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Agency Perpetuation Central

When it comes to the future ownership of your agency, it all comes down to what you do. As with anything in business, doing...
March 14, 2007

PIA National Offers Tool Focused on Perpetuation Planning

Bill JenkinsBy Bill Jenkins
Vice President of Business Development and Marketing
PIA National

When it comes to the future ownership of your agency, it all comes down to what you do. As with anything in business, doing nothing is actually doing something. If you don't take the steps to control your own future, others will do it for you.

Too often, the term "insurance agency perpetuation" creates an inaccurate perception. The word "perpetuation" is interpreted as meaning something that happens in the future, when in fact, "the future" is actually being determined by what you do - or don't do - today.

While some might take this as some sort of lofty philosophical idea, it's not. Rather, this is a "here and now" business reality.

Perpetuation is like the weather. Everybody likes to talk about it, but doing something about it can be another matter. But perpetuation is unlike the weather in one key respect: you can actually do something about it, rather than just letting it happen to you.

Perpetuation of an agency involves sustaining the existence of an agency, and this can take many forms. In some cases it involves agency ownership being transferred from one generation to the next. In other cases family members are not involved or involved in different ways, such as when spouses share ownership. Agency perpetuation often involves buying out partners or bringing in new partners.

The options for agency perpetuation or other forms of ownership transfer are numerous. To address these options, PIA National has created Perpetuation Central through its work with "The Partnership," a group of national and regional insurance companies.

When it comes to the issue of agency perpetuation, there are those on one extreme - who have no intention of perpetuating - just turn over the book for whatever you can get for it and walk away.  And, there are those who are just the opposite - with well developed plans and various options and contingencies accounted for. The vast majority fall somewhere in between these two extremes.

The resources that are available to you as a PIA member through Perpetuation Central can help, no matter where you are on that spectrum. It has been created by the PIA National through a cooperative program which brings together agent and company resources. This program is called "The Partnership." Insurance companies who currently participate in The Partnership include:

AIG Agency Auto
The Central Insurance Companies
Drive Insurance from Progressive
The Hartford
Liberty Regional Agency Markets
Main Street America Group
MetLife Auto & Home
Motorists Insurance Group
Ohio Casualty Group
Travelers Insurance
and Zurich

Put simply, Perpetuation Central helps make the process of perpetuation or other form of ownership transfer more easily accessible for agents. Make no mistake about it, Perpetuation Central does not replace the need to take advantage of the expert advice and counsel that can be provided by consultants and other experts in this area. Rather, it is designed to help you get to the point where you can make the most of that advice and counsel - that "hands on" assistance that you will need.

Perpetuation Central is available as an online tool and can be accessed in "The Partnership" section of the PIA National website.

In addition, those of you who subscribe to Rough Notes magazine have already received an informative CD-ROM on Perpetuation Central in the February 2007 issue. For those of you who are not subscribers, PIA is pleased to announce that all PIA members are now entitled to receive a free subscription to Rough Notes. To get your free subscription, just click here.

Perpetuation Central

Perpetuation Central -- Step 1

Identify Your Situation

Once you are ready to begin using Perpetuation Central, step one's goal is to identify your particular situation. "The Partnership" has identified the following 11 basic situations from which you choose:

  1. Agency owner principal, active in growing my agency over the next 5-10 years or more.
  2. Agency owner principal, active in my agency, but will begin a phased retirement process in the next 5-years (or less) through a succession plan in my agency. 
  3. Agency owner principal, retiring in the next 3-5 years through a sale to an outside third party. 
  4. Agency owner principal, in or will soon begin (less then 3-years) a retirement plan, selling my agency to outside 3rd party. 
  5. Agency owner, preparing/needing to buy-out current partner. 
  6. Agent-producer in current agency, want to make a buy-in/out offer to the older principal that is nearing retirement. 
  7. Agency owner-principal or agent-producer, looking to buy-in/out a book of business outside my current agency. 
  8. Not looking to retire - but needing a catastrophe plan.
  9. Agency owner-principal wants to get equity out of an agency but wants some continued role.
  10. Co-principals have different desires/plans/ideas - need plan for separation.
  11. Don't know - unknown.

On this page, agency owners should choose the best possible answer to move on to the next step.

Perpetuation Central -- Step 2

Download Checklists

Step two is where the paths diverge. Once you select the most appropriate situation in step one, step two lists different elements of the plan that's right for you. There are many elements listed, depending on your situation. The categories show a checklist of items you should consider as you create your plan. Some of the categories listed below do not appear in every situation. The complete list is:

  • Buyers perspective 
  • Sellers perspective 
  • Inside sale/transition 
  • Reciprocal arrangements
  • Emergency sales
  • From the carrier perspective
  • Tax implications
  • Experts
  • Non-disclosure & non-compete agreements
  • Comparison inside vs. outside
  • Valuing
  • Managing the transition
  • Defining the actual transaction
  • Due diligence

Instead of selecting the individual checklists under each category, you can download a master list of all the various elements.

Perpetuation Central -- Step 3

Creating Your Plan

Step three is creating a plan that is tailored to you and conducted on your own timeline. Some of the items are detailed and require much deliberation while others can be completed in a matter of minutes. Likewise, some items involve only agency principles whereas others require a team effort of staff members.

The checklist items may represent novel ideas that you had not considered or may require training. By reviewing and considering the various checklist items presented, you may identify possibilities you had not previously considered. Having a plan set will help give you the ability to explore many possibilities.

Since your plan is unique, there are different ways to proceed in developing it. Since you are creating a plan for your agency, you do need to set clear and obtainable objectives for what you hope to achieve and create a realistic timeline for accomplishment. Another important point to remember is to prioritize which items need to be explored before other items can be worked on. Set aside enough time to carefully think through each phase, as you develop your plan.

Perpetuation Central -- Step 4

Accessing Resources

Step four is accessing the resources you need to help you execute your own unique agency perpetuation plan. These are made available on-line so that we can continuously add as we become aware of new resources.

You are encouraged to find outside resources like colleagues and educational classes, but we have provided books, articles, additional Web site links, classes, consultants and other PIA affiliate specific resources on their web sites.

Click here to go to the Perpetuation Central web page now.

PIA Connection

This article originally appeared in the February 2007 PIA Connection.


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