No matter whether you are passing your insurance agency onto your family or not, there is no denying that planning your exit is a difficult task. However, this does not mean that you should simply put it off. It is vital to have a succession plan in place if your business is to run successfully. Two of the main factors that need to be taken into account when succession planning is what components need to be included in the plan and who is going to be involved.

Who should you include?

So, let’s deal with the ‘who’ first. You need to involve the following people:

  • Any family members that are involved in operations at your agency
  • Successor(s)
  • Tax professional
  • Business attorney

These are the four basic types of people that need to be included. Of course, you may feel that there are others that should be involved, for example, advisors or partners. Nonetheless, make sure you do not incorporate too many opinions and ideas. Ultimately, you are the decision maker.

What should you include?

Now you know who should be included in succession planning, it is important to consider what needs to be incorporated. There are five critical parts:

  • Your goals – You need to be clear about what you want from the deal. Not only in terms of financial payout, but also regarding agency culture or your continued involvement in decision making at the agency.
  • Mentoring – It is advisable not to put all of your eggs into one basket so to speak. It is a good idea to have at least two successors. Look towards younger agents, as they are going to have a longer potential tenure at their business. Do not simply choose successors and then leave them to it; you need to mentor them to success.
  • Care plan – You also need to put a client care plan into place. Consider how you are going to tell your clients that you are leaving. You want to ensure the transition does not have any interruption to client care, which is why a plan needs to be drafted regarding introducing clients to your successor.
  • Employees – Next, think about the impact the move is going to have on your employees. Do they want to stay or are they going to be leaving when you do? You may want to provide a stay bonus for the first group and ‘bonus out’ the second group?
  • Total cost – Last but not least, your succession plan needs to include the total cost of your agency, which should be revised on a regular basis. Do not forget to incorporate any debt that is outstanding.
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