Ultimate Guide To Scaling an Insurance Agency
When you think of scaling insurance what comes to mind? You have built this great business but you want to add more value to your business. When you own your insurance agency, you know that as an entrepreneur you have to stay on top of things regarding your business.
You have to make sure the needs of your customers are met, which means the more value you have to offer your customers, the more customers you will get signed with your insurance agency. So what does it all mean and how do you go about scaling your insurance agency and building a great business?
What Does It Mean To Scale An Insurance Agency?
To ensure that you are doing what is needed to scale your insurance agency, you have to make sure that you fully understand what it all means. There is a difference between scaling your insurance agency and growing your insurance agency.
To simply put it, when you are growing your business you have your system down already with how you meet your clients goals and sign up a lot of new customers to your insurance agency. So you are just trying to maintain what you already have that is working for your business.
However, when you are trying to scale your business, you are trying to generate new ideas that can generate your business more income. This is the route that you would choose to go if you care more about becoming more profitable in the long run with your business.
Always do additional research that is necessary before jumping into scaling your insurance agency. You do not want to miss any important information that can hurt your business down the line because you rushed.
Where To Start With Your Insurance Agency
Before you can think about scaling your insurance agency, you have to start with the basics so you know what to do and how to tackle an issue in the future with your business.
Here are some questions you can start with:
How do you manage an insurance agency?
Can insurance agents make millions?
How do you purchase an insurance agency?
How much does an insurance agency cost?
These are a few questions that you may have when it comes to starting your insurance agency that are worth considering when looking into scaling and managing an insurance agency.
The Beginning Stage Of Your Insurance Agency
Before you actually have your insurance agency, there are quite a few things you need to mark off of your checklist. Having an agency of your own can be challenging yet rewarding if you have your plan well thought out. Think of your goals that you want to achieve.
You want to make sure that you have more than enough funds to get it up and running. But how much does it all cost? If you could start running your insurance agency within the next 6 months: how would you picture your business running? How many employees would you like to have to run your insurance agency successfully?
The beginning stage of starting your insurance agency is one of the toughest stages you will have to deal with, but it certainly will not be the last tough stage you will encounter.
With running your insurance agency, you are going to come across many issues; but it is important to figure out how to handle each issue and to try your best to avoid the same mistakes down the line.
How Do You Manage An Insurance Agency?
There are a number of things that you can do to manage an insurance agency, but why not start off with the basics instead of overwhelming yourself early on: setting goals.
If you do not have a goal in mind when starting your insurance agency, it is going to be hard to maintain and manage your insurance agency. Break it down into specific time frames so that you can achieve your goals with your insurance agency.
Something else that you want to factor in is the type of investment you are making for your insurance agency. You are going to want to invest in your staff. You want to have outstanding employees so that your business can be successful. There are different roles you are going to want to hire for, so make sure you hire the ideal candidate for each.
Once you have your ideal team assembled, you can focus on your marketing strategy. How are you going to market your business so that you can build that clientele? You want to build a trusting relationship with your clients by marketing your insurance agency.
Can Insurance Agents Make Millions?
The question most people are thinking about when starting an insurance agency is how much money can you really make as an insurance agent? Is there a cap amount that insurance agents do not surpass in the insurance industry?
The majority of insurance agencies rely on customers to refer their business to someone they know. With every new customer there is potential that they could refer someone to your agency and your money could multiply.
However, in doing this you are limiting your cash flow to your business. Most insurance agents tend to not make more money with this somewhat crippling way of thinking, but they do still make a large sum of money.
It is definitely possible to make more than a million dollars from your agency, you just have to strategize your goals for your business. This is not an easy task, but with venturing out to people you do not know and building your business on platforms like social media, you can definitely make millions as an insurance agency.
How Do You Purchase An Insurance Agency?
When you are trying to buy an insurance agency you have to make sure you have everything that you need to be able to successfully sell insurance. You do not want to miss anything, because it could be costly if you violate certain laws.
You are going to need to have certain licenses in order to sell insurance. Make sure you know what type of insurance you want to sell because one agency cannot sell every type of insurance. Are you going to be selling health insurance? Or are you going to sell car and home insurance? You need to know your market.
Before purchasing your insurance agency, you have to have your policies in order and any other legal business requirements such as, making sure your insurance agency is in compliance with the corporate laws.
Once you have all the legal requirements in order, now you can think about the actual cost of buying an insurance agency. Most lending companies will require at least a 25% to 30% down payment for your insurance agency to get the buying process started. That price range can range depending on the size of your agency and location.
How Much Does An Insurance Agency Cost?
