Chip Off the Old Block: Buying a Book of Business

This post is part of a series sponsored by InsurBanc.

Producers who want to step up to agency ownership have an option they might not have considered: purchasing a book of business from the agency’s owner. The book of business is a launchpad for the agent to establish their own agency instead of starting from scratch.

My advice to these producers is to initiate the conversations with the agency principal early to see what options are available. Negotiate your producer agreement with future ownership aspirations in mind.

What’s in it for buyer and seller?

For the Buyer

A producer who buys their book of business is taking an initial step on that path to agency ownership. They sidestep the typical hurdle facing would-be agency buyers: coming up with significant capital to buy an entire agency. This option provides the buyer affordability.

Purchasing a book the producer has built or managed gives them the advantages of knowing those customers and having relationships with the carriers involved.

At InsurBanc, we’ve seen a number of producers buy a book from their agency, then go off to start their own firm. These producers used the transaction as a shortcut to agency ownership, since they didn’t need to start from scratch or buy an agency outright.

Owning a book of business often makes a producer appealing to another agency. Many agencies who are recruiting value producers who bring along a book of business. For the recruiting agency, recruiting the producer and gaining the book adds value to its existing operations.

For the Seller

An agency owner who sells a book gets to monetize a book of business they’ve built over time. The sale enables them to cash in some of their chips on the table while staying in the game with the rest of their agency’s book of business. A book sale can be useful for other reasons too, such as closing an office location, exiting a line of business or redeploying resources.

A book sale allows the principal to cash out to take one step closer to retirement, invest in recruiting or add a line of business.

Prepping for the Purchase

In purchasing a book of business, the key is to start early. Reach out to your agency principal and have “the conversation.” Make your intentions clear. Once the agreement is in place, both the producer and principal benefit from the value the producer will build into the book.

Once you’re over that hurdle, start to clear the next one in your path. Reach out to a lending expert who understands the value in a book of business and will build a relationship with you to fuel your plans beyond this initial phase.