Agency owners, lenders, and buyers are concerned about the impact of COVID-19 on agency value. There will be a need to assess the two main variables of agency value – its gross income and the market multiples. In the 2008 recession, the insurance agencies took double equity – its revenue got declined and market multiples reduced. Nevertheless, COVID-19 is a unique situation and not similar to recession in many ways. Let’s consider the assessment of both the variables.
- Gross income – Economic slowdown can impact different agencies differently. Ask yourself, ‘Were the financials better in the last 12 months and how will it look in the next 12 months?’ You know your business, so you can identify if the revenue was going down or not. If it was declining then it will certainly reduce post-pandemic. You even know how much time it will take to replace lost revenue.
- Market multiples – Multiples have not been affected due to several reasons. The private equity buyers strategize their capital allocations several months in advance. The interest rates are still low, so there is excess capital, which is different than the 2008 recession environment. It helps to keep the market multiples high because debt cost is inversely proportionate to multiples. Since the existing market does not reveal any changes, prediction of post coronavirus impact on multiples is impossible.
You are the only one who can answer about your agency’s financial status. If you expect revenue decline then analyze if holding the business is sensible in opposition to selling it at the moment, when the value is still high. Remember, apart from market multiples, a waning in revenue will produce a drop in equity.
The market is flooded with buyers and waiting to grab opportunities. You can approach the brokerage firm Sunbelt Atlanta for consultation. Sell my insurance agency is not a DIY project because they are in the best position to set a fair price on the listing. Your viewpoint can be biased as you are emotionally connected with the agency but an impartial evaluation can help.
Benefits of hiring experienced merger & acquisition expert
Professionally handled sales process increases success possibility
Selling a business needs proper planning and strategizing before listing. If ignored, it leads to poor results like a long time to sell or failed transaction or low sale price.
A failed transaction can be defined as a considerable waste of money and time, loss of focus on business, confidentiality breaches, and emotional burnout for the agency owner. Professionals have a refined sales process that brings good financial results with hardly any disruption or stress.
Get multiple competitive offers
The professionals will create a CIM or Confidential Information memorandum, which includes the main factors of the agency including operation, financial performance, and other documents. This tool attracts multiple buyers and several competitive offers. The deal progresses quickly and buyers place a great offer as they get an actual sense of your agency’s market value.
Peace of mind
Mistakes in selling your business can be costly. The professionals manage the entire sales process right from valuation to negotiation to closing. You can relax and concentrate on developing your business because making it more profitable can increase the agency value.