There is no exact price for the cost of an insurance agency because there are a few things to factor in when considering buying your insurance agency. One of them being—how much is it going to cost to start your insurance agency? How will you be able to get the money from a financial institution if you do not have the cash?
If you are going into a more expensive insurance firm, your cost is going to be higher to purchase an insurance agency. The price ranges for the cost of an insurance agency range from $5,000 to $1,000,000; do not forget that location can play a big part in estimating the cost for your insurance agency.
There are certain grants that you can look into to help lower your cost as well. Each grant has certain requirements and depends on location, which would require more research depending on where you live. Applying for business loans is usually the main option business owners utilize, but business loans have certain requirements as well.
When you think of the cost of the insurance agency, do not just think about the cost of the building itself—factor in the costs for your lease and whatever costs come with that, such as equipment, employees, etc. You want to make sure you have more than enough to get started until your business starts generating revenue.
Buying An Insurance Agency From A Seller
If you are not wanting to start from the very beginning with buying an insurance agency, then you are probably considering buying an agency from a seller.
This way you are kind of cutting corners and making the process a bit easier on yourself if you are a team of only one at the moment. Anything to make this easier on yourself should be considered. But are there a different set of rules when buying an insurance agency from a seller?
Your location definitely plays a part when buying an insurance agency from a seller. They may not be available everywhere, but if you do have sellers of an insurance agency near you, consider yourself lucky.
When buying an insurance agency from a seller, you are going to want to have some questions for them regarding the sale. For example, what is their reason for selling the insurance agency? Is it because they are not really generating the income they had hoped for or is it simply because they want to venture onto something new?
Things To Consider When Buying An Agency
When you are buying an insurance agency from a seller, you want to make sure the deal is beneficial for both parties, mainly you. Is it worth the money to just buy from a seller and avoid a massive headache or should you just avoid sellers altogether?
There are things that you are going to want to consider before continuing on with this potential buy from the seller:
Is buying an insurance agency from the seller profitable for you?
Does the insurance agency already specialize in the same insurance that you are wanting to sell?
If not, how do you make that transition easiest for you?
How are you going to secure your finances before buying from a seller?
Make sure to address all of these questions before buying an agency from a seller. This will save you time, money, and unnecessary complications later on.
Before Buying An Agency From A Seller
You want to maximize your revenue as much as possible from this deal. If you have any questions for the seller as you are doing your research, do not hesitate to ask. It should not seem like a hassle to get your questions answered if they are not a shady seller.
Some shady sellers might even seem like they have all of the answers but are only thinking of themselves and their wallet in the long run. If you have a bad gut-wrenching feeling about the seller or whatever information they are providing or not providing, it is probably best to avoid that seller at all costs.
If you can, try and get an insurance agency seller who specializes in the type of insurance that you are trying to sell. This is definitely easier said than done, but if you can, it will make the process easier for you and for your business to get started.
Even if you cannot find an insurance agency seller that specializes in the same insurance you are wanting to sell, no worries. There is always a way to get around that, and you can start marketing for the kind of insurance that you want to sell.
Is Buying An Insurance Agency Profitable for You?
The main question you need to keep asking yourself before actually buying an insurance agency from a seller is, “will this business still be profitable for your insurance agency?”
After knowing why the seller is wanting to sell their insurance agency, you can start to think about your profitability. Will this be a valuable asset to you? Is there something else that you need to bring to the table to make sure this is most profitable for you? This is something that you should think about as well.
Think of the employees that could come with your insurance agency—are they going to make or break your business? Would you give a pay raise or leave the pay as is with the transition? Would you even keep the already existing employees or would you prefer to hire new people?
When trying to figure out if a business is profitable for you, you have to think of more than just your pricing for your premiums and how much your lease is going to be monthly. This is why doing your research to get the whole picture and asking the right questions is important.
What Type of Insurance Is Being Sold?
At this stage in the potential buying process, you will already know what type of insurance the seller specialized in with their agency. This will determine how you could strategize your goals for the kind of insurance agency that you want.
If they offer the same kind of insurance you are wanting to specialize in, then you will be able to add in your specific goals for your insurance agency with what the agency has already accomplished. Again, this can depend on their reasoning for wanting to sell the insurance agency in the first place.
If you are wanting to keep the current employees from the seller’s agency, you can majorly benefit from that. If you have an employee that has been with that company for years before selling, you can come up with some strategies with your prospective new team. It is all about teamwork.
Even if the seller's agency does not already sell the same insurance that you are going to be specialized in, it does not mean that you can not turn it around. It is your business after all. Here is how to go about that transition.
How Do You Make The Transition Easier?
