Having a perpetuation plan for your agency is one of the most important investments you can make in your agency. It will protect you, your customers, your staff as well as your family. It is critically important for all agencies to document their plan, regardless of where they are in their agency lifecycle.
This plan will provide clarity and direction if something unexpected happens to the current owners, and ensure that the agency is well positioned to continue to operate and serve their customers. Agencies that do not have a documented and executable plan often sell at a huge discount when they are faced with an unexpected loss of the agency owner due to the time constraints and urgency that exists in those situations
Key components in a perpetuation plan
Your plan should address what will occur when an unexpected event occurs in the form of a Contingency Buy-Sell Agreement. In addition, your perpetuation plan will outline the guidelines and requirements for a systematic transition of ownership. Every plan should include these key components to ensure that all parties involved will have clear direction on what process and steps should be taken to transition the ownership of your agency.
- Define the parties involved
- Outline the eligibility & priority to purchase shares
- List the triggering events
- Define the method and frequency that will be used to determine agency price
- Define the mechanism that will be used in each situation
- Define the funding sources
- Outline the Insurance coverages required
- Tax Implications
- Define how disputes will be resolved
- Define how agreement can be amended, changed and/or terminated
The IIAT team is prepared to step you through the questions you will need to consider in building a perpetuation plan that is right for you and your agency.
