In early 2006, I financed a partner buyout. Like many, it was a partnership that had run its course and became unbalanced regarding effort and growth. One partner was disengaged, and his division was languishing, revenues stale. The other partner was still hungry and growing his innovative division of the agency. With financing, my client became the full owner and subsequently tripled the business over the next ten years. Quality products and carriers were added, more than tripling the value. Plus, reaching a certain size and scale has propelled the business into a different valuation category.
This client recently told me that 2017 is the year he will sell. Healthy and active in his early 60’s, he has made the decision to exit the business and retire. Here are a few reasons he decided to sell, as well as others I have recognized over the years. These explanations do not include obvious health or family life change situations. These are not financial, tax, or estate planning motives. These reasons are intangible and subtle, but just as real. Here are some signs, in an honest moment, you may see that tell you it’s time to sell.
1. No longer hungry. There isn’t the desire to make the extra phone call, take the additional meeting, get stoked about the next account or opportunities for a new product. It’s just not the same buzz that it used to be. While certainly a responsible owner, there’s no longer the fire in the belly.
2. You realize a new owner may better serve the agency. As you network with your peers, you can’t muster the same enthusiasm. You may begin to understand that a new owner is going to be more effective than you. Are you doing the business justice if it’s standing still rather than moving forward?
3. Lack of internal action. There are employee issues or sub-optimal processes that you don’t want to address. Many times, owners subconsciously don’t acknowledge a weakness because admitting knowledge obligates action. And the owner simply doesn’t want to deal with it.
4. Your lieutenant is ready. If you have been a good planner, succession is in place. Perhaps it’s family perpetuation or a high potential employee you hired years back. If your lieutenant is ready, they probably see things they will change for the better. Implementing those changes with the current owner in place is hard. Your good leader is now ready for ownership.
5. Something else is more exciting. Being a successful agency owner has built your entrepreneurial skills. Perhaps you began to dabble in another industry or business venture and find it’s naturally grabbing most of your attention. You enjoy a change of business challenge.
6. You don’t want to compromise your personal energy – at any level. Mental energy is more precious and finite. The staff is in place and the agency “runs itself.” But not actually, not 100%. The business, which is the largest personal asset, is still on your mind – perhaps the back of your mind – every day. The agency still requires some level of energy.
Sometimes “it’s just time.” It’s not money, it’s not health, it’s not family. It’s just time to pass the baton to the next generation of the owner.
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Kelly Drouillard is the General Manager of the Insurance lending division at Live Oak Bank. Reach her at 913.980.7773 or firstname.lastname@example.org