Kentucky IA Magazine Winter 2024

Clearpath Specialty will maintain its position as an expert in providing monoline workers' compensation insurance through its unwavering commitment to in-depth industry knowledge and tailored solutions, ensuring businesses receive comprehensive coverage that meets their unique needs.

Providing competitive workers’ compensation coverage in KY, GA, IN, TN, and WV

Chair From the

A MESSAGE FROM LAURA YOUNT

Happy New Year Big I Kentucky! My name is Laura Yount, and I am your 2024 Big I Kentucky Chair. I am honored to represent you for the next year and look forward to all we will accomplish for independent insurance agents in our state.

The insurance industry is currently facing unprecedented challenges, making it a tough period for professionals across various roles, including agency owners, producers, and carrier representatives. The pressure is palpable as individuals navigate difficult conversations with colleagues and customers. Please know that the association is here to support you.

Late last year, Big "I" and Trusted Choice unveiled the Hard Market Toolkit, a comprehensive resource filled with tools to aid you during these challenging times. While the term "comprehensive" may sound time-consuming, the association takes a focused approach by highlighting one item each week in the Thursday e-newsletter. These resources, ranging from policy timelines to webinars and client email templates, are designed to be implemented in your agencies.

Given the challenges such as carrier insolvencies and rising premiums, finding suitable markets has become increasingly difficult. Big I Kentucky addresses this by offering two options for members through Big I Markets and Independent Market Solutions. There are no fees, no volume commitments, and you retain ownership of your expirations and book of business. For more information, be sure to reach out to the association.

The 2024 Kentucky Legislative Session commenced on January 3, and regular updates from President/CEO Tara Purvis will be provided via email in the Legislative Bulletin every Monday. Advocacy is a key pillar of the association, and we’re very fortunate to have such a strong voice in both Frankfort and D.C. in this highly regulated industry.

At the Big I Kentucky Annual Convention last November, attendees were privileged to hear a keynote speech from James Clear, the author of "Atomic Habits." His bestselling book offers a comprehensive guide on habit change and self-improvement. Emphasizing the concept of making small changes daily, Clear suggests that the cumulative effect over time can transform who you are. As we enter this new year, my challenge to you is to embrace this philosophy. Should you need assistance on this journey, please feel free to reach out to me or the association.

OFFICERS

Laura Yount, CIC, CISC Chair, London 606.878.0100

Chris Wiseman, CIC Chair-Elect, Bowling Green 270.781.2020

Carolyn Reynolds Vice-Chair, Richmond 859.623.8485

Allen J. Crawford, CIC, CSRM Treasurer, Somerset 606.679.6311

George “Chip” Atkins III National Director, Louisville 502.585.3600

Whitney L. Floyd , CIC Immediate Past Chair, Henderson 270.827.3543

DIRECTORS

Philip Anderton, CIC, CRM Louisville, 502.585.3277

Tori Conn Louisville, 502.713.0004

Susan Coblin Frankfort, 502.875.2244

Neel Ford, CIC, AU, CPIA Owensboro, 270.926.2806

Dustin Million Lexington, 270.926.2806

John Purdom Murray, 270.753.4751

Jared Pursley Glasgow, 270-646-8162

Nick Rolf Fort Thomas, 859-781-0434

Adam Sheridan, CLCS Somerset, 606-679-6311

Tara

Commissioner’s Desk From the

I am a member of the Executive Committee Internal Administration (EX1 Committee) of the National Association of insurance Commissioners (NAIC) and that committee is currently in the process of hiring a new Chief Executive Officer for our National Association. This has been a time-consuming process since we first evaluated the organizational structure of the NAIC and then revised the job description for that CEO position. We are now working with a national search firm in evaluating candidates.

While this process has been lengthy it has been extremely worthwhile, requiring the committee to evaluate what traits and attributes are needed to fill this leadership position. Are the “soft skills” of time management, communication, problem solving, adaptability, critical thinking, and teamwork more important than those knowledge-based skills such as subject matter expertise or operational experience? Some people may debate these diverse skill sets but in our lengthy process of evaluation of our needs, the soft skills and experience are must-haves.

