Usually, when people ask an agent or agency principal “what business are you in,” they answer, “I’m in the insurance business!”
That’s only superficially correct. The real answer, I learned along the way is this: We’re in the people business! All of us!
I strongly believe that. Indeed, I saw that truth confirmed again and again not just in my current practice as a business broker specializing in insurance agencies, but also in my prior career as a professional negotiator, during which I worked on a number of tough legislative battles.
Think Beyond the Numbers
Sure, numbers are important. Everyone who sells an insurance agency wants the best price he or she can get for it. After all, the proceeds frequently represent a huge chunk of the seller’s retirement plan.
Furthermore, sellers nearly always have an emotional investment in their agencies. After all, they spent decades, and sometimes generations, nurturing and building their agencies and their reputations. Where a buyer has the emotional distance, most of the time, to look dispassionately at the numbers, the seller has so much of his or her own identity wrapped up in the agency that it’s difficult to close a deal based on the numbers alone. To maximize the chance of a successful and mutually beneficial close, it’s vital to have someone involved in the deal who has the perspective and wherewithal to look beyond the numbers to keep the sale moving forward.
Here are a few principles I’ve discovered and confirmed over decades involved in tough, stressful negotiations.
- Don’t get so wrapped up in your situation that you can’t mentally and emotionally put yourself on the other side of the table.
- Remember – most sellers have never sold a business before. The process can be very scary – especially for the seller, who doesn’t get a ‘do-over.’ The prospect of leaving money on the table is much more difficult for a seller facing retirement than for a buyer with many productive years ahead.
- Expect the unexpected. No deal ever goes through without a hitch.
- When you think you’re at an impasse on valuation, take a step back and consider the human element. Think lifestyle issues and people concerns.
Here’s an example of what I mean: A recent deal I was brokering seemed in danger of falling apart. The seller wanted to retire, and seemed stuck on the numbers. We put the number aside for a bit, and agreed to take a look at some side issues. Our next meeting found me asking the more personal questions that brought out that the real issue wasn’t money. Rather, the seller was most concerned about his daughter’s career path and the future of the current support staff. The seller wanted to be sure that he was leaving the agency with a buyer that had the same employee values and career path.
Once we figured that out, the long list of interested buyers was suddenly down to two that shared the same values. With the satisfaction of knowing that he had done everything he could to secure the staff’s career path, the deal hit full stride and closed within 30 days. Clearly everyone was a winner.
- Things aren’t always what they seem. In another recent deal, we thought we had a price obstacle to overcome. Most of the conversations with the seller revolved around getting the maximum amount of money that could be obtained from the sale of the agency. In reality, the issue was that the seller was simply burned out. So much of the seller’s life was in the agency she built that she had nothing left to give.
The real issue in this case wasn’t price at all. Instead, she needed a break. It was a lifestyle issue. When we figured that out, we quickly figured out a way where the seller didn’t have to stick around for a long transition period. Once our seller saw that she was going to be able to make a quick exit, she was willing to give a little on the final selling price. That little issue was really a big deal to her, and we were quickly able to tie up the rest of the sale. Again, everyone was a winner.
There is tremendous skill involved in keeping a difficult deal moving forward. The key is in remembering that a business is more than a cash flow statement and a set of financials. A business is made up of people who have many different needs and wants that can’t be measured in dollar bills.
Most of the time, it’s that part of the equation that is the most important, and is the key to a successful sale.
Marc Greene has over 30 years of business experience and holds a Bachelor’s degree in Accounting and a minor in Finance and Marketing from Florida State University. Mr. Greene is licensed by the Florida Department of Business & Professional Regulation as a Real Estate Broker and licensed by the Florida Department of Financial Services a 2-20 General Lines Insurance Agent.