Do you own your agency? Part One

Robert Wells, Tennessee Territory Manager

Step 1: Build a successful agency. Step 2: Sell it and retire, or pass it on to your kids or family. Sounds good, right?

You are an entrepreneur! Do you want to own your own business, or do you already? Maybe you just think you own it. What am I talking about, you ask?

First, let’s look at what ownership IS. Definition – One who owns; the rightful proprietor; one who has the legal or appropriate title, whether he is the possessor or not; in a general sense, one who has or possesses the subject/item or entity.

In the insurance world, there are several types of agencies and agency owners:

An exclusive or “captive” agent typically does not own their book of business. Instead, they generate income from the business written while they are employed and may be paid a reduced percentage of that value when they retire. Some agents in this situation can sell their book, but only to an “approved” buyer and for a fraction of what the true market value should be. These agents build a book of business that will be passed on to the following agent to replace them when they depart, so technically, there is no true ownership here.

Independent agents in a bad partnership group may find they are in a similar, or even worse, situation if they have partnered with a non-reliable group. Promises of “company access” may be just that… Access, not ownership. If you grow a book of business on a sub-code and have a non-compete clause in your contract, exactly what do you have? You have nothing to sell and nothing to take with you when you decide to leave because the business is not yours to sell. These partnership groups promise easy-in-easy-out, low or no fees, and direct appointments. If it is a direct appointment, the carriers will pay you directly, not the partnership group. If you don’t own it, you can’t sell it. No ownership here, either.

Then there is the independent agency, either all on their own, or in a partnership program that provides for the unlimited sale or transfer of their business. These agencies have direct appointments with their own companies, write their own business, own their commission and profits, and can sell when and where they want at their own asking price. True ownership.

Here at Mountain Empire Agency Alliance, we frequently work with agencies that have ended up in a situation they never expected to be in – building a large book of business they do NOT own. This is a situation that they never saw coming and would have avoided if they had known the end from the beginning.

ALL agency partnership groups are for-profit businesses, not a 501(c)(3) organization. So if it sounds too good to be true… it is—100%. Look hard at promises, contracts, references, experience, and historical performance before deciding on the “ownership” of your agency.

Look for Part Two next month, where we will dive into some of the most crucial details to evaluate before making a decision that can dramatically affect your financial situation.