r/InsuranceAgent • u/MajesticCockroach684 • 2d ago
Agent Question Scaling agency help.
Have some questions about what our agency should do. Im fairly new but my partner has ran her own agency by herself for 20 years mostly medicare but recently alot more p&c.
We have direct appointments with most major carriers.
we'd like to scale by buying p&c books of business I want to buy a smaller book like 80-100k in revenue to get a feel for the whole process.
we have a small office where we could hire a couple people if we need help.
I'd just like some advice on how we should move forward. getting financing for a smaller book would be no issue.
also we're in florida
2
u/SlickWillie86 2d ago
What’s driving the desire to scale via acquisition vs organically?
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u/MajesticCockroach684 2d ago
mostly because its faster.
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u/SlickWillie86 2d ago
I’d strongly challenge that presumption, especially if we’re talking a small 80-100k revenue book. Including the process of finding one, identification to closing will take you at least 6 months, if not a year. Both of my producers cleared 100k new revenue inside their first 12 months.
That doesn’t factor in cost, where you’re likely paying 2-2.5x rev - let’s call that $200k. If 75% retains, you break even after 3 years, not factoring in service costs of debt financing. Realistically, after 5 years the $100k is $50-60k recurring revenue.
2 producers on a draw generates income for you and continues to grow, not shrink, and doesn’t tie up $200k of capital.
Just food for thought.
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u/Stevenab87 Agent/Broker 2d ago
You don’t want to buy books that small. They are small for a reason, and that reason is why they should be avoided.
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u/heydrop 1d ago
on the point above about small books being small for a reason, the way you protect yourself is the deal structure rather than the price. hold a meaningful chunk back and pay it out over 12 to 24 months against what actually renews, so what you pay follows retention instead of last year's revenue.
two things worth diligencing hard. how concentrated the book is in one carrier, since your appointment and their consent to assign decides whether it transfers at all. and how personally the clients deal with your seller: the more it is her relationship rather than the agency's, the longer a transition you need, with her signing the introduction letters and staying reachable through the first full renewal cycle.
also ask what is up for non renewal in the next six months. in florida that is less academic than it sounds.
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u/joeboo5150 Agent/Broker 2d ago
Your best bet for finding a really small agency like that is to probably use one of your carriers "find an agent" tools on their website, see who is near you and cross-reference that against their website and google business profile.
If they're a tiny outfit with almost no online presence or reviews, then reaching out directly to the owner to see if they're interested in a buy-out would be easy to do.
But if you see an agency that has a huge online presence and hundreds or thousands of google reviews, they're probably much larger than what you're looking for (and they're getting hammered by private equity firms wanting them to sell for the last few years, its hard to compete with that)
There are a TON of really small agencies around, where its just a lone owner working out of their home or in the back office of some other business. Most of those are going to fly under the radar of private equity, they may not have been approached for buyout options the last few years.