After all, what is an organization and what does it need to thrive. We have discovered that team leadership, culture building, and

strong communication skills are critical attributes to possess. In an organization with 56 members (states and territories) with diverse interests, we also need a leader who has the ability to listen to multiple stakeholders, find common ground and support the members in our common regulatory responsibilities. Just as insurance regulators must balance our responsibilities of protecting consumers and maintaining insurers’ financial solvency, our CEO must balance serving member interests and running an effective organization. I am confident that we will find the person we need and I have been enriched personally from participating in this endeavor. It has provided an opportunity for selfreflection. How do you define leadership?

We are a third-generation, family-owned, independent managing general agency and wholesale insurance broker with a history of valuing and trusting business relationships. Our underwriters and brokers coordinate among specialty teams to meet the needs of multi-faceted risk opportunities, piecing each risk puzzle together for our producers. We strive to be a premier resource through our core pillars of honesty, integrity, respect and trust.

THE MUST KNOW WAYS SMALL BUSINESS WILL CHANGE IN 2024

by : Danielle Fallon-O'Leary, Contributor, U.S. Chamber of Commerce

Business leaders share their expert predictions on how the state of small business will change this coming year.

From technological advancements to shifts in consumer and employee demand, small businesses must continuously adapt to market changes. With 2023 winding down, many entrepreneurs are looking ahead to 2024 and adjusting their strategies to meet the needs of the business climate.

To help entrepreneurs position themselves for success in the coming year, seven business leaders share their predictions on how small business will change in 2024.

The adoption of AI will increase

With ChatGPT’s release at the end of 2022 — and its subsequent influx into the mainstream throughout 2023 — the adoption of artificial intelligence (AI) by small businesses has only increased, noted Ammo.com Co-Founder and Chief Content Officer Sam Jacobs.

“Expect [AI use among small businesses] to grow fast in 2024,” said Jacobs. “AI implementation (e.g., in marketing, HR, customer service, and logistics) and marketing automation help small and midsize businesses cut down on manual mistakes, save time and resources, grow faster, and profit from the added efficiency and productivity.”

Small businesses will leverage AR/VR for more immersive experiences

Another technology that has grown rapidly in recent years is the augmented reality (AR) and virtual reality (VR) sphere. Jon Morgan, CEO of Venture Smarter, predicts more businesses

— especially those in retail, real estate, and hospitality — will use AR and VR in 2024 to create immersive customer experiences.

Business teams will need to build their digital marketing and analytics skills

Sergey Solonenko, Founder and Chief Marketing Officer of Algocentric Digital Consultancy, expects that digital transformation will influence the small business landscape in 2024.

“As a best practice, invest in upskilling your team in digital marketing and analytics,” said Solonenko. “Platforms like Google's Digital Garage offer free courses that can be beneficial.”

He also recommended that small businesses build a robust online presence, whether that is through an optimized website, active social media profiles, or even a mobile app.

“This digital shift is not just about technology,” Solonenko continued. “It's about changing the way you connect with your customers.”

More small businesses will permanently embrace remote operations

The pandemic launched a global shift toward flexible work environments, with many companies maintaining remote or hybrid work today. Bassem Mostafa, Owner of GlobeMonitor Market Research Agency, predicts that decentralized and remote operations will become the norm for many small businesses.

“This change encompasses not only where employees work but also how businesses interact with customers, manage supply chains, and deliver products and services,” Mostafa said. “Remote operations enable small businesses to tap into a global talent pool, reduce overhead costs, and offer services around the clock, without geographical limitations.”

According to Mostafa, this shift also encourages a greater focus on digital tools and platforms to manage business activities, offering small businesses the agility to quickly adapt to market changes.

The most successful small businesses will be values-first, profits-second companies

With more customers prioritizing making a positive social impact in their purchases, Skincare Stacy Founder Fawn Bowe believes 2024’s small business landscape will see a heightened focus on sustainability and ethics.

