One simple way to increase the value of your independent agency
Written By: Keegan LaMar, Product Marketing Analyst
One of the strongest drivers of business valuation is expected growth rate. In an industry where it’s become increasingly difficult to stand out, agencies must find new ways to grow. Standard policy offerings can be purchased online and from most agencies, so they are no longer a path to growth. And valuation matters. During the first 9 months of 2017, over 450 agencies were acquired according to Insurance Journal.
Consolidation can be good! For larger agencies, it can mean spreading your footprint within an area and owning more of the market. For smaller agencies, merging can mean gaining financial stability. But how can an agency make themselves stand out for a merger or acquisition? How can an agency increase their potential value to those looking to invest in them?
The answer: niche lines of business.
Niche lines do a lot more for an agency than just add a new revenue stream. They can create a path to value. According to Kevin Stipe of Regan Consulting, “what is newsworthy is how much more buyers are willing to pay for specialty business than general business. By our calculations, a block of specialty business is frequently valued at 25%-50% more than a comparably sized block of general business, since it is more profitable and can be projected to grow more quickly.”
For independent agencies, the biggest opportunity lies within niche lines of business in the commercial space. According to McKinsey, “small commercial accounts or more than one-third of the U.S. commercial lines market and is the fastest growing commercial segment.” Finding areas within the commercial space that are underserved is the key. Iamagazine.com noted that 54% of independent agencies don’t specialize in a specific industry at all. That’s more than half of all agencies missing out on this big opportunity.
Whether you’re looking to get acquired or simply add value to your business, niche lines can change your agency for the better.
Recently, Vertafore hosted a webinar titled “Riches in Niches: How to Grow Big in Small Markets” where we covered the importance of niches and how you can take advantage of this opportunity. To watch the webinar, click here: