Insurtech Building Blocs Podcast

The M&A Playbook - Key Steps for a Successful Agency Sale with Brett Rosen

In this episode of the Insurtech Building Blocs Podcast, host Cory Schmidt interviews Brett Rosen, a seasoned M&A advisor with Rosen Advisory. They discuss Brett's unique experiences in the deal process, his transition from the buy side to the sell side, and the importance of understanding seller objectives. Brett shares insights on valuation factors, the significance of organized financials, and the typical timeline for selling an agency. The conversation emphasizes the need for sellers to be prepared and the role of relationship building in successful M&A transactions.

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Insurtech Building Blocs is presented by AgencyBloc, the #1 Recommended Insurance Industry Growth Platform serving the benefits and senior market space with 6,500+ customers across multiple solutions within the platform. With a range of insurance-specific solutions for sales enablement, client and policy management, compliance management, quoting and proposals, and commissions management — all with highly recommended customer support — we've got you covered.

Transcript for the Episode

Note: CS denotes Cory Schmidt, and BR denotes Brett Rosen.

CS: Okay. All right. All right, Brett. What's the most interesting thing you've seen happen during a deal process?

BR: So when I was on the buy side, buying agencies on behalf of my former employer, OneDigital, we bought a book of business from a gentleman who, very nice guy, successful guy, had a nice book of business. And we went through the process with him directly. We bought the book and he then went a little bit quiet. I call it ghosting or

call it ghost protocol is my term for it. And he just kind of disappeared. And one day I got a call from his wife and she asked me who I was and who my company was. And I explained and she said, well, I had no idea that he had sold his business and I haven't seen him in a month. And so, that was not uh commonplace happening. What someone did actually took the money and ran. And so that can happen.

CS: So did you mean? Did he resurface? Do you know?

BR: He resurfaced, but I wasn't involved with any of the follow-up interactions. I left that to his family. Yeah, he had walked and stepped away, but he was missing in action.

CS: Unbelievable.Incredible.

BR: Yeah. So anyway.

CS: All right, well, let's dig in. It's another episode of the Insurtech Building Blocs Podcast. Welcome to the show. I'm your host, Cory Schmidt, excited to dive into some topics today of interest specifically on the M&A front. So this is a topic that's actually pretty fascinating to me. I think it's a really interesting topic and actually I know it's of interest to our customers and listeners as well.

I'm really excited to be joined today by Brett Rosen. I got to know Brett, met Brett, I guess officially about a year ago at our BlocBuilder Conference and Brett was a speaker there. And I heard from our marketing team, it might've been one of the more highly rated sessions and they wouldn't tell me where my sessions fell on that chart, but I think that was, know, them not answering that question I think was telling. I know people are interested in what Brett has to say and

BR: Okay.

CS: in the area of the industry that he operates in. thanks for coming on the show, Brett. It's good to see you.

BR: Thank you so much for having me. I'm really appreciative to have the opportunity and to talk with you this morning.

CS: Yeah, absolutely. So I know we're going to dig in. We've got a few areas of conversation that we wanted to touch on, but the one that we hit on on the top was the one I was most interested in, which was the craziest kind of thing that's happened throughout a deal process. So appreciate you sharing that story. That's fun. So I think maybe to start with Brett, let's give the listeners a sense of kind of your background. You you founded Rosen Advisory, but obviously you're

BR: All good.

CS: time in the health and benefits space far precedes that. But it was very related and sort of, sorry, I don't think so. Yeah, I'll try to keep those to a minimum.

BR: that an age comment right there? that just a little... You can tell by the light bouncing off my head, I'm very experienced.

CS: Very experienced. Yes, I like that. But yeah, very interested in kind of your path and what made you found Rosen Advisory.

BR: Yeah, thanks for asking. So my immediate prior role to founding Rosen Advisory, which is a boutique sell side advisory firm. So I represent sellers in the marketplace and insurance, HR, employee benefits, retirement, a little bit of wealth management business as well. And so before going to the sell side and founding my sell side advisory practice, I worked.

for a very prolific buyer, that's OneDigital, was my former employer, and I was executive vice president of corporate development, which really was M&A and deal making, which entailed recruiting firms, vetting firms, recruiting firms, developing relationships, and then shepherding them through the process of selling to OneDigital. And so it was a fantastic job, great company, but I was selling one.

I was selling OneDigital and selling people and joining OneDigital. And I really enjoyed my time doing that, but I was really excited to turn the page. while I really enjoyed it, what I always felt in the role was, and I was, my fiduciary responsibility was to bring people on board. And the good news is, the buyers really do want to find a great fit. So you're kind of co-underwriting each other.

but you're still selling too and you want people to come on. So there's just a lot of give and take there and you're selling them on you and they're selling you on them and all that good stuff. So I was there 17 years, had done over 50 deals with the company. So I got a lot of practice and there was a recapitalization of the company. And a few months after that, I just decided that it was time to take a step back and do something else.