“Consumers are increasingly drawn to brands that demonstrate environmental responsibility, a trend that small businesses can capitalize on to differentiate themselves in the market,” shared Bowe.

Competition from local and global players will increase

In a digital-first climate, business opportunities are no longer confined to a single geographic region; instead, the door is figuratively open to international markets.

“As digitalization opens business frontiers to the international markets, more local and global players will fight for visibility and profits,” explained Emma Bukowski, Founder and Designer of Noserider Surf Club. “Businesses must stay different, find a unique niche, provide top-notch customer service, and adopt personalization to remain relevant, make profits, and thrive.”

Customers will take greater control of their journeys

Erin Banta, Co-Founder of Pepper, observed that today’s customers are accustomed to taking their buying journey into their own hands — a trend she anticipates will continue into 2024. To meet this demand, she said, businesses must cater their offerings that allow their customers to take the reins.

“[Employ] customer education and other resources to help shoppers gain a deeper understanding of why and how they can benefit from your product or service. Or create a more customized consumer experience, from the way you interact with your customers to their ability to fine-tune your product or service to their precise needs,” she elaborated. “Success in 2024 will have to do with giving the customer more control over your business’s involvement in their purchasing habits.”

This article was originally published on uschamber.com.

NAVIGATING ADULTHOOD WHY YOU SHOULD JUMP INTO THE INSURANCE GAME

By: Erin Fosson, Big I KY Staff

Adulting is calling. As a youthful job seeker, diving headfirst into the world of insurance may seem like a stretch. But think about this- it could be quite the unexpected adventure. Here's the lowdown on why choosing insurance could be just the vibe for you.

1. Stability That Doesn't Bore You to Tears

Stability might sound about as exciting as watching paint dry. But, hear us out. Knowing you have a stable job that pays the bills and then some has been a game-changer. Insurance is like the dependable friend who always has your back, rain or shine. It's not the flashy rockstar of careers, but hey, stability is pretty darn cool when adulthood hits.

2. Cha-Ching! - Money Talks, and Insurance Offers a Decent Conversation

Let's be real – bills suck. The real world doesn't run on dreams alone. Insurance doesn't just offer a paycheck; it offers a decent one. It's not just about keeping the lights on; it's about affording those weekend brunches without checking your bank balance every five minutes.

3. Work Hard, Play Harder: Work/Life Balance Is a Thing

Contrary to popular belief, insurance isn't all about suits, ties, and late nights in a dimly lit office. Many companies get that millennials crave a life beyond work. Work/life balance is a legit thing in insurance agencies. Weekends are for hikes, Netflix binges and travel, not for catching up on work emails.

It's the best of both worlds!

4. Dodging the Burnout Bullet with Training and Support

Burnout is like the boogeyman of adulthood –everyone's afraid of it. But guess what? Insurance agencies aren't leaving you to fight this monster alone. Training programs are a real thing. They don't just throw you into the deep end; they guide you through it. Learning the ropes becomes a team effort, and that makes a huge difference. Preventing burnout? On it.

5. Office Vibes That Don't Suck the Life Out of You

Say goodbye to the stale office air and the cubicle life of yesteryear. Insurance agencies have caught on to the fact that millennials like a little flexibility in their workspace. Hybrid working and coffee shop sessions are the new cool. Imagine a world where your "office" can be a cozy corner in a hip coffee joint or your favorite spot in the park – insurance is embracing it.

In a nutshell, diving into insurance may not be your first plan. But it can be the hidden gem you’ve been longing for. Stability, money, work/life balance, training that prevents burnout, and office vibes that don't suck – who knew insurance could offer all this?

If you’re wondering where to start, maybe the world of insurance is waiting for you to take the plunge. After all, adulthood is an adventure, and insurance is your unexpected sidekick.

IF YOU AREN'T USING CHATGPT

HERE'S WHERE TO START

By: Evan Leitch, Virtual Agency Solutions

In today's fast-paced and ever-evolving world, insurance agents are constantly seeking innovative ways to enhance their marketing and streamline their operations. This is where ChatGPT, an advanced language model, comes into play as a valuable tool for insurance agents. With its ability to understand and generate human-like text, ChatGPT can revolutionize the way insurance agents interact with their clients and market their business.

