Page 110 - The UnCaptive Agent

PLANNING 83

The Exit Plan

The last bit of planning I want to mention is the Exit
Plan. You’re just now thinking about starting your busi-
ness, so thinking about when you will leave your business
probably seems a bit odd! But I believe in the old say-
ing, “begin with the end in mind,” and every business
creator is eventually going to become a business seller.
Eventually, you are going to perpetuate your agency to
someone. That could be a family member, employee, or
an outside purchaser. While it isn’t important to know,
at this point, who will ultimately buy your agency (or
even when that will happen), it is important to remember
that it will happen someday.
When it does, you will want to make the most out
of that one-time transaction. Even though you may
not write this plan down, I’d like you to remember the
elements of agency value because this value is some-
thing that you need to bear in mind as you build your
agency so that the day you walk away will be a very
happy day indeed.
Agency value is expressed in a variety of ways.
Frequently, and especially for agencies with less than
a million dollars of revenue, values are expressed as a
multiple of revenue. The truth is that gross revenues
only drive value indirectly. All businesses sell based on
the net profit that they produce for the owner. With this
in mind, as a shrewd business owner, you should seek
to maximize profitability with every decision you make.
Examples of the kinds of decisions that impact agency
value include selling standard lines business instead of
excess and surplus lines (to receive dramatically higher
commissions), managing your books of business effec-
tively by refusing to write clients with high loss ratios,
spreading your business among many carriers to reduce