1. Acquire | Grow | Succeed
What you need to know for every phase of your agency’s evolution

2. Our time today…
Agenda
1. Buying an agency
What a prospective buyer needs to know
3. Building your agency
How to stay competitive & profitable
5. Selling an insurance agency
How to get the right price from the right buyer

3. Agency Efficiency Scorecard
• Determine where you are at today
• Set a benchmark for where you would like
to be
• Identify frustrations

4. Agency Efficiency Scorecard

6. Buying an Agency
• Why acquire?
• Searching for the RIGHT agency
• Conducting due diligence
• Negotiating a price
• Obtaining financing

7. Why acquire?
• Grows income quickly
• Cost-effective
• Promises benefits of scale
• Sellers are motivated now more than ever
Note: Buyers will need to contend with due
diligence & financing

8. Timeline

9. Searching for agency
• Determine criteria
– Agency size/premium volume
– Product mix
– Location
– Agency’s condition
• Where to find agencies
• Assemble your support team
– Attorney | Tax Consultant | CPA | Valuation

10. Conducting due diligence
• Learn how the agency operates
• Identify reasons for the sale
• Understand policyholder/carrier relationships
• Review book of business/product mix
• Explore relationships with carriers
• Review all financials
• Examine non-compete contracts
• Assess compatibility

11. Negotiation
• Buyers underestimate the cost to acquire
or cost savings
– Here are some areas to be sure you have a
handle on when negotiating the price you will
pay:
• Technology
• Producers/Staff
• Office expenses
• Future commission/Cash flows

12. Balanced Risk
Buyer
Seller
Lender

13. Obtaining Funding
• Funding options:
– Commercial loan at a bank
– Venture capital/Angel investment
– Peer investment/Self-funded
– Commission-based lender
• Need a lender that understands the value
of the future cash flows with commissions.

14. Action Planner

16. Stay competitive & profitable
• Develop a growth strategy
– Set realistic goals and determine a plan
– Agency management systems
– Producer development
– Knowing your customer
– Weaving in new marketing methods
• Fund your strategy

17. 4 Stages of Agency Growth
1. Build your clientele
2. Create a team
3. Share the lead
4. Grow past the owner

18. Goals & planning
• Determine where you are now/where you
want to be
• Identify areas for growth
• Set realistic goals
• Specific
• Measurable
• Accountable
• Realistic
• Time-Based

19. Planning
Always have a plan, and believe in
it. Nothing happens by accident.
- Chuck Knox

20. Planning
• Sales plans ≠ Marketing plans
• Why a marketing plan?
• Becomes a roadmap
to achieving goals
• Track success
• Monitor/Adjust
• Understand budget and
timing to meet goals
• Keeps everyone on the same page

21. Planning
• Building a marketing plan without the resources:
• Know your audience
• Find ways to be found
• Plan out tactics
• Set goals/Monitor progress
• Rinse and Repeat

22. Management systems
• Must be able to manage interactions
efficiently
• A good system will…
– Provide in-depth understanding of clients
– Average income/client
– Show you the best types of clients
– Most profitable clients stand out

23. Producer development
• Build a team culture
• Be sure to include incentives & rewards
• Develop a dashboard and monitor
frequently
• Pay producers what they are worth
• Eliminate any not aligned with agency
goals

24. Knowing your customer
• Capture and maintain information on
customers
• Track history/communications
• Create templates and checklists for staff to
follow
• Manage tasks
• Track prospects through to conversion

25. Information
• Maintain a database & maximize it
– Make updates important
– Ensure accuracy & completeness
– Ask for permission (print/email)
– Utilize information in interactions
• Birthdays/Anniversaries/Life Events

26. Information
• What can you do with all this information?

27. Personalization

28. Measurement
• Results matter
– Dashboards
– Metrics
– Goals
• Holds agency accountable
• Provides benchmarks
• Cut what’s not working
• Increase what is working

29. Measurement
One important metric to monitor with
marketing is ROI.
Return on Investment
(Return – Investment)
Investment
Profit – Marketing Investment – *Overhead Allocation – *Incremental Expenses
Marketing Investment

30. Measurement
For example…
Email Campaign
Direct Mail Campaign
Great Marketing Resource- http://www.mplans.com/

31. New marketing methods
• Build an interactive website
• Utilize SEO
• Build a presence
• Utilize digital marketing
– Communications
– News
– Prospecting

