Many agents get to a point in their career where they want to work less, travel more, and spend time with their family. How do you do that if you are the person running the company or handling your specific clients?
If you have employees who can take over for you, there is your answer. However, if you are like most health agents who don’t have the luxury of having someone step in and handle your clients when you want to take time off, you need to consider your options.
What are your options?
It’s now time for you to think about your future. What does it look like—working part-time? Retiring and handing the company over to someone? Staying on as a consultant and advisor?
When it comes to your business and your future, there are three options: you can cash out, work with a company like Retire with Renewals, or do nothing.
Cash out
Cashing out is all about value. Here are several ways to determine the value of your business:
- Actuarial: Employ an actuarial firm that specializes in the valuation of businesses. They will determine a present value that considers the business now and its current value, persistence, the time over which to project income, interest, and other factors. This is a book value calculated mathematically. We would call this type of valuation theoretical or hypothetical.
- Perceived Value: What do you believe your business is worth, and what would you be comfortable accepting? What is fair? Do you have a minimum value in mind below which you would not consider selling?
- The Market: Get several offers from actual potential buyers. For example, a company with gross annual revenues of $300,000 using a 1 ½ times gross revenue basis would be offered $450,000.
Here are some other considerations when it comes to cashing out:
- Are you convinced the potential purchaser will give excellent service and care to your clients after you retire?
- How will the purchase be paid? Will it be delivered in a lump sum, or will it be paid out over several years?
- How will lost accounts be handled? Will the lost business be charged back against the purchase price in some way? If so, how long after the new owner acquires your business would charges for lost accounts be applicable?
- What is the tax impact of the sale? There will be taxes. For example, a 40% + federal and state income tax bracket creates a $180,000 tax obligation on purchasing a business sold for $450,000.
Work with a company like Retire with Renewals
A commission continuation plan ensures you will continue to get paid long after you retire and working with a company like Retire with Renewals ensures you have a plan in place. This will make you feel better knowing that your business is taken care of and you will continue to have financial security. There are benefits to having a commission continuation plan:
Whether you fully retire or decide to work part-time, you keep receiving renewals.
- You control when to retire and can adjust the agreement to fit the retirement you want.
- If you transfer your book to a new agency, you still get paid monthly.
- There is no more overhead, because the servicing agency handles all servicing.
- Many commission continuation plans offer added survivor benefits after you pass away.
- Your taxation issues often are minimized as opposed to cashing out.
- Many agreements offer commission continuation that guarantees a minimum number of years payout (five years at the very least).
- You have certainty that your clients will be serviced by professionals with the same vested interest as you.
Do nothing
It has been said, “All it takes for bad things to happen (like losing your commissions) is for good people to do nothing.”
In the event of a “what if” scenario, news travels fast, thanks to the Internet, instant messaging, and social media. The news of your disability or death will put clients you have on the “hot call.” Your competitors will do their best to convince your clients that they are the company they need to work with.
Once a client completes a Broker of Record (BOR) change request, you are out of the picture. You can do nothing, but it would be better if your clients were informed of your good intentions. If they know there is a plan in place in such an instance, they don’t need to panic and run when rumors start, and you can keep your business whole.
The bottom line
We work with agents who want to retire or work less, and we let them decide how much they want to work. Some agents want to work only during open enrollment, some agents want to only work with only with Medicare clients. What do you want?
Whatever you decide, Retire with Renewals is there to service your book of business so you will continue to receive commissions for the rest of your life* and can use them to take care of your family.
*Depending on the structure of our contract.
Photo by Noriko Cooper