Your new team is the backbone of your business. You want to make sure to keep communication open with them regarding the business. If they are good employees who work hard, you are going to want them to stick around for your business. Good employees are getting harder to find; so you want to keep the ones that you have.
You want to make this transition as simple as possible for you and your team so that there is not any confusion. Since there will most likely be changes within your insurance agency once you buy it, you want to make sure to keep your team up to date with the new changes.
You are new to them and they are new to you, so why not get to know the people that help you run your insurance agency? You will already have established the boss role and will want them to respect you as the new owner of the insurance agency.
Do not leave your team in the dark, especially in the beginning of getting your insurance agency business established. Open communication always works best for employees and gives them a sense of understanding the whole process, because this will be new for them as well.
Securing Your Finances Before Buying
Just like when you are buying property for any other reason you need to have your finances in order. You can look for loans or if you have the money you can offer cash to buy the insurance agency from the seller. There are certain requirements that you have to meet depending on the business loan that you are looking for.
If you are getting any type of commercial loan to buy your insurance agency, it can be based on a number of things like:
Your credit history
How much you can afford
Where you live
You do not want to go over your budget that you have for buying your insurance agency, unless you have thought of the potential risks that come with going over your budget.
It takes money to make money, so you want to make sure you have enough funds so that you do not have to dip into your personal fund. But in the end you have to do what you have to do for your business.
Finance Options for Buying An Insurance Agency
There are many finance options when it comes to purchasing a business, whether you are starting out your business from scratch or buying an already started business, like an insurance agency.
The finance options that are available depend on the state that you live in. Make sure to look on your states’ government website to see what finance options are available for you, like an SBA loan.
If an SBA loan is not an option for you then you could try getting financed by a financial institution. These requirements tend to be more strict than trying to get an SBA loan, so make sure you are aware of these requirements and that you meet the requirements before getting started with your application process.
This can alleviate a lot of headache down the line, since financing is one of the toughest parts of starting your business.
Different Financial Institutions To Get Your Loan
There are so many banks to get financing from, but which one would be more beneficial to you? There are also many different loans that you could potentially qualify for from these financial institutions.
What are the requirements for some of these well-known financial institutions that you could get your business loan from for your insurance agency? Here are a few of the financial institutions that will be covered:
Bank of America
JPMorgan Chase
U.S. Bank
These financial institutions are well known and trusted loan providers you can rely on to provide the necessary funds for scaling your business.
Financial Institution Requirements
Each financial institution has certain requirements when it comes to getting a business loan. Some financial institutions might have similar requirements that need to be met in order to qualify for the loan amount that you requested for your business, but it is going to require a little bit more digging to figure out what those specific requirements are.
Requirements for Bank of America
Everyone has most likely heard of Bank of America as being one of the best financial institutions thus far. Bank of America values rewards when it comes to debit card purchases and credit card purchases, but they also value rewards for business loans.
Just like with most banks, Bank of America offers secured and unsecured loans. For their secured loans, it is going to require that you have a higher annual revenue than compared to their unsecured loan option. This could mean that you could potentially have a lower interest rate with the secured option as well.
One of their main requirements for business loans is that you have to have at least two years in business and your payment terms can only be up to five years; which does not give you a lot of time compared to other bank loan offers. This is something to consider when you want to determine how long it is going to take you to pay back the loan.
Requirements for JPMorgan Chase
JPMorgan Chase has similar requirements for financing options, like Bank of America. They also offer certain services and products for business owners, like checking accounts and credit cards.
Their repayment terms seem to be more flexible than the Bank of America repayment terms. They offer terms up to 7 years for their loans and even longer depending on the type of loan you are applying for.
They offer loans starting at $5,000, but for lines of credit for your business you can get anywhere from $10,000 to $500,000 for your loan amount.
Requirements for U.S. Bank
U.S. Bank is one of the easier financial institutions to get a business loan from to start your insurance agency or any other type of business. U.S. Bank does not require you to be in business for years—they only require you to be in business for 6 months to a year to get started with the application process. This option is perfect for people who have a start-up, like an insurance agency.
Even though there are not too many locations for U.S. Bank, they still have a good variety of options to choose from for your loan needs for your business. Just like if you were looking at any other financial institution for a loan for your business, you need to make sure you have a strong enough revenue.
There are not too many options for financial institutions that do not require you to have many years in your business, so the ones that you do find that are credible institutions are worth looking into like this one.
Sources:
https://www.nerdwallet.com/article/small-business/best-banks-small-business-loans
https://www.insurancejournal.com/magazines/mag-ideaexchange/2019/04/01/521816.htm
https://agencybrokerage.net/2018/02/top-things-to-consider-when-buying-an-insurance-agency/