32. Innovation
What’s not new:
• Insurance is all about sales
• Sales is all about two things
– Lead generation
– Closing

33. Innovation
What IS new is HOW:

34. Innovation
So HOW do you innovate?

35. Innovation
So HOW do you innovate?
• Build strong Calls to Action/Offer Value
Sample Landing Page-Oak Street http://www.mantoothinsurance.com/

36. Innovation
So HOW do you innovate?
• Be a resource
– Events/Education
– Newsletters
– Social Media/Blogging
Facebook-Oak Street
Twitter-Oak Street
LinkedIn-Oak Street
https://www.facebook.com/MantoothIns?v=app_198028816891495&app_data=wlbb%3D1

37. I have the steps, now what?
Most important thing-start some where
• Three ways to accomplish:
– You create the plan/Engage staff to assist
– Create a master plan/Engage temp help
– Dedicated staff OR Outsource to an
agency/consultant
Just remember…
It doesn’t all have to happen overnight. It’s a
process and will take time

38. Funding your strategy
• Initial acquisition funds/investment
• Owner capital
• Agency revenue
• Line of credit
• Working capital loan

39. Action Planner

41. The RIGHT Price & Buyer
• Give yourself time
– Assess your strengths & weaknesses
– Develop a financial platform
• Seeking a buyer
• Negotiating a price
• Conducting due diligence
• Arranging financing

42. Give yourself time
• Plan to prepare for at least 2-3 years prior to
sale
• During this time, be sure to:
– Continue profit trends
– Keep clean & accurate financials/files
– Minimize major changes
– Ensure agency and assets remain free of
liens or other encumbrances

43. Timeline

44. Give yourself time
• Secure your support team of professionals:

45. One year out…
• Strategy 1: Assess strengths &
weaknesses
• Strategy 2: Develop a financial platform
– Estimate FMV of business
– Analyze profitability/performance
– Determine the best sale structure

46. Seeking a buyer
• Assess current staff for succession
candidates
• Utilize a business broker
• Take advantage of listing sites:
– Agency Exchange (Oak Street’s free service)
– AgencyEquity.com

47. Negotiating a price
• Consider several factors:
– Multiples of revenue
– EBITDA
• Sale Structure
– stock buy or asset buy
• Set a preliminary price

48. Due diligence
• Compare buyer/seller goals
• Determine buyers financial stability
• Request full disclosure of financials
• Secure commitment letter
• Clarify management structure

49. Arranging financing
• Funding options:
– Commercial loan at a bank
– Venture capital/Angel investment
– Peer investment/Self-funded
– Commission-based lender
• Need a lender that understands the value
of the future cash flows with commissions.

50. Action Planner

51. Case Study
Comparisons & Contrasts

52. Agency Structure
Good Less Desirable
• Agency owns the policy • Carrier retains ownership/control of policies
expirations/commissions • Agency passes ownership of
expirations/policies down to sub-producers
• Producers are focused on sales and are • MGA retains ownership
compensated on production • Producers have multiple responsibilities
• Non-compete, Non-solicitation and including office operations/CSR
• Producers are not compensated on
Confidentiality Agreements are in place production – receive a flat salary
with all employees • Producers have all of the relationships with
• Owner/manager is aware of all day-to-day policy holders and there are no NCAs, NSAs
or Confidentiality Agreements in place
activities and has a presence in the agency
• Owner/manager is absentee and removed
• Relationships with local businesses (car from day-to-day processes
dealerships, real estate agents, etc.) • Owner/manager is over-involved in day-to-
day and does not empower or hold
employees accountable
• Involved in local dispute(s) (landlord,
competing agency, locally insured company/
customer, etc.)

