A significant number of agency owners don’t have a succession plan in place, instead viewing perpetuation as an event rather than a process. Nothing could be further from the truth, says Reagan Consulting President Kevin Stipe, and whether you choose to sell or pass your business along internally, there is one thing you’ll need: young, talented staff.
“The most valuable agencies in the industry are those that can actually perpetuate themselves,” said Stipe, who has nearly 22 years of experience in the agency merger and acquisition space. “The best thing an agency can do to maximize its value is get younger talent in the system, which gives it the choice of whether to sell internally or externally.”
The advantage of young and talented staff for internal perpetuation is obvious—the agency will still be profitable when the owner retires, negating the possibility for leadership gaps.
However, making skillful hiring decisions is also key if an agency owner is looking to sell the business.
““Nobody wants to buy a wasting asset, which is an agency devoid of talent,” Stipe said. “Truth be known, the buyers out there are looking for talent just as badly as everyone else. Talent is the most important thing they’re trying to buy.”
In fact, two-thirds of growth for larger, publicly traded brokers comes from acquisitions, making it a key source for future talent.
Given stereotypes of flightiness and entitlement surrounding the millennial generation, however, many independent agencies may be loathe to hire younger people in key producer positions. To that, Reagan Consulting presents convincing evidence to the contrary.
In the group’s 2009 “Young Producer Study” and its 2012 update, Reagan found the 91 young producers followed produced a book of business in excess of $500,000 by their fifth year of employment. Three years later, 80 of the original 91 were still employed as producers in their same agencies. Of the remaining 11, 10 were employed elsewhere in the insurance industry and one had left due to the brith of a child.
The median producer in that group was generating new business commissions of $117,000 annually, and 45% had taken on leadership roles within the firm.
Based on the study, Reagan Consulting suggests that while hiring young talent directly from college is an effecting talent acquisition strategy, hiring young producers with work experience is more effective.
“These hires may be a little more expensive, but they typically have greater maturity and bring real-world experience,” Reagan said. “We would encourage you to consider hiring talented producers at all ages and stages, but would encourage you to make certain that young producer hiring is a part of your plan.”
Tomorrow, we report on the importance of proper valuation techniques and outside expertise. Stay tuned!
You may also enjoy: "Aging producers could lead to agency employment crisis"
"The right hires are crucial as producer sector expands"
"Looking to decrease agency costs? Try this tactic"
You've reached your limit - Register for free now for unlimited access
To read the full story, and get unlimited access to Insurance Business website content, just register for free now. GET STARTED HERE
Already a website member? Log in below.