Vaughn Stoll's most recent Acquisitions for Agency Owners Newsletter: Approach The Potential Sale of Your Business with the Same Vigor as Growing Your Business

Founders and owners dedicate years of their energy, talent and resources to growing their businesses. As they consider a potential sale, though, many owners fail to invest the same thoughtful planning into the next chapter of their business as they did during the beginning stages of growing their business.

Ideally, acquisition preparation should start three to five years before you are ready for the actual sale. Be proactive and intentional about your goals — including valuation expectations, timing, access to new resources and markets, cultural, team and customer fit and your post-acquisition role — to set you and your business up for success.

Six actions to execute 3-5 years ahead

An acquisition deserves the same level of thoughtfulness and planning you have always maintained while growing your business. After all, your acquisition strategy impacts not just your wealth, but your teammates, customers and your legacy.

Engage these six key actions three and five years ahead of your potential sale:

1. Optimize your financial operations.

Review your financial statements for accuracy. Consistently record your revenue and expense items so that any buyer can review your P&L and easily understand the profitability of your business.

Tighten discretionary spending and review related party transactions. Reduce operational costs, such as travel and entertainment budgets, where possible. Ensure all transactions with related parties, like rent for buildings you own, are at fair market rates.

2. Create consistency across your producer compensation model.

A market-aligned producer compensation model can be more attractive to potential buyers. Reducing inconsistencies and complexity now can prevent disruptions later. If your model is difficult to explain succinctly, streamline it.

Many firms still use outdated models, so review your compensation structure and ensure it reflects current market conditions in your region and industry. For example, if your producers receive a 60% commission, that likely exceeds fair market value today. Don’t worry about matching your compensation model to exactly what you think a potential buyer wants, focus instead on having a model that is simple, consistent and sustainable.

3. Wrap up contractual relationships.

Most buyers prefer 100% interest in your business. Reducing negotiations at the sale stage makes the entire process more efficient. If you don’t own your entire business, start discussions and negotiations now to see if you can buy those business or have a pre-arranged agreement to buy them in the future.

4. Establish a long-term succession plan.

Buyers are looking for the security of a sound business plan that spans 5+years into the future. Even if you plan to remain in a leadership role for five years post-sale, it’s crucial to consider who could be your potential successor.

Firms with long-term succession plans drive higher values. Identify your potential successors and position them in leadership roles now.

5. Start tax and estate planning with an experienced accounting firm.

Depending on your business’s complexity, you’ll need varying levels of tax and estate planning. Find an experienced accounting firm and estate attorney that have worked with other firms through the sales process to guide you. Many tax and estate planning strategies take years to execute, so start now.

6. Proactively develop relationships with potential acquirers.

Meeting regularly with potential buyers, even years before selling, builds valuable relationships. Develop a short list of potential acquirers based on your first-hand experience. Don’t rely on second-hand information — only you are qualified to determine the cultural fit for your firm. Developing these relationships over time allows you to make an informed decision when you are ready.

Give your business the time it deserves to plan for what’s next

You’ve spent years creating a thriving, valuable business. The sale process deserves the same level of pride and attention you’ve given to every other aspect of your business’ development thus far. Interested in learning more about the acquisition process? Reach out to our team.

Interested in speaking with our Mergers & Acquisitions team? Email acquisitionsdept@bbins.com or contact us directly.

Acquisitions for Agency Owners
by Vaughn Stoll, SVP & Director of Acquisitions

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