500k, but your bottom line will. It WILL cost you more to operate on your own. Unless you're planning on drastically changing something about the way you do business, so that you grow bigger, faster, you'll have a hard time making it to year 6 and beyond. Just the honest truth.

I wish you the best, and hope you find great success, no matter what you decide.

I see a couple of posts have been added. As far as agency succession, that's something you should start discussing with the owner NOW if you see the potential for his retirement coming in the near future. This could be an opportunity for you to drastically increase your income, with much less risk. Start saving your pennies now, because you'll probably want around 25% down to finance an acquisition.

Also, did you just recently start gaining traction as far as getting new business is concerned? 150-190k per year with a 500k book over 7 years isn't adding up. Either you started very slow, and weren't earning very much to begin with, or you have a very serious retention problem, and need to address that immediately.

 

[bww143]

To answer your question, maybe, but you could always offer to purchase it from them and ask for a discount, since you worked for them. So agencies will do that for the producers who work directly for there agency.

Offer to purchase at retirement?

 

[jkearns]

Offer to purchase at retirement?

Prior to it, if you can. Are they offering any employee benefits such as 401 K, matching contributions, earning equity in the agency, etc.? If so, then you may want to stay there. You know what I mean?

 

[bww143]

No hard feelings, you just seemed a little overzealous about encouraging the OP. Purchasing an existing agency as means of diversifying and starting a scratch agency are two VERY different endeavors. I'm not sure how close you've ever been to his situation, but prodding an otherwise unremarkable producer to leave a good gig to risk it all and start his own agency is setting him up for disaster.
To be honest, I wouldn't have had any business opening my own agency if it were my only means if income - I would've ruined myself and my family. I wouldn't have even thought about doing it. I'm all for entrepreneurial spirit, but I'm just not convinced it would be a good move for him. For me, I was only risking my fun money, but stand to gain a lot more. Unless there is more to this guy's story that we haven't heard, he isn't in that position.

Based on what you've told us, OP, sounds like you probably gross about 50k a year in commissions, so you're probably netting around 30? That's a decent NET income.
Given your current numbers, you're not going to be able to go it alone without a cluster or wholesaler, so your gross won't change at 500k, but your bottom line will. It WILL cost you more to operate on your own. Unless you're planning on drastically changing something about the way you do business, so that you grow bigger, faster, you'll have a hard time making it to year 6 and beyond. Just the honest truth.

I wish you the best, and hope you find great success, no matter what you decide.

I see a couple of posts have been added. As far as agency succession, that's something you should start discussing with the owner NOW if you see the potential for his retirement coming in the near future. This could be an opportunity for you to drastically increase your income, with much less risk. Start saving your pennies now, because you'll probably want around 25% down to finance an acquisition.

Also, did you just recently start gaining traction as far as getting new business is concerned? 150-190k per year with a 500k book over 7 years isn't adding up. Either you started very slow, and weren't earning very much to begin with, or you have a very serious retention problem, and need to address that immediately.

Yes, started slow for the first few years, and the past 2 have gained traction.

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Prior to it, if you can. Are they offering any employee benefits such as 401 K, matching contributions, earning equity in the agency, etc.? If so, then you may want to stay there. You know what I mean?

They do not offer anything.

 

[indienoise]

I'd have a talk with the owner. Work out a deal: you show consistent production at a level you both agree on, and you lose the monthly fee and have the opportunity to purchase the agency. Get it in writing.

If he won't do it. then as soon as you're comfortable writing 250k or more a year, and for God's sake YOU HAVE LOTS OF MONEY SET ASIDE, then by all means, look at going into business for yourself. Have a plan LONG before you leave, though. Figure on not actually making any money for at least your first year. Plus what it costs to get started.

 

[bww143]

No hard feelings, you just seemed a little overzealous about encouraging the OP. Purchasing an existing agency as means of diversifying and starting a scratch agency are two VERY different endeavors. I'm not sure how close you've ever been to his situation, but prodding an otherwise unremarkable producer to leave a good gig to risk it all and start his own agency is setting him up for disaster.
To be honest, I wouldn't have had any business opening my own agency if it were my only means if income - I would've ruined myself and my family. I wouldn't have even thought about doing it. I'm all for entrepreneurial spirit, but I'm just not convinced it would be a good move for him. For me, I was only risking my fun money, but stand to gain a lot more. Unless there is more to this guy's story that we haven't heard, he isn't in that position.

Based on what you've told us, OP, sounds like you probably gross about 50k a year in commissions, so you're probably netting around 30? That's a decent NET income.
Given your current numbers, you're not going to be able to go it alone without a cluster or wholesaler, so your gross won't change at 500k, but your bottom line will. It WILL cost you more to operate on your own. Unless you're planning on drastically changing something about the way you do business, so that you grow bigger, faster, you'll have a hard time making it to year 6 and beyond. Just the honest truth.

I wish you the best, and hope you find great success, no matter what you decide.

I see a couple of posts have been added. As far as agency succession, that's something you should start discussing with the owner NOW if you see the potential for his retirement coming in the near future. This could be an opportunity for you to drastically increase your income, with much less risk. Start saving your pennies now, because you'll probably want around 25% down to finance an acquisition.