But what is ChatGPT? Let’s ask ChatGPT directly!

“ChatGPT is an advanced language model that utilizes deep learning techniques to understand and generate human-like text. When a user inputs a message, ChatGPT analyzes the text and

generates a response based on patterns and information it has learned during training.”

In other words, ChatGPT is a conversational tool that was trained on an enormous amount of actual human-written sentences and words found online in order to respond with a human-like response to any question or prompt you can think of.

While the technology is not perfect – there are some creative use-cases for independent agents.

1. Creation of Blog Posts for Agency Website

Tired of writing blog posts for your agency website? Use ChatGPT to generate that blog post. Not sure on a topic? Let ChatGPT generate some ideas.

Be careful though – ChatGPT is a chatbot, not a human so the content it writes needs to be reviewed for accuracy.

2. Start an Email

Stumped on how to write a certain email? Describe what you are trying to convey and ask ChatGPT to write it. This is a great way to start an email that you can edit, tweak and update to make your own.

3. Summarize News Articles

Is there a long article or report that you don’t have time to read? Copy and paste the article text asking ChatGPT to summarize the article. Read more in less time!

4. Writing Email Campaigns

Allow the bot to generate email campaigns (or a series of emails) for you to use. For some reason, the creators at OpenAI didn’t think to consider the E&O risks that emails and communication from agents can create. Don’t forget to review and update the response as needed.

5. Generate Social Media Posts

Need some ideas or inspiration for social media posts? ChatGPT not only can give you ideas on what to share on Facebook, LinkedIn or other social media pages but it can also help you write a description.

6. Review Letters, Emails and Proposals

Have the technology review what you have written. Unsure if your email or letter is missing something and want to improve it? Copy and paste it into ChatGPT and ask for a review!

By harnessing the power of this advanced language model, agents can leverage its ability to generate human-like text and transform the way they interact with clients and promote their business. While it's important to review and edit the content produced by ChatGPT for accuracy, this technology opens up new possibilities for independent agents to enhance their efficiency. Embrace the potential of ChatGPT today and explore the creative ways it can empower your insurance agency in this fast-paced digital landscape.

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The worst brings out our best.®

70 CREATIVE WAYS TO REWARD EMPLOYEES

(PLUS WHY IT MATTERS)

By: Jennifer Herrity, Indeed

Creating engaged and productive employees starts with fostering a system of appreciation and rewards in the workplace. Employee rewards are an important part of any company culture, regardless of the industry you work in. Employees who feel appreciated are more likely to have a positive attitude towards their work, which contributes to a more productive work environment for all team members. Learning about different ways to reward your employees may help you identify a method that works well for your organization and motivates your team.

In this article, we discuss the benefits of rewarding employees and suggest some creative ways to reward your employees.

Why

is rewarding employees important?

Rewarding your employees when they do a good job helps them to feel appreciated and important. Employees are also more likely to react in a positive and productive way when management shows them how appreciative they are for their effort or good work.

• Some additional benefits of rewarding employees include:

• Reduces employee turnover

• Generates more revenue

• Increases customer satisfaction

• Improves employee engagement

• Creates a fun company culture

15 creative ways to reward employees

Here are 15 great ways to reward your employees for a job well done:

1. Give them handwritten notes

Write your employee a note in a nice thankyou card or on a piece of stationery paper. Include your message of sincere gratitude for their hard work on a project, task or overall positive attitude when handling their workload. It’s a thoughtful way to reward employees and make them feel special. This helps your employees know that you pay attention to them and are aware of their specific role in the company's success.

2. Allow them to leave early

Give your employees the afternoon off to show them you appreciate their work. Allowing your employees to leave early when they've earned it provides them with needed time-off to relax or to do something they enjoy. Employees usually appreciate the extra time to run errands, meet up with their friends, spend time with their kids or to just relax and rejuvenate for the next day or week ahead.

