Can you help me help you…

A Lot of pro bono and underpaid work for people in the insurance industry goes under appreciated and unnoticed. I like to help people, share information and build relationships, so I am often willing to go out of my way to be of service. I’ll be honest though, I get frustrated when people don’t see the value that we add as a transaction advisor.

I’m sure many professional advisors sympathize with my frustration of “Can you help me, help you?”.

If you don’t know me: “Hi, my name is Danny and I’m a workaholic”. I’ve been at this for over 10 years. I love what I do because I get to work with some great entrepreneurs, help people achieve their goals and constantly learn new things all of which are the things that motivate me. After evaluating over 1000 agencies and brokerages, negotiating hundreds of purchase agreements, and managing roughly 100 due diligence processes and closings though, I’ve earned the right to say that I’m an expert. I am fortunate to be in class of only a handful of other people in the country with the same level of knowledge, skill and experience.

As someone that wants to create value for clients, I often ask myself what is our expertise and service worth?

Here are some things I know:

  1. P&C insurance brokers get paid an average commission of 6-20%
  2. Real estate brokers get paid an average commission of 4-8%.
  3. Business brokers get paid an average commission of 8-10% (value under $3M).
  4. M&A advisors get paid an average commission of 4-7% (value of $5M to $25M).
  5. Investment bankers get paid a commission of 2-4% (value of $25M to $10oM+).
  1. Our clients are happy at the completion of a transaction and willingly pay our fee (not always true for some of our competitors).


So, I will put this out so everyone understands. How much value would you assign to each of the following?

  1. Accurately assessing the value of an agency so that the price is positioned where the seller neither leave money on the table nor drives off good buyers with an unrealistic request.
  2. Providing feedback on how to prepare an agency for sale years in advance.
  3. Preparing for due diligence before disclosing buyers so that a deal doesn’t stall out due to a delay or the seller doesn’t end up in a renegotiation late in the transaction.
  4. Discretely soliciting interest from a variety of buyers while screening out those that are not qualified or are known to be tire kickers.
  5. Simultaneously negotiating with the best buyers to obtain competing offers in a tight window of time.(Creating a bidding war)
  6. Providing professional advice on the financial and legal provisions of the purchase agreement and ancillary documents.
  7. Directing buyers to the best options so that the owner obtains the most amount of cash/equity at closing, and then communicating directly with the lender to insure that the deal will happen in a timely manner.
  8. Managing the due diligence process to insure it moves forward diligently & with no issues.
  9. Buffering communication between the seller and buyer to avoid potential friction that can easily wear down the goodwill and cause one party to kill the deal.
  10. Continuing to provide guidance and communication through the transition of ownership to minimize the risk of buyer’s or seller’s remorse.

Let me elaborate on a few points for clarity:

Not only have we completed hundreds of valuations for principals, buyers and lenders, we have a database of hundreds of more completed transactions and have worked with most of the buyers in the marketplace, giving us direct knowledge of how they value agencies and structure deals. While there exists a multitude of buyers in the marketplace for agency sellers, only 20-30% actually close deals and of that 20-30%, only 20-30% of those will be aggressive in their bidding for a particular agency. It’s a little known secret that the most active buyers only close on 1 out of 4 or 5 of the deals they look at. Nearly all of our former clients came to us after attempting to sell on their own and wasted many months waiting to see if one of their buyers would consummate a deal. In nearly every case, we sold the agency for more than they were asking, with better temis and closed the sale in a much shorter time frame.

What is the value of finding the highest price and best terms available, and closing the transaction diligently?

I wish more clients would call us 3-5 years in advance of when they want to sell. Had they done so, we could have helped them improve cash flow and value and/or reduce the taxes incurred from the sale, advice that you might expect your accountant to give. Such recommendations would include:

  1. Converting from a C-corp to an S-corp (which could cut the capital gains tax in half)
  2. Reducing the amount of personal expenses written off through the business
  3. Reporting all of their income on their financials
  4. Evaluating sales and marketing expenses
  5. Restructuring staffing and compensation
  6. Executing employment agreements
  7. Separating out commission and premium deposits into different bank accounts
  8. Avoiding taking on long temi obligations like leases prior to a sale.

What is the value of increasing your net proceeds by 10%, 20% or even upwards of 50%?

We have worked with many attorneys over the years. Most of them had been practicing law longer than I have been an M&A advisor. But, as I mentioned, we deal in agency M&A transactions day in and day out, whereas the average attorney has only ever been involved in a few agency M&A transactions throughout his/her career. Your attorney will mostly likely have the legal expertise to negotiate contract provisions, but without significant experience they won’t know what is and isn’t customary nor how to interpret provisions specific to the insurance industry. We also have regular dealings with a lot of lender in the insurance space and, hence, have personal or associated relationships with many firms around the country. Our in house attorney has the experience and specializes in M&A Law.

What is the value of making sure other professionals involved in the transaction are doing their job proficiently?

We do that for our clients, but you have to first help us, help you by letting us do what were good at creating value through the transaction process. It takes a little faith up front but you won’t be disappointed. The money aside, there is value in the peace of mind of having an expert representing you too.

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