53. Carrier-Product Mix
Good Less Desirable
• AM Best rated carriers • Non-rated or Demotech rated carriers
• Multiple carrier contracts with two to five • Few carrier contracts/relationships
strong relationships • Sub/Non-Standard business
• Standard/Preferred business • MGA/Carrier retains ownership of
• Ownership of expirations customer
• Renewal/trail commission streams/vesting • No renewal or trail commissions – 1 time
• Various lines of business – Property & upfront payout
Casualty, Life & Health, Financial Products, • One product type/niche
Personal & Commercial

54. Credit
Good Less Desirable
• Low Credit Balance/Credit Limit Ratio • High Credit Balance/Credit Limit Ratio
• Seasoned Accounts • Several Newly Opened Accounts
• Average Number of Open Accounts • Too Few Accounts=No History
• • Too Many Open Accounts
Few Inquiries
• Several Recent Inquiries
• No RECENT Derogatory Activity
• RECENT Derogatory Activity
o No Delinquencies
o Delinquent Accounts
o No Collections o Collections
o No Judgments o Judgment
o No Liens o Liens
o No Bankruptcy o Bankruptcy
• FICO 720+ = Excellent • FICO 620-649 = Low Average
• FICO 680-719 = Good • FICO 580-619 = Poor
• FICO 650-679 = High Average • FICO <579 = Very Bad

55. Income Statement
Good Less Desirable
• Revenues exceed Expenses = PROFIT • Expenses exceed Revenues = LOSS
• % New Business Less (of total commission • Larger Equipment Rental Expense
revenue) – Purchase equipment?
– Renegotiate contract?
– Less NB needed to maintain revenue levels year
over year • High Bank Fees
– Higher retention – Too much debt
– Switch banks
• Larger Bonuses on Smaller Revenues – Negotiate fees
– Better carrier programs/relationships • High Software Fees
– Higher retention/lower loss ratios – Purchase software?
• Lower Advertising Expense • High Interest Expense
– – Too much debt
Yielding higher revenues
– Rates too high
• Larger Producer Commission Expense • Employee Benefits Expense = Mgmt Only
– Better incentives to produce – Offer benefits/pension plans to employees – incent
for production/productivity/tenure
• GOOD: Depreciation & Amortization
Expense
– Non-cash expense that decreases taxable revenues –
add back for cash flow

57. Who we are
Oak Street Funding is an innovator in niche
funding providing commission-based
commercial financing for insurance
professionals nationwide.
– Founded in 2003, we have worked with
agents nationwide delivering the funding they
need to buy, build, or sell their agencies.

58. What we do
In an industry where traditional commercial
financing won’t work, Oak Street Funding
provides the solution to fit each insurance
professional’s needs.
Whether the agent needs $10,000 or
$10,000,000, we’ll customize a loan to fit
your needs.

59. Why it matters
Now more than ever, agencies must find
financing with a lender that understands
their needs and market conditions.
We provide the financing that many banks
won’t, using an agent’s own
commission stream and cash flows as
collateral for the loan.

60. Take advantage of opportunities
• You can borrow against the future
commission stream from your in-force
book of business.
• Stay in control of your cash flow. And
your customers.
• Every Oak Street loan is custom designed
based upon your book of business and
cash flow.

61. Oak Street vs. Traditional Bank
Oak Street Funding Traditional Bank
Offers a variety of products including
revolving lines and interest-only
 
options
Provides financing based upon
intangible business assets only
 
Has an in-house team of experts that
understands the complexities of the
 
insurance business
Requires little cash out-of-pocket  
Centralized location provides quick
turnaround times
 
Services loans in-house  
Offers online account management
tools
 

62. The Oak Street Process

63. How it works…
Step 1
A high-level review of the policies and carriers to be used as collateral for the loan
Step 2
Preliminary loan terms and options are presented for your approval.
Step 3
Your Loan Coordinator will guide you in gathering documents and information needed
Step 4
Your Underwriter works through the due diligence process and prepares loan documents.
Step 5
Once the loan documents are signed and approved, we will fund the loan proceeds.
Step 6

64. With a loan or line of credit from
Oak Street Funding, it’s easy to:
• Acquire an agency to increase market
share and build your revenue stream
• Consolidate business debt accumulated
on high interest rate credit cards
• Hire a producer to add top line revenue
• Purchase leads to expand into other
markets
• Upgrade technology to increase efficiency

65. What agents are saying…
“I can’t think of anybody else who would have
loaned us $2 million. I would give a ringing
endorsement of Oak Street funding to anyone.”
-Ewald M., Florida
“Oak Street funding blows my bankers away in
terms of knowing the business.” -John K., Florida
“I wish more agents knew about Oak Street
Funding. Right now many are struggling to make
it with their book of business. They need to pick
up the phone and call.” -Chris B., Georgia

66. Interested? Contact us today…
(1-866-625-3863)
www.oakstreetfunding.com