FINANCE

SHOULD YOUR AGENCY HAVE AN ACQUISITION STRATEGY?

Reasons Why You Should Consider Including One in Your Strategic Plan

It’s likely that your insurance agency has already undergone the process of creating a strategic plan, which is basically a road map for your agency. It’s valuable because it creates key goals and objectives and provides markers for measuring success. A good strategic plan will help provide definition for both management and employees for the type of agency you strive to be. It will outline key performance goals along with both a mission and vision statement. But, have you ever considered including an acquisition strategy in your agency’s strategic plan? Here are some reasons why it may be advantageous to do so: • Create a competitive advantage. An acquiring agency can create a new dynamic where the new agency has new access to a larger client base, more agents or more carriers. The result could possibly create new revenue sources and possibly increase bargaining power with carriers.

• Overcome a barrier to entry. Building a new agency in a different market may carry unwanted expenses. Things such as leases, employee costs, even travel times may be too costly. Additionally, the time it might take to build a new agency to the point of desired profitability may be outside of an acquiring agency’s defined plan. Time and expenses could be overcome through acquisition.

• Gain market share/Enter a new geographic market. Acquiring an agency can grow the business footprint by entering a new town or market. Also, an agency might acquire a new agency that offers lines of business that are complimentary to their own offerings.

• Diversify business product lines. Perhaps your agency offers property and casualty lines exclusively. You might consider acquiring an agency that specializes in life products or crop insurance. There may be considerable value to a growing agency to gain diversity. • Create cost savings. Support staff at any business are invaluable to a well performing business. Acquiring a new agency might provide an opportunity to stretch the cost of support staff a cross a broader number of producing agents or even locations. The result would be a more efficient overall team.

• Provide business succession. It is entirely possible that the next owner of your agency is already hard at work for your agency. It is not uncommon for high producing agents to put themselves in a position to own an agency that is their employer. If that type of person is not immediately recognizable at your current agency, they may be working at a targeted acquisition agency. Although this factor should not be a primary consideration when considering an acquisition, it may be a valuable bonus to the transaction.

As an acquisition becomes a higher priority to your agency, don’t forget to consult with your professional advisors including a banker who specializes in this area along with an attorney and accountant.

John Lisowski is director of commercial lending for Security Financial Bank (SFB), a Wisconsin financial institution that specializes in lending to insurance agencies. SFB has helped numerous insurance agents with their banking needs, including acquisitions, partner buyouts, building expansions and refinancing projects. For more information, visit www.sfbank. com or contact John at jlisowski@sfbank.com or at 715.629.4077.

> John Lisowski

Director of Commercial Lending, Security Financial Bank