Succession Planning — How to exit a brokerage on a high

Volume 48, Issue 2

In short

• Successful succession planning requires long-term preparation, clear communication and early engagement with stakeholders.
• Exit options include family succession, employee share plans, or selling via mergers and acquisitions — and each option requires some strategic groundwork to maximise value.
• Business attractiveness depends on strong systems, clear client value, robust financials and a capable team to ensure continuity and maintain buyer interest.

For independent insurance brokers, retirement isn’t just a personal milestone; it often requires some business decisions that demand foresight, strategy and a solid succession plan.

Whether the goal is to pass the business on to family, put it on the market or offer employees an opportunity to buy in, having a clear plan in place makes all the difference, says Dr Craig West, founder and chairman of Succession Plus, which offers specialist strategic advisory services to SME owners.

“Planning ahead is crucial to keep the business strong, clients confident and employees secure,” he says.

“A successful transition is not a quick process but requires extensive, long-term preparation, ideally spanning several years.

“When people try to rush this, it never works properly. The handover isn't successful. There’s a disruption with clients. There’s a disruption with employees. And then you’ve got a problem.” 

Weighing up the options

Richard Klipin, CEO of the National Insurance Brokers Association, says the industry is facing significant demographic changes as many brokers approach retirement age, which is opening up opportunities for younger brokers to carry on the business.

“There are many great examples of family businesses that are bringing in their children through a succession plan,” he says.

“Often, [the children] have worked elsewhere in the sector before joining their parent’s business to build their skillset and now they’re on the cusp of transitioning to leadership roles or they’re already in leadership roles.”

Klipin also points to the current activity in mergers and acquisitions in the sector, and says it’s another option for brokers who have built the business up and are now ready to either hand it over or remain in the business in some capacity.

“The general insurance sector is awash with mergers and acquisitions activity at the moment, so people are taking the opportunity to sell to businesses that are growing, either in conjunction or in partnership,” says Klipin.

“The large, local, listed players are all growing by acquisition, and that’s driving a lot of people who have built businesses to determine what they want to do and sometimes bring those plans forward.”

Preparing a brokerage for sale

To do that, brokers need to make sure they have properly prepared the business and built up its value, stresses Ricky Natapradja, vice chairman of the Association of Indonesian Qualified Insurance and Reinsurance Brokers.

“When discussing business valuation, it’s crucial to understand what makes a business attractive to potential buyers and how preparing for a sale can significantly impact the final price and terms,” he says.

Start with auditing all financial reports and appraising all assets, as well as looking at non-financial factors such as branding, reputation and the quality of the people within the business, says Natapradja.

“The things that will give you the best outcome are obviously having your systems and processes in really robust form, having a clear value proposition for your clients, having a great team of people and staff that supports that, and having a really good leadership and transition piece that sits around that as well,” he says.

Transferring ownership to employees

Offering employees an opportunity to buy into the business through employee share plans (ESPs) is another exit strategy for some brokerages, says West.

ESPs are becoming increasingly common, as they allow employees to gain ownership even if they cannot afford to buy the entire business upfront.

This helps retain key talent, locks in intellectual property and ensures client relationships are maintained, protecting the business’s value and future performance.

“ESPs involve selling parts of the business gradually to key employees over a period, potentially five to 10 years,” says West.

“Owners, particularly those who may already be independently wealthy, often see ESPs as a way to provide a financial reward, while also creating a legacy and looking after their clients and staff.”

Communicating the plan

Whatever the plan, it is critical to consistently communicate it with all stakeholders, including employees and external partners, says Natapradja.

“It’s the only way to ensure a smooth transition and maintain business value,” he says, “especially when you are cultivating loyalty among a younger generation of often quite vocal employees.”

"Good communication also means you bring your people along for the ride", says Klipin. “People are the greatest strength of your business."

"If you suddenly make a decision to sell and you haven’t brought your team on the journey, there’s a decent risk that people will go and look elsewhere, and that will affect the outcome of your sale,” he says.

Not having the conversations early enough can adversely affect the decision when it’s crunch time. “In the end, businesses that are well prepared are more attractive to professional buyers, who are often quite particular about compliance and due diligence,” says West.

“Owners who are unprepared may have to accept lower offers or unfavourable terms, such as being required to continue working for years after the sale without the benefits of ownership.”

Four tips to build and maintain your client pipeline

A strong pipeline of clients is intrinsic to the brokerage’s value, and there are some important steps to take to make sure existing clients stay in place and others are signed on, even after you leave the business.

1. Structure the business to operate independently of the owner. For example, if the current owner is responsible for generating a majority of the brokerage’s leads, when they leave those leads may dry up or go with them.

2. Gradually introduce the successors to clients over an extended period, by involving them in networking functions and client meetings (starting as observers and progressing to leading meetings). This allows clients to become familiar with the new management team.

3. Multiple people in the business need to be familiar with each client, so that they understand the business relationship and can step in at any point.

4. Clearly document all client relationships so they can be easily transferred, including key contacts, communication history, service expectations and any unique preferences or ongoing strategies.

Writer’s insight

“It seems that planning for retirement is just like making any other business or financial decision — the longer you plan, the better the outcome.”