3. Provide them with a health club membership

This reward may be a good idea for employees who are interested in fitness and health. Gym memberships and workout classes can get expensive and offering to pay for a month or two of health club classes may be an exciting reward for many employees. You may provide them with a membership to classes they are interested in like yoga, spinning or kickboxing.

4. Bring them breakfast

If you know your employee's favorite breakfast treats or meals, try surprising them with breakfast at work in the morning.

You may bring them their special coffee order, doughnuts, breakfast burritos, pancakes or any other breakfast item they may enjoy. This may be an easy option to try once a month as a regular reward for the team.

5. Let them work from home for a day

Office-based employees may enjoy skipping the morning commute and working from home for a day. This may help them to break up the monotony of their weeks, and it may be a good motivator for continued performance and productivity. Be sure to establish expectations and ensure everyone has the proper resources before implementing this reward.

6. Watch a movie in the office

A great way to team-build and reward your employees is to watch a movie together in the office one afternoon. Let your employees choose the movie and bring some popcorn and snacks in for them to enjoy. This is a great way to relax and bond with your team. It also contributes to a fun company culture that may increase employee satisfaction.

7. Send them on an adventure

Pay for a fun, adventurous activity for your employees to do such as kayaking, ziplining or rock climbing. This gives your employees an exciting experience they are likely to remember and share with others. Depending on the activity, it may also function as an excellent team-building activity.

8. Provide them with event or festival tickets

Gifting special event tickets to your employees provides them with a memorable experience they are likely to be grateful for, and it gives you the opportunity to personalize the reward.

Try to pay attention to each employee's interests and provide them with tickets based on what they like. For example, if you have an employee who likes an out-of-town team, get them tickets when their team plays the local sporting team.

9. Post their accomplishments somewhere public

Let an employee's peers and other leaders know about their accomplishments by creating an employee appreciation board. Showcase their work and accomplishments so everyone can offer their praise and appreciation to this team member. Consider updating this board regularly to celebrate your team’s achievements often.

10. Assign a great parking spot

A prime employee parking space close to the entrance of your office building is a thoughtful and practical way to reward your employees. Finding parking in a crowded parking lot may take up extra time, and a designated parking spot may reduce their overall commute time each day. Be sure to check with your building’s rules before trying this reward.

11. Change the dress code periodically

If your workplace has a strict dress code, try changing up your dress code a few times a month. This provides your employees with fun options to change their wardrobe. For example, you may implement a day to wear jeans or other casual attire.

12. Schedule a happy hour for the team

Invite your team members to a monthly happy hour paid for by your company. Happy hours after work provide your employees with a fun way to bond with their teams and leaders. It also changes the routine to provide some variety in your employee's personal and work schedules.

13. Give them company swag

If your company has branded apparel or products, give them some of your products for free as a reward for doing a great job. Most employees enjoy free products that are useful. For example, your employees may enjoy water bottles, mugs, backpacks or lunch boxes.

14. Invest in their continued education

Consider investing in your employees' continued education through training and leadership classes. This shows that you appreciate them and want them to grow within your company. You may also consider a tuition reimbursement program for employees who are interested in taking college courses to help them advance in their careers.

15. Allow them to relax with in-office massages

Hire a traveling masseuse and let your employees sign up for short massages in the office. This allows your employees to rest for a few moments. You may consider this reward after your team completes a challenging project or they meet quarterly goals.

55 more ways to reward employees

Some other ideas for rewarding employees include:

1.

2.

AGENCY INCUBATION/DEVELOPMENT (SOAR)

CONNECT WITH A PERSONAL SOAR GUIDE TO IDENTIFY A PATH TO START OR GROW YOUR INSURANCE AGENCY.

SOAR is a free Big “I” member service in which a dedicated association professional connects with your agency to help you navigate essential member resources.

Through brief conversations designed to hone in on how we can best meet your agency needs with existing Big “I” membership programs, a SOAR guide will help your agency develop a personalized plan for maximizing the benets of your Big “I” membership investment.

