Insurance Sales | Easier and more upside than running a small business??

searcher profile

April 24, 2019

by a searcher from Dartmouth College in Allentown, PA, USA

I've been searching for 6 months and not yet found the right company. This morning, I met with a local business leader who manages a successful commercial insurance and financial services business. My intent was to share what I'm searching for with the business owner to see if he would direct me to any of his clients who might be interested in selling their companies. 

I walked away with an insight that was different than expected....

The gentleman was genuine and tried to help. He shared ideas about clients of his that could be open to selling, and we brainstormed together about different ways to go about sourcing opportunities. However, at the end of the discussion the gentleman shared the following: 

'- a B2B insurance agency has no customer concentration issues;

- a B2B insurance agency has no inventory and very few employee headaches;

- a B2B insurance agency has contractual, recurring revenue;

- a B2B insurance agency offers a wonderful work life balance (he mentioned never missing a kid's practice or doctor appt). 

He apologized for turning the tables and said he wasn't trying to recruit me; however, he made some pretty compelling points. He shared that his agency works with 100+ different companies, and he sees a lot of different business models from the inside out - and he's pretty certain that he makes more money, with less headaches, than most small business owners. 

What am I missing? Should we all just be going into insurance?

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commentor profile
Reply by an investor
from University of California, Berkeley in Moorestown, NJ 08057, USA
^redacted‌ bought and is running an insurance agency in Dallas. He was a presenter at the HBS Conference in December. His situation was a little different, it was a turnaround of a money-losing company.

If selling insurance fires you up and you think you would be successful at it, go for it. Any of the big insurers will let you open up a captive agency and train you (for a fee). Type in "Become a <insert company name here> Agent" into Google. Or you can buy a captive or independent producer any day of the week. They are almost as plentiful as bars and car washes.

Also, like any networking meeting, people are going to be most familiar with what they do, and not a lot of people have the mindset to think about buying businesses. If I had $1 for every networking meeting where what I got was a referral to a business broker or the suggestion "why don't you look at opening a franchise?" I'd be retired.
commentor profile
Reply by a searcher
from Stanford University in San Jose, CA, USA
I've run an online commercial insurance brokerage. It can be a good business, depends on the types of customer you service. Too small customers, need an automated platform to squeeze out a profit. Larger customers are better but then you may have concentration issues. Currently, due to a hot M&A market for Insurance brokerage multiples are higher than other B2B services businesses. You can finance a lot with bank debt which helps and there are a number of lenders that do only this. The way I look at it, you need to be able to expand margins by automating, add a distribution channel or extract higher commissions by doing acquisitions and consolidating premium to fewer carriers. There is less competition for agencies with <$1m in revenue.
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