Constructing an agency perpetuation plan is essential in the preparedness and growth of your agency. As the principal, it is crucial for you to be prepared for the continuing success of agency, even when you are not at the helm. Agency perpetuation is either external or internal. External perpetuation planning means preparing your agency for sale to an external buyer. Internal perpetuation prepares your agency for a change of leadership within the existing employee base, or to a family member. About 90 percent of all agencies have perpetuation plans, which help them increase value, identify successors or buyers, and establish plans for continued success and growth.
The key component of developing a perpetuation plan is identifying your agency’s culture, or its underlying mission and values. These values and mission(s) make up the backbone of a positive workplace for your employees and positive experiences for your customers. The culture of your agency, when clearly defined and cultivated in operations, should attract and keep employees who share the same values. Employees who feel that they belong will naturally hold your agency together no matter who is in charge. These connected employees are crucial in retaining agency stability and customer satisfaction, particularly when the agency is undergoing leadership change.
In order to support their internal or external perpetuation plans, agencies should also pinpoint growth goals for the next several years. Most agencies focus on adding new producers, increasing digital capabilities, and investing in marketing. After increasing marketing efforts, agencies see an average growth in policy of 26.7 percent, demonstrating a significant increase in revenue and productivity. Successful principals also identify areas in which to cut costs and increase efficiency. Some, for example, outsource customer service. In terms of accounts, principals should direct producers to stabilize cash flow by focusing more on personal and small business lines, as they are more predictable than larger accounts. Finally, to consider the long-term future, agencies should concentrate on attracting millennial and Gen Z employees, who will be valuable mentees and potential leaders within your agency.
In summary, there are ten crucial steps to consider in making a well-developed, thoughtful agency perpetuation plan that will adequately account for either external sale or internal leadership change:
- Identify values and culture
- Create emergency plan
- Set goals for growth and track metrics to increase valuation
- Outsource customer service, consolidate personal lines to cut costs and increase efficiency
- Market agency and communicate to build relationship with clients
- Start sharing knowledge with future successors
- Invest in tech
- Hire employees that share culture and values
- Create timeline for transferring ownership
- Establish training and mentoring programs