Are you looking to buy an insurance practice? The insurance industry is performing well, and competition is fierce. Buying a firm is often the preferred way in for aspiring business owners, as they have a readymade framework and brand to take advantage of. Nevertheless, not all available insurance firms represent a good opportunity. It is up to you to whittle them down. But, don’t fret, as we will give you a helping hand below.
Get to know the employees
It is important to get to know the employees before you buy an insurance firm. Get to know the key members of staff, and make sure they are willing to stick around as well. These employees will know the good and the bad of the business, how to operate any complicated technology or systems, and they will speak to insurance clients on a day-to-day basis.
Get the seller to stick around for a while
It is a good idea to get the seller to stick around for several months after the business deal has gone through. You will need to talk to them about this before the sale of the business. This will help you to ensure an orderly and smooth transition of the business, and you will be able to figure out the books and be introduced to their customers.
Negotiate a letter of intent
A letter of intent is a two or three-page document, which will outline the vital details of the sale. The terms and conditions of the sale will be agreed upon between both the buyer and the seller. Some of the things you will incorporate include the assets that are going to be sold to you, when and how the purchase price is going to be paid, and, of course, the purchase price.
Dealing with prepaid expenses
This is something a lot of people overlook, however, prepaid expenses can be a tricky area if you have not sorted them out beforehand. There are instances when the seller will have prepaid costs, for example, they may have paid for a year’s worth of marketing. The seller could expect you to reimburse them for the portion of the year they are missing out on, as you will be benefitting from the advertising.
Determine whether you can assume the seller’s lease
If the seller is leasing office space for their insurance firm, you need to find out whether the landlord is going to allow you take over the lease as it is, i.e. without the rent being increased. In addition to this, you need to determine how much time remains on the lease term. If the lease is due to run out soon, you may want to negotiate a new contract with the landlord before buying the business.
If you consider the five points mentioned above, you should be better placed when buying an insurance firm. Despite how desperate you may be to get your hands on an insurance company, you need to approach this with a lot of caution and consideration.