Thinking about selling your book of business? The time of year can have a huge impact on how smooth the sale goes, especially for agents who have Medicare Advantage or Part D drug plans in their product mix.
Here's what you need to know about timing the sale of your insurance business for a seamless transition.
From start to finish, selling your insurance agency can take anywhere from 2-3 months.
Appraising your book of business and putting a value on it is very easy and fast for us.
What slows down the closing is getting carriers to assign commissions to us. Some carriers are fantastic about it, but others are very slow. We stay after them and handle all of that ourselves, but ultimately, we're kind of at their mercy.
Let's say we have 90% of the commission assignments over to us. If there are one or two carriers dragging their feet, we can close out what we have and do a separate purchase on the remaining 10%. While this approach is messier, it allows the seller to get paid.
During the fourth quarter, Medicare Advantage carriers have a blackout period where they won't do any new contracting. The same thing applies for doing commission assignments.
Most companies are flooded during the fall, and commission assignments are not a high priority for them.
So, we really can't purchase a book of business in the fourth quarter, especially if there's any Medicare Advantage in it.
In addition, when we buy a book of business, we have a full staff that services these customers. Our staff is understandably busy during fourth quarter, so it would be difficult for us to bring in a new book of business at that time.
We put a lot of emphasis on ensuring these customers are comfortable with the transition and feel welcomed. Having the time to reach out to each and every customer is important, and doing that during the whirlwind of fourth quarter wouldn't be ideal.
Want to hear from an agent who sold their book of business to us? Read Steve Hughes' Case Study: Everything You Need to Know About Selling Your Insurance Business
The beginning of the year is a great time to start talking about selling your book of business. It's a new year, the AEP is over, and there's plenty of time to get the sale done before the next AEP rolls around.
December and January are really a sweet spot for starting the discussion. If we're going to do valuations and there's any MA in it at all, we have to wait until the end of January to see what renewed during the AEP.
So we can start the conversation in the beginning of the year and get you a valuation at the end of January or the beginning of February.
Another great timing option is talking to us in the summer and telling us you want to do one more AEP. We'll go through all of the details and busywork ahead of time so that when the AEP is over, we're ready to roll.
There's a lot of back and forth, so this approach gives us plenty of time to chat and plan. It also gives you some time to ease into the transition.
While selling your book of business is easy, feeling ready to take that leap is the hardest part. Giving yourself one more AEP can help you raise the value of your book of business and get you mentally prepared to sell.
Related: How to Know When It's Time to Sell Your Insurance Business
If you write a lot of business during the AEP, it can really increase your valuation and get you a higher multiple.
We'll talk to an agent wanting to retire or sell their book of business any time of year. But January through August is the time to really be getting down to brass tacks.
Whether you want to retire right now or you're planning for a few years down the road, we'd love to help you with your perpetuation plan. Schedule a call with me to get the ball rolling: