For optimum results, preparing an agency for sale should begin at least two to three years before you put it on the market.
your business for sale and potentially connect with thousands of motivated buyers.
Negotiate a price Negotiate the purchase price based on several factors, including multiples of revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Also determine whether it should be a stock or an asset purchase (more common with acquisitions of smaller agencies). Typically, a preliminary price will be agreed upon subject to the potential buyer’s due diligence.
Do due diligence When an acquisition falls apart, it’s often because one or both parties don’t do enough (or the right kind of) due diligence. After you identify a buyer who meets your criteria, make sure you compare the prospective buyer’s goals for the agency with your goals, determine the buyer’s financial stability and clarify management structure as part of your homework.
Arrange financing If discussions between you and a prospective buyer are promising, the next big hurdle may be finding a source of financing for the purchase. The obvious place to turn for a commercial loan is a bank, but the vast majority of banks don’t understand the cash flow embedded in your in-force book of business and aren’t willing to lend against intangible assets. A commercial finance company that can facilitate the sale by requiring relatively little out-of-pocket cash may be a viable option.
Capitalize on what you’ve built When you do decide to step away from your agency, the right planning can help you leave with the financial rewards you desire and the satisfaction of seeing the business and legacy you’ve worked hard to build continue. For assistance in selling your agency, visit www.osfagencyexchange.com.
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