Smart Exit Planning Strategies for Niche Markets
Selling a Group Insurance Business
We hear it all the time: 'This economy is a hostile environment for a business sale.' However, group insurance businesses continue to sell at a brisk pace, regardless of the economy.
The economy isn't the only thing that is uncertain these days. So are group insurance business buyers, many of whom are waiting to pull the trigger on their next acquisition.
Success is a factor of preparation, execution and a keen eye for the market. As a business seller, you need to go into the process with the mental goal of presenting your business in the best possible light.
Brokerage Benefits
A good broker can offer several benefits to business sellers. First, business brokers are in tune with the realities of the market and are skilled at helping owners make their businesses attractive to premium buyers. More importantly, brokers have the ability to identify serious buyers and maintain confidentiality throughout the sale process. Typical brokerage rates (a.k.a. success fees) run 10% of the final price - an expense that is usually recouped through a higher sales price and less time on the market.
Average Preparation Time
It's critical to properly plan for the sale ofa group insurance business. Since buyers prefer to see evidence of future cash flow, you'll want to to strategically lock in cash flows and increase profits before you list the business. Next, the business will need to be documented in professional financial statements and manuals that facilitate the ownership transition. Since all of this takes time and effort, a group insurance business can rarely be ready for the marketplace in less than six months. If you can afford to wait, we recommend investing a few years in improving your business's financial position before you put it on the market.
How to Skillfully Address Buyer Concerns
Buyers can present challenges, especially during the due diligence stage. The questions group insurance business ask during due diligence are designed to alleviate their concerns about the business and should be promptly addressed by the seller. Avoid answering buyer concerns with vague generalities. Instead, be as specific as possible, even if it means doing additional research before offering a response. If due diligence drags on too long, your broker may need to intervene.
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