Also, did you just recently start gaining traction as far as getting new business is concerned? 150-190k per year with a 500k book over 7 years isn't adding up. Either you started very slow, and weren't earning very much to begin with, or you have a very serious retention problem, and need to address that immediately.

Insurance is not my only means of income, I have another source of income that works very well with insurance. It could get me through the lean first few years of insurance.

 

[indienoise]

There is no reason you can't hit 500k in premium in first year if you have the right plan in place.

You need about 400k in premium to make a good living and that's a risk.

Insurance is not my only means of income, I have another source of income that works very well with insurance. It could get me through the lean first few years of insurance.

then if you can't work out a deal with the owner of the agency you're with, then by all means, GO FOR IT! Just understand, you will have less profitability for at least a couple years.

Book ownership was a part of the reason for doing my own agency, but mostly it was because I knew I'd have a much higher closing ratio as an independent than captive. So my experience was a little different than yours.

 

[jkearns]

Insurance is not my only means of income, I have another source of income that works very well with insurance. It could get me through the lean first few years of insurance.

Great. I also broker mortgage loans and always recommend Farmers for placing there home insurance with, plus advise them on getting life insurance policy as a form of mortgate protection. Trying to lock them in as customers for life. You know what mean?

 

[insurance1822]

You just love the term broker don't you? Stock broker too I bet? Business broker? Gas lease broker? Oil futures broker? Maritime contract broker? Precious metals broker?

The guys I know who own brokerages & are legitimate brokers would never waste their time buying any captive agency. They're so filthy rich it would never cross their minds. I call BS on this whole "broker" operation. The only guys writing business across state lines (not just bordering states) but "20+ states blah blah look at me" are larger online operations. Based off the look of your website, you sure as sh*t don't appear to have any tech experience.

Enforcing reality.

OP - do not ever consider captive. Indienoise input is the most realistic here. If you can double your production (which your production is pretty lean for how long you've been doing this..) then it starts making more sense.

I bet Jkearns does taxes too..has a few used cars for sale & sells real estate too.

 

[jkearns]

Insurance1822, what's your problem?

Excuse me, I'm licensed in 21 states. I purchased a Farmers Agency over a year ago. Prior to that, I solely brokered entertainment insurance for the entertainment industry. Until I purchased the Farmers Agency, I had no experience writing personal lines or any other commercial lines. I spent 4 years learning on my own, solely just selling insurance products for motion pictures, events, and entertainment services. I tried using superior access and reached out to clusters and other associations, but did't like the idea of forking out money to them with no immediate results, such as you get when purchasing a book. I didn't want to take the risk starting from the ground up doing personal lines and other commercial lines. So, I looked at independents in the Los Angeles area, but most wanted to much or more than I was willing to spend. Then I stated to look at the big four: State Farm, Allstate, Farmers, and Nationwide. I liked what Farmers had to offer, plus no conflict in brokering entertainment insurance, which is my bread and butter. While in the reserve agent program I was introduced to a local Farmers agent, who was retiring, due to his battle with stage four cancer. I saw it was a great opportunity and it was at a fair price and went for it.

Since, I was already licensed in multiple states at the time I expanded my territory to where I now have 21 licenses. My goal is to get all 50 & DC, mainly for brokering commercial lines for products Farmers has no appetite for through using the Farmers owned-operated GA or other appointments or intermediaries, but I do have a referral relationship set up with MetLife's GA, where I can refer business to for personal lines or other commercial, which I don't want to or have the time to spend on writing in those non-resident states. It's not the best split in the world with MetLife's GA, but then again they call, quote, and close the prospect you referred to them, while still owning the expirations. Thought it was a great idea in outsourcing those needs when they arise to someone else, would you not agree? Postive thing is, I can always BOR the policies over to another intermedary or go for a direct appointment at a later time.

I got into mortgage brokering as of recent, due to meeting a few others Farmers Agents, who do it and it helps in selling more home insurance. It's a load of work in doing mortgages and I would not advise it. I hoping to find another mortgage broker to refer the business to and take a cut of the commission, plus retain the ability place Farmers as the preferred option for homeowners insurance for the client.

Any how, I'm getting my series 6 and 63, due to Farmers offering its financial solutions such as mutual funds, variable universal life and annuity products. Something I want to get and to learn to understand.

Other than that, I have not thought about getting any other license for any other industry. I have however thought about getting my surplus lines or special lines and/or reinsurance licenses, but have decided against it. For at least the time-being, that is.

Any other wise comments or things you would like to ridicule me about?

I only share what has worked for me and I have nothing against a captive, such as Farmers. In fact I have had nothing but positive and great things to say and the upper management support has been nothing but excellent and they know I broker and have my non-resident licenses. However, it has been frustrating not be able to get appointed with them in my non-resident states, so I wouldn't have to refer that business else where, but I can understand the decision and respect it as the company respects mine in referring that business in those non-resident states else where.

You don't need tech experience to build a website and I used what works. Keep it basic and simple, plus cost effective. I also never said I was a big operation. I'm just a small business owner with a big dreams, goals, and willing to take risks where others can't or wont, plus think about of the box.

My sites are:
www.johnkearnsinsurance.com
www.johnkearnsagency.com
www.johnkearnsagency.cc
www.johnkearnsinsuranceagency.com