SOAR then plugs your agency in to specic resources designed to protect, enhance, or grow your business. SOAR focuses on six key areas a startup/emerging agency needs:

The Big “I” has been helping agents succeed for over 125 years. In partnership with your Big “I” state association, the SOAR program is here to assist independent agencies survive and thrive.

WHAT IS SOAR?

SOAR is a free, personalized service for Big “I” members to help set your agency on the path to success using available resources included in your agency’s Big “I” membership.

At the heart of SOAR is a personal connection to a dedicated association professional who will meet with you to understand how we can help your agency, well…soar!

WHO CAN PARTICIPATE?

The only requirement is that you are a member of your Big “I” state association. In turn, you have access to Big “I” resources and can participate in SOAR.

SOAR was designed with agency incubation in mind, but all Big “I” members may request personal assistance from SOAR in leveraging Big “I” member resources to enhance their agencies. Let us connect you to the programs designed to serve you!

Not a Big “I” member? You’ll need to join to take advantage of SOAR resources. Learn how to join your state association and the national IIABA association at independentagent.com/belong

HOW DOES THIS DIFFER FROM BIG “I” MEMBERSHIP?

SOAR provides your agency with personalized concierge service to connect you to the specic benets YOUR AGENCY needs.

IS THERE A COST FOR THE SOAR PROGRAM?

The majority of our recommendations are benets already included with your existing Big “I” membership. There may be a cost for certain offerings.

I’M A STARTUP AGENCY. CAN I GET AGENCY ERRORS & OMISSIONS INSURANCE?

Yes! As a Big “I” member, you have access to the largest, most stable E&O program in the country. Our program was created “by agents, for agents” and broad credits are available. We do have options for startup agencies. Extensive E&O Risk Management resources are also available to help you set up policies and procedures from an agency operation standpoint.

CAN YOU GET ME CARRIER APPOINTMENTS?

Big “I” Markets provides market access to quality carriers across many lines of business with no commitments or volume requirements. Additional appointments may be available through Eagle Alliance/Eagle Agency.

FAQ

CAN YOU HELP ME SET UP A WEBSITE?

Yes! Our marketing benets offered through Trusted Choice includes resources for website design and audits of existing websites. They also provide many other marketing benets including a $1,000 Marketing Reimbursement Program.

THE TECHNOLOGY OPTIONS FOR AN INSURANCE AGENCY ARE OVERWHELMING. CAN YOU HELP ME NAVIGATE THE OPTIONS?

The tech world moves fast and we have the experts and resources to help you make the right decision for your agency.

HOW LONG WILL MY AGENCY BE PART OF SOAR?

You are welcome to access SOAR and the personalized services as long as you would like (and as long as you are a member!)

HOW DO I START?

Visit us online at independentagent.com/SOAR to schedule a meeting with your personal SOAR guide, or email summer.cole@iiaba.net.

5 AREAS TO RESEARCH TO IDENTIFY THE RIGHT AGENCY TO ACQUIRE

By: Jay Morris, Senior Associate at Insurance Marketing-Communications from Aatrijk

Whether you’re a seasoned producer with an itch to do things your way or the next generation in a familyowned business, acquiring an insurance agency through a purchase or perpetuation could well be in your future.

Four in 10 independent agencies anticipate some form of ownership change within the next five years, according to the 2022 Agency Universe Study. One-sixth (17%) of principals are age 66 and older.

On top of that, agency growth and profitability have improved markedly in the last few years. In fact, Reagan Consulting’s most recent Growth & Profitability Survey re-corded the highest agency growth results in the survey’s 15-year history. It’s no wonder there are more agencies now than when the pandemic started. It all bodes well for budding agency owners.

Yet, buying a firm isn’t something you do every day. Aside from purchasing a home, it’s the single largest investment most agents will make. If they haven’t done their due diligence, even smart agents can do some not-so-smart things when buying a firm. They may not fully understand how agencies are valued, how to negotiate a buy-sell agreement or the best way to finance a purchase.

