One of the most effective ways to expand your agency’s business is to acquire another agency. Whether you purchase a local competitor or an agency in a nearby town, an acquisition instantly increases the size of your book of business and gives you new opportunities for cross-selling to customers. If the agency you buy has top-quality producers who are willing to stay on, your agency will continue to grow.
As with so many other things in life and business, timing is everything when it comes to making an acquisition. Try to buy at the wrong time, and you might end up hurting your business. Fortunately, there are plenty of signs that can suggest the time is right.
Start with a plan
Have you noticed that nearly every piece of business advice points to the value of planning? There’s good reason for that. If you pursue acquisitions without clear, concrete goals in mind, you may buy the wrong agencies or start the process at the wrong time.
Your plan doesn’t need to be lengthy or elaborate, but it should spell out what you hope to accomplish by expanding through acquisition. It should also include an honest appraisal of what you can afford and how you’ll finance the purchase. After you develop the plan, run it past your accountant and your attorney. They’ll provide an objective review and offer insight.
Having a plan can also put your employees at ease.
Transactions like acquisitions create uncertainty for employees, especially if they don’t know your goals. Sharing the goals (without the financials) will reassure them that you’re not acting impulsively.
So what are the signs that now may been a good time to pursue an acquisition?
Customers really love you
If you’ve been able to build up a strong, loyal base of customers, it’s a sign that you’re doing something — actually, a lot of things — right. You may be getting referrals from customers for friends in another part of town, another community, or even for a business line you don’t yet offer. That’s a way that customers are telling you that they want you to expand the scope of your business, add to your team, or open a new location — and acquisitions allow you to do all three.
You’re flush with cash
You’ve done a great job of managing cash flow, and your bank account is growing. That money isn’t doing much for you sitting in a checking account or a CD. By investing it into an expansion, you’ll put it to work and use it to fuel additional growth.
Your team is hungry
You’ve assembled an outstanding group of hardworking employees, and they enjoy their jobs. Yet you’re sensing that they’re getting a little bored and set in their ways. People like to be challenged and succeed. An acquisition can take those employees out of the daily routine and encourage them to do more. That’s especially true if you link incentives to the acquisition.
You have a winning strategy
There’s plenty of competition in your town, but you’ve come up with a way to outpace the rest of them. Maybe you’re a dazzling salesperson, perhaps you’re a savvy marketer, or maybe you’ve just hired the best customer service people in the state. If you can duplicate or expand upon that strategy in another neighborhood or nearby community, you can accelerate your growth while diversifying your customer base.
You can’t meet demand
Your agency is so busy that your current staff struggles to keep up with the volume. You could add another person, but there’s no extra space in the office. Maybe what you really need is another office or two to help you keep up with the customers. For example, you may be able to buy the business of another agent who’s ready to retire, so you’ll get his book of business and his employees.
Your system is efficient
It’s taken some time to get there, but your agency is a well-oiled machine. It wouldn’t be hard to feed 50 percent more policies into that machine. If you’ve developed a highly efficient system for selling to and taking care of customers, an acquisition is the quick way to scale up your volume.
Your research says it’s time
Perhaps you’re one of those people who studies everything at length. It may have taken you three months of article research and test drives before you were ready to buy your car. Similarly, you may have been studying your numbers and those of your market for months, and you’re convinced that now’s the right time. Your accountant agrees.
You’re ready to move up
You’ve built your agency from the ground up, and made more cold calls than anyone you know. Now you’re ready to let trusted employees do the groundwork while you focus on developing a long-term strategy for the business. Having more employees and a larger book of business can help you move away from day-to-day concerns so you can manage the bigger picture.
The other advantage of moving up is that it may free up more time to do the things you enjoy, whether that’s golfing, fishing, or taking that dream vacation. And isn’t that why you started your agency in the first place?