7 minute read
Six Considerations Before Selling Your Business
By Phil Calhoun & David Ethington
The “Should I sell my business?” question comes to most business owners at some point. In our ten years of helping health brokers with commission planning, it is clear that seller’s remorse is real. In fact, 75% of business owners regret selling their company just one year after the transaction, according to a PwC research mentioned by the Exit Planning Institute.
From our experience we find some brokers have not kept current with technology and this is causing them to lose clients, miss out on finding leads, and experience difficulties with closing new business.
This article covers SIX key reasons and signs to consider before selling your business.
Trying a new or better business opportunity
As an experienced business owner, you may desire other opportunities of greater interest at some point. Starting a new challenge usually means you’ll need money or time, which leads to giving up your current business ownership. According to the Exit Planning Institute, 80-90% of business owners’ wealth is related to the value of their business. Taping into this value is tempting for some owners.
If you built your company early in your career, you might reach a point where you look for something that is more aligned with your current lifestyle.
Most of the brokers we work with are ready to retire. Few health brokers sell then get into a new industry. Some sell and stay in the industry. Working with carriers GAs or FMOs are considerations. Making an industry decision makes more sense and may bring more value both to the employer and their new employee, you. It is understandable for younger professionals to follow their desire to relocate as they have the drive to find a new opportunity and are willing to make more” dramatic” life changes than someone with family and significant local connections to lose.
Lack of profitability from the business
When your business isn’t as profitable as it was before due to rising costs, a lack of growth in the industry, or a shift in market preferences, it’s a good sign to let go of it. It’s important to highlight that a lack of profitability alone doesn’t mean your business has no value.
There might be several different factors causing this issue and maybe you are not in the mood to turn things around.
With a commission-based business, unless you have added staff or have family in the business and need to share the success, profitability is not often a concern.
Planning a smooth succession
If you have a family business and there are no potential successors, planning the sale as a next step is the smart thing to do.
Doing exit planning allows you to train the next generation of the management team. It is common that as part of the transition and future of the business the seller will need to stay for a year or two to provide the experience the buyer needs.
We have found some sellers want out while others may complain but they have not looked at what is next. In the case where the seller is needed in a post-sale transition, this is ideal when the Buyer wants the Seller to gradually transition out.
Increased competitors or risks
Over the years it might be possible that the number of competitors in the industry and the risks of the business operations increase to a level with which you’re no longer feeling comfortable.
Relying too much on just a few referral sources in the local market can impact new business. Under these circumstances, some sellers decide to start the sales process.
When litigation risks can jeopardize the company’s future, sellers should disclose to potential buyers if there are any pending lawsuits or penalties. In most cases issues are discovered during due diligence.
In the state of CA there are many competitors who enter the state with advanced technology, unmatchable marketing resources, and new products that open the door open to catch the eye of your clients. More competition in health insurance lines is forecasted in 2025 and beyond, so brokers not able to stay current with the competition will face an uphill battle.
Lack of strategy in the long run
If managing the business doesn’t feel any more like a challenge due to a lack of strategy for the future, then it’s possible that business owners feel like it’s time to move on. Additionally, through the year, entrepreneurs can face many new challenges. If there isn’t a contingency plan that can give some guidance and support against these potential issues, then the lack of business strategy can feel overwhelming.
Using your own money to cover operating expenses is not a plan but is a sign that funding new projects will be more difficult.
In our experience industry changes and challenges keep coming, 7 years with group benefits and nearly every other year with Medicare. Carriers change plans, federal and state laws drive change (ACA, CMS and Medicare marketing hurdles, DOI and DOL requirements, tax laws) and the cost of doing business. Partners can help (FMOs and GAs) bring resources to deal with industry changes and tech challenges. Finding advisors and mentors is also vitally important to build a successful business strategy.
Retirement
Running a book of business is no easy job and can take a toll on the business owner’s health. This can lead to looking forward to retirement or simply taking time to rest. Whichever the reason, many business owners can always decide they’ve reached a point at which they should lay back and enjoy what they have worked so hard for.
From our experience we find some brokers have not kept current with technology and this is causing them to lose clients, miss out on finding leads, and experience difficulties with closing new business. The competition has the edge when they bring technology with CRM systems to service clients, methods to regularly touch clients, and marketing programs to reach out to more prospects. Consider today’s Medicare age ins are more tech savvy and most younger business owners and benefits decision makers look for technology solutions for their group benefits management. Brokers who do not have the ability to stay competitive will see their book of business shrink. And at some point, they are better off planning their exit.
If you want to explore your commission planning for 2025 please reach out.
Here’s situations where we can help:
• Have no idea about your future plan, Have family or employee(s) who will step in, we can help
• Have family or employee(s) who will step in, we can help put the plan together
• Looking for a Buyer
• Worried about staying active but need to protect your
commissions
Integrity Advisors is a health insurance agency which specializes in educating health brokers on the importance of commission protection. Commission Solutions is a program offered by Integrity Advisors.
Phil Calhoun MBA,is a board member of the Exit Planning Institute Orange County Chapter, he owns Integrity Advisors.
Click here to arrange a no obligation 15-minute coach session
714-664-0311
David Ethington, is an expert in the process to acquire and transfer health commissions. He has trained many brokers in commission education and built the commission transfer planning module for Medicare commissions provided to our broker colleagues.
Click here to arrange a no obligation 15-minute coach session David@commissions.solutions
714-664-0605
