Last month we continued our discussion of our top ten rules for sellers of insurance agencies. Over the last two months we have covered: 1. Seek Professional Guidance, 2. Commit to the Process, 3. Understand the Value of Your Agency, 4. Be Proactive, 5. Present Your Agency Properly, and 6. Understand the Details. This month we wrap up our top rules for sellers with 7. Define Negotiation Parameters, 8. Get Your House in Order, 9. Don't Overlook Reverse Due Diligence, and 10. Be Ready for the Long Haul. 7. Define Negotiation Parameters. Rely on your financial advisor to lead your negotiations. This is particularly important in the early stages of the letter of intent or term sheet. If you follow the "wish, want and walk" theory of negotiating (see the Published Articles section of the Hales & Company website (www.halesgroup.com) for a detailed article on the "wish, want and walk" theory of negotiating), you will be provided with a much smoother process and you will remove most of the emotion that is attached to selling your agency. Too often agency owners either try to negotiate themselves or, worse yet, turn the negotiation over to their attorney far too early. Deal negotiation is a skill not easily learned. Rely on your financial advisor to lead you through the negotiation process and tell you when to bring in your attorney. 8. Get Your House in Order. You have signed the letter of intent and you let out a big sigh; the hard work is done! Well, not quite. Now comes the real fun part: due diligence. If your advisor has done his job properly, you have already gotten your house in order for this stage (see article: Don't Expect Top Dollar if Your House is in Chaos published in the May 4th edition of Insurance Journal). At this stage the buyer's team will review carrier contracts, financial records, IT, employment files, production reports, etc. They will want to validate your pro forma adjustments. They will verify that you actually own your book of business and that it is not subject to rights of ownership by your producers or sub-producers. The bottom line: to ensure a successful due-diligence process so that the financial terms and structure do not get changed from your initial agreement, you need to have your house in order. 9. Don't Overlook Reverse Due Diligence. Due diligence is a two way street. You must perform your own reverse due diligence on the buyer. It is essential that you believe that the buyer's operating model and culture is conducive to you and your agency's culture. Your due diligence should include a site visit to the buyer's headquarters, meeting with management and key employees and discussing the buyer's plan of integration. Probably the most important step at this stage is to talk to other agency owners who have sold to the acquirer. Talk to shareholders and some of their key employees and learn firsthand what the culture is like, how integration went and what changes took place. In the end, understand that change is coming. Change can be good, but only if you and your team are prepared for change. 10. Be Ready for the Long Haul. Recognize upfront that the selling process is not quick. It is not unusual for a transaction to take nine to 12 months from start to finish. If you are not mentally and emotionally ready for the long haul, your odds of completing the transaction are greatly reduced. During this time you still need to manage your agency for growth and profitability. While this sounds easy, it is not. There are no shortcuts in the selling process. Shortcuts can only result in bad things happening! Be ready for the long haul. When these ten seemingly simple rules for selling an agency are followed the chances of consummating a transaction that is ultimately deemed a long-term success are greatly increased. Most agency owners sell their business only once so it is critically important that the sale be done "right"; hiring an experienced advisor who has been through the process many times over will pay exponential dividends and is an essential component of the selling process. Daniel B. Price is Vice President of Hales & Company, Inc.