The natural thing for me to do is to continue to do my work in the M&A space, but I realized, gosh, I could really offer some experience and wisdom to folks who are looking to sell. And I saw some things in my role that I knew could differentiate what I wanted to do in the market and how I would approach it versus what I saw happening. And hence, Rosen Advisory was formed.

CS: Very cool. Yeah, I love the story. You know, your comment about you were trying to kind of help, obviously you're representing, you know, the company, the buyer, but you're also trying to help the seller. You know, we went through a process of finding an investor at AgencyBloc a few years ago. And I kind of, you know, described our advisors through that process as marriage counselors in some way, like they were trying to find the right match. know, matchmakers maybe is a better term, right?

BR: Yeah.

BR: Yeah. Absolutely. Absolutely.

CS: Trying to find the right match and and that's not easy right like there's a lot of variables and everyone's trying to kind of navigate a number of different fronts what What what maybe made you move more over to the sell side rather than the buy side?

BR: Uh, first was a non-compete. No, I'm just kidding. It was, but I, I, uh, I was really excited to, uh, switch sides of the table, so to speak. And candidly, really kind of speaks to who I am and how I approach business and deal making in particular. I always found myself negotiating really hard on behalf of the seller and.

CS: Well, that's a good reason.

BR: It was, it just is my natural inclination to go. I'm a Buffalo Bills fan. So I root for the underdog. I'm from Buffalo, New York. And so I always root for the little guy. know, one of the reasons I joined OneDigital was it was a startup and I went from Cigna National Accounts over to OneDigital about 20 years ago. And I went because it was a startup and, know, kind of the new kid on the block and had, I guess, had an incredible run there. When I joined, it was a million, about a million, million and half dollars of revenue. When I left, we were like 750 million.

So I'd gone from working for a startup to working for the kind of the big corporation. And so it was an amazing run, incredibly educational, really brilliant people. I was trying with brilliant people, hard workers, and it was just a great experience. But I'm more wired for one-on-one, small coaching, counseling, helping, and not into big corporate.

meetings and all that kind of stuff. I just candidly love to do things my own way. And as the company got bigger, that worked great when the company was small. As it got bigger, it just kind of was like, it hey, I had my run 17 years and we got this thing almost to a billion dollars of revenue. It's probably time to try something else. So I found myself negotiating again on behalf of sellers quite a bit. And what also I would see people who were just, you know, these agency owners.

really great insurance people, employee benefits people, financial services people, but they did not know what they did not know. And so I did, of the 50 plus deals I did, all of them were direct to a seller, with a seller. There was no advisor involved in the process. Now that's not to say we didn't work on, or I didn't work on a ton of deals with advisors, but I never got any of those. So, and it was, there was a lot.

And we, had a lot of, you know, it was, it was a lot. I said, you know what, like, why is this? And the reason was, is in when I went direct, I had a chance to develop the relationship. We went through the advisors, um, the way that other advisors do business. I, I have a foundation of my business is ensuring exceptional relationship development and not going to financials and then quick meetings and get the deal done and move on to the next. That's why.

BR: So I work by myself or with a very, I have a small team. have three people. but, but I love, doing it. What I see candidly from being on the other side for so long as the right way. others may argue with that, but this is what I saw and this is what I think, is most beneficial to sellers. So I, I really focus on relationship development. So what, what I saw in that, again, cause we're going back for a quick sec. So I saw people.

not asking the right questions, not understanding that they could negotiate and how they could negotiate and what the different areas of negotiation could be like from not just upfront price, but an earn out and the terms of the contract. And, and so the people were putting their faith in me. And so I was working my tail off to make sure they got the best deal possible within the confines of me being a fiduciary of the company, not, not of theirs. And so I love the freedom now of, of

being able to help them as they see fit. And one of the ways, you know, the most important thing I probably do in my role today, uh, and then I take the most pride in is telling people they shouldn't sell, um, and just walking away and saying, I'm not going to sell you on selling. You have a great thing going or candidly, like a lot of times it's like, you've got a lot going on in your life right now. And I understand why you might want to sell the one you take three months or six months and just think it through because.

you know, maybe someone's going through a divorce or maybe they had a death in the family or maybe they have a health condition. And I get calls like that all the time. And so, I, I really try to think through what's right for that person at the time. And, know, I really try to think of it as good goes round. And if I don't try to sell them on selling, it'll, it'll, it'll always be there or I'll get a referral or whatever. But I feel like a lot of people have sold through the years.

when maybe they didn't need to or it wasn't the right time because they got caught up in some momentum.

CS: Got it. Yeah. No, it's great advice. And I think it's admirable that you kind of look at it from that perspective, Brett I think that, you know, even as someone that contemplated us bringing on an investor for many years, like it was not a rash decision. It's a, it should be kind of a long process of saying like, what's the right thing for the business and what's the right timing, you know, and then obviously the what's the right partner, which is why a good matchmaker, as I like to call the advisors, that's, it's, it's really important, but

BR: Yeah.