Here are five areas first-time buyers and existing principals need to research when eyeing an acquisition or merger:

1) Due Diligence and Pricing

Too often, prospective buyers don’t focus enough on an agency’s financials and book of business. It’s generally well worth the cost of retaining an outside expert to help you determine the value of a firm. You’ll also benefit from talking to a certified public accountant (CPA), attorney or lender that’s handled these types of transactions before.

Ensure your go-to experts are familiar with independent agency transactions. Agencies have unique cash flow, reporting and financing challenges. Work with professionals who understand how income is generated and reported, and how agencies are priced.

Determine all the income sources for the firm you’d like to acquire, notes Scott Freiday, senior vice president and division director of InsurBanc. “Not all agencies do a good job of managing and tracking premium and commission income,” he says. “As a buyer, you should expect to see up-to-date financial data and reports.”

At the same time, “You’ll want to kick the tires of the agency to be sure everything is in working order,” Freiday says. “If the agency has an antiquated agency management system, an old telephone system or computers, or doesn’t have a strong customer service team, it’s an indication that the firm may not be worth as much as the seller says.”

Remember, as the buyer, your job is to determine a fair price for the firm “as is”—not what the seller thinks it’s potentially worth. Complicating the issue: Agency sale

prices have soared in the last decade, fueled by privateequity (PE) firms and other competitive and economic forces. That can make it tougher for smaller players to get into the game.

That’s why Donovan Dunn, president of Roger Keith & Sons Insurance in Brockton, Massachusetts, is selective. Dunn has bought eight nearby agencies in the last 12 years but “walked away from two or three opportunities because the price didn’t work for me,” he says. “The seller was able to get a higher multiple from a PE source. [PE firms] usually outbid me. Some of the lowerrevenue agencies fly below the PE radar, so we can pay a reasonable price for those.”

2) Financing Options

There are several ways to finance a sale, Freiday says. Sometimes the seller is looking for all cash at closing. Or the seller may be willing to provide a note to the buyer— either for the full amount, or a percentage with the remainder in cash or a bank loan. Many times, it’s a combination of bank, cash and seller financing.

Often, the buyer doesn’t have the cash to buy the agency outright, so there is a seller-financed arrangement. Sometimes, a seller is seeking a staged exit, meaning they will sell part of the firm now and the rest later. Perhaps the seller isn’t ready to retire and wants to stay on for a few years. “Just be clear about the seller’s intentions, especially if they’re holding the note,” Freiday says.

Dunn says he prefers to offer the seller a 100% cash deal, which he finances via InsurBanc. “The sellers are happier to have the full amount in their pocket up front,” he says. “That has given me an advantage.”

In the case of an internal sale or partner buyout, the agency itself might hold a note. However, some bank financing may be necessary to avoid putting too much stress on the balance sheet. Often, an industry lender can provide better agency financing solutions than local banks, which may steer you to higher-priced or Small Business Administration-backed products.

Finally, make sure your family is comfortable with the financing arrangement, Freiday stresses. “It’s a decision that will impact their lives, too,” he says. “If you’re married, your spouse may need to sign as a guarantor. Or, maybe you need to adjust your personal lifestyle to afford the agency.”

3) Post-Sale Roles of Buyer and Seller

Prior to the sale, it’s important to define the post-sale roles of the buyer and seller. For example, will the seller have an advisory role? Perhaps the seller has agreed to

mentor the buyer, who is transitioning into a management role.

As the new owner of an agency, you might appreciate the counsel of an experienced owner who knows the ropes. On the other hand, you might find yourself butting heads with someone who is used to doing things their way. Set expectations and boundaries so you can maintain a healthy working relationship—if that is the arrangement you’ve decided on.

Sometimes, Dunn offers a “retention component” to incentivize selling principals to keep large commercial accounts on the books after a deal. He doesn’t like so-called “earn-outs,” or cash payments for retaining business.

“I put them on payroll if they are staying on,” Dunn explains. “We agree to an initial annual salary and maybe after a year or two they go to more part-time, and then they retire. It’s easier to do if they’re on payroll.”

Dunn bought a firm where the principal wasn’t quite ready to retire, “but wanted to shunt off the responsibility of running the agency,” he recalls. “We did a management relationship. We did a revenue split, where he continued to work and manage his customer base, and I took on the duties of running the agency and the infrastructure.”

