How Young Agents can take Advantage of the Retirement Boom
(by Marc Greene, Owner & Founder of General Insurance Brokerage)
- How much experience should an agent have before starting or purchasing an agency? Why?
Experience generally relates to success. The barriers to entry have changed over the last three years. Prior to 2018, a new licensee could purchase an agency and get the carrier appointments once they filled out an application and had a meeting with the carrier representative. Progressive was the first to shut down new appointments to licensees that are not currently appointed with them. I notice that licensees with prior experience are more likely to succeed in their own business, in this industry much the same as others; the more experience that you have obtained can relate to success as an independent business owner.
- What should young agents do to ensure access to the credit they will need to buy an agency?
The 7A SBA program is designed for buyers that do not have an excessive amount of wealth. Many of the lenders in the insurance space provide this type of funding on a 10-year amortization with as little as 10% down payment. Underwriting factors include credit score, experience in the industry and the ability to put down 10% and have working capital to run the new business.
- How should a new agency approach budgeting? What are the expense pitfalls it should look out for?
In the insurance space, the buyer typically gets the prior month commissions as part of the contract to purchase which is always helpful for cash flow. Expenses are typical; rent-utilities-agency management system/rater-payroll-business insurance and marketing. A new business owner that was not previously in a management roll can find that the responsibility of paying the monthly bills a managing employee can be a true test of one’s character.
- What financing options do agents have for acquisitions? Which do you recommend or discourage? Why?
Typically, a new buyer will only qualify for the SBA 7A program or owner financing. Conventional loan programs are more typical for current agency owners and higher wealth individuals.
- How can the way an agency uses technology effect its profitability and chances for success?
Technology has changed the world. The younger population expects to be reached by social media and won’t even know what a phone book is. It is my opinion that the cost of reaching a potential client has decreased due to social media.
- Are there any other things younger agents should be doing to prepare themselves for agency ownership?
There are many books and articles written by business leaders and technology innovators, that is always a great place to begin your quest for knowledge.