How important is a succession plan for your agency?

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When you first started your business, how far into the future did your planning extend? Perhaps you planned for five, ten or even twenty years down the line. How much thought did you give to your exit strategy?

Everyone agrees that having a written plan on file with your general agency, or someone who can ensure your plan is implemented, is important. If you are too ill or disabled to certify or support your business, revenue can stop very quickly.

Whether you have disability income protection or life insurance, your family and partners rely on you to ensure a paycheck arrives each month. Your commission checks may form a large part of your family’s income, and with a plan in place, everyone at LeClair Group can take action on your wishes, providing greater security for all your loved ones.

Things to consider

Though it might be difficult to accept, it’s important to bear in mind that business might be done differently under the new owner once you have stepped away. This is a factor you must be aware of and comfortable with if you decide to move forward with a new buyer.

Consider keeping your staff informed about where you stand with a succession plan. Many are already thinking of this, and your team is stronger with key people in the loop. If it is obvious you are “exiting,” or have become too ill to work for a while, people will support your through your transition or illness when they know a succession plan is in place.

Where there will be new owners, your staff and clients will need a warm “hand off” to ensure service and satisfaction continue. Confidence about retention plays an important part of the valuation of our business, and how you hand over and make arrangements plays an important part.

Make sure all your carrier partners and general agency partners know of you plans in plenty of time. Another important part of your valuation is confidence the AOR will pass to the new owner. Many carriers require in their contract that you have a succession plan on record in case something unexpected happens to you. The new owner of your business will also need to confirm they have all the necessary contracts in place to take over your book of business.

Who can help?

Whether you’re a sole proprietor or a large corporation, it’s important to have the right people in your corner as you move through your plans. Some hired help you’ll need include:

  • Accountant
  • Tax specialist
  • Attorney (ideally with experience in succession planning for independent insurance agencies)
  • Valuation specialist
  • LeClair Group

These professionals will help you in determining the value of your agency and the steps you’re taking to increase the value, along with what your long-term plan looks like and whether you plan to keep or sell your agency. Never underestimate the value of professional support; this will ultimately maximize profits and ensure that the efficiency of the agency continues increasing whether or not you choose to continue at the helm.

When it’s time to step back

Even when everything is in place for a proper succession, it can be hard to know when to finally put the plan into action. As long as you have a plan, it is much easier to adjust dates rather than scrambling to make a plan when you may not be in the strongest position to make agreements.

Succession planning is a continuous process. Once you have a plan in place, review it each year and ensure it meets the needs of your family, clients and business partners. The most important thing you can do is to start now and commit to having a good plan on record for your business.

Everyone that relies on and loves you will appreciate knowing what will happen when you plan to retire or if the unexpected happens to you.

Case Study

If an agent passes away before they pull together a proper succession plan, their entire business can be thrown into chaos, creating a mountain of legal problems for everyone involved. LeClair Group recently encountered this scenario when an agent passed away without a succession plan in place. This agent had discussed several times the need to create a succession plan, but always left it to another day.

As a result, significant issues and challenges arose, including:

  • Difficulties servicing current members with enrollment and general updates
  • Working with family members in the processing of data that existed in paper files
  • Tracking down companies the agent previously worked with through old tax returns
  • Paying out earned commissions to his beneficiaries
  • Preventing his Book of Business become carrier ‘house accounts’
  • Agreement to transfer the AOR to a local agent

The agent’s former colleague said that, had everything been properly in place, the succession process would have gone much smoother for everyone involved. LeClair Group knew the agents and carrier partners and advocated for a transfer to a local agent, who agreed to a financial plan to service his clients; this arrangement ensured that revenue continued flowing to the deceased agent family and the new agent without interruption.

“The transfer of business would have been easier to deal with so that we could service the members and have full disclosure of the carrier partners, along with the proper data that is needed for communication purposes,” she said. “For agents looking into creating a succession plan, it is good practice to do it sooner rather than later and not wait until the last minute.”

Keep us in the loop

Need help getting started? My Advantage Portal on offers a variety of educational resources on succession planning, from webinars to professional referrals. If you already have a plan or when you have completed your plan, please send a copy to LeClair Group for our records. Should anything planned or unexpected happen to you, it’s important that we know what to do with your book of business so we may help you deliver on your promises.

Reach out to if you have any questions.