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How to Buy an Insurance Agency

How to Buy an Insurance Agency

Here’s what you need to do to edge out the competition if you’re serious about buying an Insurance Agency.

Insurance agencies always seem to be in high demand when it comes to business ownership opportunities. Regardless of the size of an agency, these businesses consistently garner interest from prospective owners who are intrigued by a people-based business that offers the potential for steady and sustainable income. The median annual income for an insurance agent in 2016 was $49,990, according to the Bureau of Labor Statistics.

If you’re ready to get into the competitive market of searching for an insurance agency for sale, here are some important tips to put you ahead of the buying competition.

  1. Know what’s required going in. Even if you’ve worked in the insurance business before, it’s important to understand that purchasing your own agency will be much different than working for someone else. Purchasing your own agency will require a huge investment of time, energy, and money.
  2. Buy for the right reasons. Being a “people person” is a common reason cited by those interested in acquiring an insurance agency. That isn’t enough to sustain your ownership of an agency long term, however. If you love the insurance business and see this as an opportunity to create your ideal agency, you’re probably on the right track. Before you buy, consider whether or not your interests and motivation are best served by buying an agency or perhaps working for an established one.
  3. Know your market. If you plan to continue operating the agency you’re buying “as is,” make sure you’re familiar with the area, demographics, and the overall demand for your insurance products. Understanding the market and any fluctuations that have occurred over time will help you accurately assess whether or not you can reap consistent profits.
  4. Determine what business you want to be in. If you’re planning to run the agency as is, make sure you are comfortable with what it currently does — home insurance, auto insurance, or both, for example — or if you will need to make changes to shift the direction of profits.
  5. Know the seller’s motivation. It’s important that you understand the seller’s motivation for putting the agency on the market. Of course, you don’t want to acquire a failing business. Are they simply ready to retire or move onto a new business venture, or is there a less-obvious reason? Before you consider proceeding with a potential buyer, you’ll want to ensure that the agency is well-established and thriving to the level that it will provide the livelihood you envision. If it isn’t, you’ll need to realistically evaluate your ability to grow the business into the agency you envision.
  6. Determine how the seller valuated the insurance agency. As with any business purchase, it’s important to understand the process that was used to determine the purchase price. Make sure you understand where the profit comes from and whether or not the agency is currently profitable. Evaluate any physical assets that will be acquired as part of the purchase, the quality of any employees you’ll be retaining, the agency’s sales records, and its financial and risk management. All of these factors can help you determine whether or not the business is a sound investment. Also make sure you understand any pricing factors that are based ongoing concern (or the assumption that the business will continue operating for a period of time that is sufficient to carry out its commitments and objectives).
  7. Have a purchase plan. You’ll want to approach any purchase opportunity with a plan for how you will acquire the business. This means having an accurate picture of your own finances and evaluating your options. Will you be able to get financing for the purchase? Or will the seller need to agree to an owner financing agreement where you’ll pay for the cost of the agency over time?
  8. Recruit the proper professionals to help you. With any business purchase, you need to do your due diligence. That includes making sure all records are reviewed with a fine-tooth comb by the appropriate experts that can help you understand them. At a minimum, you will need an accountant to review the agency’s complete tax and financial records, and a lawyer to review any business plans or contracts.

If after reading this you are still interested in pursuing your dream of insurance agency ownership, a professional business broker can help you to find the best opportunities available.



Bruce Hakutizwi

About the author

USA and International BusinessesForSale.com Manager for BusinessesForSale.com, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.

@BizForSaleUS

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