Best practices for selling an insurance agency

If you created and built up an independence insurance agency, you will be willing to do everything you can to maximize the retirement nest egg that you've built.

What Do You Do When It's Time to Sell Your Insurance Agency?

You're ready to part with this insurance agency, and the book of business that you've been building for the last 10, 20, maybe as long as 40 years? Before you ride off into the sunset, let's make sure you're getting the best deal you possibly can.

So as we get finished here, let's talk about the things that you need to do when it's time to actually sell the agency. So let's execute.

1. Choose the Seller

First question: do you want to sell your agency yourself? Or do you want some help?

Do you want to do it yourself or hire a third party to help?

You may have been talking to someone in your agency, an employee maybe, or one of your friends in the business, and that's your buyer. And it may be that you can do a very casual sell that works out well for everybody, and broker it all by yourself.

Or maybe your agency is fairly small, and you just don't feel like you can afford the help of a Mergers and Acquisition advisor. Okay, that's fine, but just make an informed decision  .

Selling Your Insurance Agency Through a Mergers & Acquisitions Advisor

Before you do, though, let me talk about the value of using a Mergers and Acquisitions advisor. The first value is expertise: this is what they do for a living, and just like you're a great insurance agency owner, they really know the insurance industry, and they know what agencies are selling for.

Then there’s the know-how and experience: good M&A advisors have all kinds of things in their bag of tricks to help the deal structure, the negotiation, the closing, and every other part of the transaction work to your benefit.

Think of an M&A advisor as an investment

It's a proven fact: M&A advisors get more money out of the agencies they sell, then the owners would on their own. After all, if they didn't, they wouldn't have a business! They do charge for their services: 5% of the deal is a typical amount. But think about this hypothetical transaction: If the M&A advisor can get an extra million dollars for you, and their cut is $250,000, that's a three or four to one return on your money. Isn't that worth it?

I strongly recommend using an M&A advisor. At the very least you should interview some and find out for yourself what they can offer you, what they charge, and whether or not you think that's appropriate to your situation.

2. Find Specialists

Regardless of whether you sell on your own or use an M&A advisor, you're going to need a good attorney and a good CPA, and I don't mean the ones you've been using for the last 30 years. I mean people who understand deals, who've done deals, and who specialize in agency sales.


In a sale, solid accounting and tax advice can mean multiples of 1000s of dollars in additional actual money in your pocket based on a really good tax structure.

The tax structuring of a deal can add really significant value to you. And you need the right people. After the decision to sell, this is one of the most important hiring decisions you're ever going to make in your entire business career. So do it carefully.


An attorney with experience in agency sales is going to make sure you don't make any mistakes that bite you later, and help you with ironclad NDAs (more on this soon.)

I know it's tempting to use the folks you've been using for a long time: you know them well and you don't want to hurt their feelings. But if you are planning to sell, ask around and find somebody that specializes in transacting businesses, for both your attorney and your tax advisor - it's going to make you a lot of money.

Don’t forget to thank your current team

Take your good friend, your regular attorney or CPA out to dinner or drinks later to say “thanks for all the good years of service”. But don't leave hundreds of thousands of dollars on the table because you didn't use experienced transaction folks.

3. Quietly search for a buyer

If you're doing this transaction yourself, you need to get educated on current agency values and typical deal structures, and you'll need to make a list of prospective buyers that you think might be willing and capable of buying your insurance agency.

Now, be careful when finding a buyer: you don't want it known on the street that you're selling. That's going to cause customers to leave, and potentially employees too. Neither one is good for agency value. So you want to be very careful in preparing your list and very careful about how you approach folks. 

Remember the NDA!

In fact, I would only recommend having very general conversations with any potential buyers without a well-written and executed nondisclosure agreement or NDA. This part of the sale process must be kept very quiet, so discretion is extremely important.

4. The sale

Now that you have an NDA agreement, and an interested buyer, what do you do? Perhaps you also have a letter of agreement on price in general terms. Now the buyer is going to want to do due diligence. 

Due diligence

Some agency transactions, particularly those done with another local Insurance Agency, have a fairly low level of due diligence: they're just gonna look at your production reports, your income statements and tax returns to verify the income that you've told them, and the expenses that you've approved. And that's about it.

If on the other hand, you're selling to a national broker or a private equity firm, expect to have a very thorough due diligence experience that may take many months. Again, if your transaction is for enough money, you're going to be willing to put up with that - after the deal is agreed to, getting it done is where the real work takes place.

Now, after the letter of agreement and due diligence have taken place, it's time for the final contract. This is where you want to be sure that your deal attorney and your deal tax advisers are very involved, so that you make the very best decisions about structure. That negotiation will be as important in many cases as the price.

Talking to your team about the sale

Now that you have done all that, it's finally time to tell your staff. And you'll want to tell them after the fact because you don't want anyone leaving. You also want to make sure they understand the terms of the deal, which probably include material changes to their work life and the fact that you're sticking around… because you will be sticking around for some time.

5. The Earn-Out

That brings up the reason why you'd stick around, and that is the earn-out. Most deals have some sort of earn-out, and what I mean by that is that you're going to get paid some cash up front, and then you're going to make additional money based on the agency continuing to perform as it has in the past. So you'll want to stick around to make sure that happens.

Today, as I sit here, typical agency deals look like 12 to 14 times EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for a purchase price. That's usually getting paid with six to eight times EBITDA as Cash Money in Your Pocket, and a tax problem to solve with the rest of it paid over the next three to five years.

You need to be thinking about sticking around for three or four years to make sure you get all that extra money.

Well, that's really it. It's a one to six months or maybe a year process - or maybe it's 10 years. The earlier you start the better! Get organized, get profitable, get growing, and you're gonna have the retirement that you and your family have always dreamed about.

Good luck, and I hope you make an enormous amount of money on your agency sale!

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