The deal called for a review in three years, where Dunn had the right of first refusal to buy the agency. “I wound up buying, and it worked out great,” he says.

4) Carrier Appointments

Let’s say 25% of the business in the seller’s agency is with a certain carrier, but you don’t have an appointment with that carrier. Unless the carrier is accepting new appointments, you could have a problem. Make sure all the seller’s appointments will transition to the buyer.

At the same time, you may be bringing new appointments to the agency. How you align books of business, determine which markets to pursue or let go, and position yourself for future growth are important points to think about when assessing a buying opportunity.

“Sometimes you take on carriers you don’t really need,” Dunn says. “Sometimes you get a carrier you want.” After one purchase, he had to wean off three carriers with the seller. Two were B-rated, and his firm’s bylaws don’t permit them.

The other duplicated products his other carriers already provided.

5) Culture

Ultimately, there is more than money involved in an agency merger. For example, will you change the name of the firm? If there are several locations, will you consolidate? How involved in the community will you be? Many agencies are very supportive of local civic organizations, sports teams and charities. Do you plan to continue to have that kind of presence?

Also, be mindful of how the sale itself and your management style will impact the agency’s staff and business culture. Do you want to reorganize the firm? Hire a new producer? Plan meetings with staff early on to clearly define their roles and jobs. Open communication will be key to a smooth transition and retaining the people you need.

As you contemplate agency ownership, take the time to do your homework and talk with people who have experience evaluating firms. An agent-focused lender can help you review a firm’s cash flow and financials. It can suggest financing options you may not have considered. It also can advise you on the loan-to-value threshold you’ll need to meet and what you can realistically afford.

There are many things to think about when buying an agency, but it’s best to do your homework and eliminate as many sticking points as possible before the deal.

Easing Into the New Normal

Other than notifying customers of the deal, agency principal Donovan Dunn avoids “rigid changes” in the first 90 to 180 days after he makes a purchase. He prefers to keep the name of the firms he’s purchased for an initial three to six-month period and then begin to co-brand with his firm.

“It’s important to keep that prior agency name instead of just throwing my shingle up there,” Dunn says. “I think that’s when you would see a lot of disruption.” A recent example of signage: Finnerty Insurance Agency / Roger Keith & Sons.

He tries to be respectful of the acquired firm’s staff. “They can walk out my door and get a job at another agency right away, so I don’t want to lose them,” he says. “We don’t want to frustrate them. We don’t want

disruption.”

“Unless something really needs to be done, we want to see how they work,” Dunn continues. “In some cases, we’re not making any changes to their workflow. They’re learning new carriers and a new agency management system.”

“Most of my struggles have been post-purchase,” Dunn admits. “Some of it can be culture-based, certainly. There can be a challenge in getting acquired agencies’ employees on board with your policies and procedures—teaching them our new management system or acceptable limits of coverage. From an administrative standpoint we have struggled quite a bit with every agency purchase. It takes a while to integrate them right.”

In particular, he says, technology has been a challenge. Merging customer data is complex, and running two management systems simultaneously gets expensive after a while.

When Dunn initially talks with the staff of a firm he’s bought, he tells them, “We can learn as much from you guys as you hopefully can learn from us.”

And: “We always call it a ‘merger’ versus a ‘sale,’” he says.

2 Key Lessons

Independent agency owner Donovan Dunn learned two important lessons in buying other firms over the last decade.

First, “don’t bite off more than you can chew,” he says. “The worst experience we had over the last decade was when we acquired multiple agencies at once. The agency staff and I just didn’t have the bandwidth.”

Now, he says, “We really take our time and make sure we are transitioning the agency at a reasonable pace.”

Second, “make sure to develop relationships with the acquired agencies’ key accounts,” Dunn adds. “The principals are selling because they are leaving the business. They won’t be there forever, so if you don’t have a personal connection, accounts are more apt to leave once the principal is gone.”

This article was originally published on iamagazine.com in October.

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