It’s a simple question, but one that’s not so easy to answer. Where do you stand in the market among competitors? 

How are you positioned to grow? What’s your angle, the edge that will attract clients and candidates to your business?

How do you fit in?

If you haven’t stopped to strategically consider where your firm stands in the market as you plan for the future, now is the time. With the influx of private equity investors and new private capital showing interest in the insurance industry, if you’re like most agencies, you’re in a landscape where mergers and acquisitions are a theme. Maybe your competitors have partnered with a larger national organization, maybe they got bought out by a major regional player, or maybe—like you—they are holding on to hope. The misperception that many owners have in a market where everyone is “selling out” is that their status as an independent is the ultimate advantage. They think they’ll attract people from those selling businesses—that the acquired firms will shed talent and their client base will diminish. That’s just simply not the case.

The reality is that people usually don’t leave firms that have undergone a successful acquisition. Most typically recognize opportunity. They see personal and professional growth for themselves, and they’re excited about what this means. However, in the instance where key employees aren’t sticking around for career growth and new opportunities, the selling shareholders will buy their loyalty and lock them up with new restrictive covenants.

Leadership is usually hyper-motivated to grow in a way they never did historically. They can leverage their new partner’s resources and become stronger, more efficient, more influential. They can bring better service and ultimately value to their client base.

Now, how does this picture change where you stand in the market?

Stop. Look. Listen. Get real about your surroundings. Here are some areas of focus to consider as you get a grip on the market and your place in it.

How are you addressing growth? In MarshBerry’s State of the Industry analysis, we found that the three-year compound annual growth rate of the 14 most active private-equity funded brokerages is 28.4%. Insurance firms posted an average 5.8% growth in 2017, with the top firms growing at a rate of 14.9%. What does this mean? If you aren’t growing by 6% or more, you’re shrinking. And most agencies are not exceeding this average—they’re kicking the can down the road.

Are you taking the meetings? I wonder how many calls you have received from a buyer in the marketplace who wants to just get together for an introductory meeting. Do you blow off the voicemail, or do you take the call? Even if you have no plan to sell your business, there really isn’t harm in saying yes to a meeting. How often do you get a chance to sit down with a peer or competitor and learn what best practices they’ve adopted to succeed? Use your time to find out what they think about the market and determine where they fit in. This will help you better understand your position. Personal meetings with owners who want to get to know your firm provide an opportunity to ask questions and get a real, honest snapshot of how another business is positioned and where you stand relative to your peers in the marketplace.

Are you self-aware? Be honest about what you are doing today to grow. When you stand on the pulpit and scream to anyone who will listen that you are going to remain independent, is it a hollow promise? Step back and take stock of how you are truly investing in your firm’s growth. Are you recruiting production staff and spending your hard-earned profit on reinvestments in value-additive resources? Are you focused on coaching and mentoring? Do you have a plan for succession? What are you doing today to position yourself for tomorrow? All great questions that will help you be honest about your position in the marketplace and determine whether you can honestly accomplish your goals.

Where are you going? Once you nail down where you stand in the market, you can plan for the future. You can determine what steps are necessary to drive growth, attract talent, increase value and create a competitive advantage that will serve you well whether the end game is to perpetuate or sell.

Market Update

As spring heated up, so did market activity among buyers, with 36 deals announced in May 2018 compared to 29 announcements in April 2018. While the market appears to be slower than last year, with 168 announced deals through the end of May compared to the 230 deals announced over the same time period in 2017, several pending transactions of top 100 brokers, along with the expectation that there are more to come, give a sense that the market is as active as ever.

After announcing four deals in May alone, Alera Group is now tied with Hub International at 13 deals announced through May this year. AssuredPartners is in second place with 10 announced deals but is followed closely by BroadStreet Partners, NFP and Gallagher, which have all announced nine deals thus far in 2018.

The Hilb Group, which published 14 deals in 2017, announced its first transaction of 2018 with the acquisition of a New York-based property-casualty agency, The Bentson Insurance Group (May 1, 2018). This acquisition bolsters Hilb’s presence in the New York/New Jersey region, making this Hilb’s fifth office in that region and bringing its total office count to 58 across 17 states.

Trem is EVP of MarshBerry. phil.trem@marshberry.com