CS: I am curious, you know, when folks engage with you, do the owners typically sell to the highest bidder or what, how do you navigate that when it comes to, hey, I'm ready to sell, I've got some offers, like, what's the dynamics that play out there?

BR: Yeah, great question. So I would say that, well, the key is what's the owner objective and starting with what the owner objectives are. And that is just me asking a series of questions and understanding and really listening and making sure that we design a process that fits what their objectives are. It is possible. And I can't remember anybody saying this to me, but they could come to me and say,

I want to sell to the highest bidder and take the most money possible. It's actually, as I think about it, it's never happened that way. and I would respect that and say, okay, we're going to go and figure this out and we're going to create a really competitive situation and we're going to drive the highest price possible and you go and work there and, do the best you can. Now, again, that hasn't happened. The way that it works is generally in the process I take people through is to really help them. I'm sorry for me to really understand the.

alchemy of that situation in terms of three factors. How important is the financial opportunity to you and kind of where does that fit? What's in it? So what's in it for the owner? How important is culture and et cetera, et cetera. So what's in it for the owner? Number two, what's in it for the team? And what I love about this business is it's a very people oriented industry and

What's in it for the team is admirably really important to everybody that I work with, which is great. So it's not about the highest bidder. It's always about what's in it for me as the owner and the total package there. And people care about culture. What's in it for my team, my team members, and how will it impact them? And then what's in it for my customers? And how are they going to take the news? And are they going to see this as continuation of our legacy? And that's

remarkably important to people as well. And so if you focus on two and three, what's in it for the team and what's in it for the company, then you can step back and negotiate and say, okay, well, you know, if there are dramatic differences in the pricing of the deal, you know, are there, what are the pros and cons and how much is someone leaving on the table? I don't think I ever really see anybody have to leave too much money on the table because

BR: The people that are in the acquisition business generally have relatively similar financial goals and objectives. The private equity buyers have generally the same return objectives and are willing to pay similar pricing and they know what they need to pay in order to get deals. So the good news is that by doing the homework in partnership with the owners and really

understanding what their most important needs are or wants and needs are, we can go get the right price and the right deal structure and let them have their cake and eat it too. It is possible to get the highest bidder and go somewhere where is your number one choice in terms of culture and opportunity in terms of growing the business going forward.

CS: Yeah, I really liked the three prong framework that you're describing. I am curious, like, I mean, we see a lot of M&A just among our customer base, right? Like our customers acquiring other agencies and also our customers, you know, being acquired by other, you know, larger aggregators or roll ups, if you will. I'm curious, Brett, you're describing a scenario where it sounds like in most cases, the agency becomes part of the buyer's organization, like larger organization.

BR: Well.

CS: Is it most typical to see that the owners are sticking around at least for some time period? Is there typically like an earn out? Is that pretty common? Like what's kind of typical from your perspective?

BR: Yeah, so typically the buyers are looking for sellers who want to become part of something. And so this is a really important aspect. So I'm glad you asked that because the buyers want to know that, know, they're paying, look, minimum like six times earnings or six years of earnings is like a low multiple these days, all the way up to 10, 12, 14 times earnings, huge, huge numbers, huge numbers. So

CS: Wow. Yeah.

BR: you can't succeed in that financial model of paying that much money without the business growing, not just standing still, but growing. So they're underwriting for potential growth. But then on the other side of that, it's like, okay, if we know we can get like 5 to 10 % growth, that's probably acceptable. But what are also the risks on the other side? Is it going to potentially go backwards?

No one wants to a deal that can potentially go backwards, buying in a trading asset as we call it. So in terms of the deal structures, usually it's an upfront payment and then an earn out, which is a bonus additional purchase price, part of the asset purchase agreement or the business purchase over a three year period. And that's designed to keep the owner engaged and have a bogey after three years. So after three years.

You know, there's, the businesses are going to be fully integrated. If the owner does decide they want to step aside, it's plenty of time for, the buyer to have solved for replacing them and stabilizing the book, know, solidifying the business and setting it up for future growth. of my deals, I would say, I can think of, you know, I've done 30 or so deals in the last three years. I can think of two offhand.

that said, I really want to sell my business and leave. One was someone with a health condition. And then the other is just someone who's a little bit older and is like, you know what, I've made my money and I want to sell the business and I want to be really upfront with the buyers. And so those will generally get a lower purchase price, but there are buyers for those as well. But it's all about it being a win-win and being candid with, you know, the buyers about what the owner's objectives are.

So there's a deal for everybody out there, whether you need to leave for some reason or you want to over a period of time. The key is just open communication and then everyone works together to structure a deal that can work. Now, in those types of situations, like even in the unfortunate situation where someone has a health condition, we did find a buyer and we came up with a creative way to price it so that everyone could win.

BR: But there were a lot of firms that had absolutely no interest in that, not because they wouldn't have wanted to help the seller, but because it's just they didn't have the resources to bring to that deal to overcome the perceived risk that they saw. So there's different buyer types for kind of any and every type of situation.

CS: Sure, yeah. And you described a pretty dramatic range, regardless of what the multiples are on the ranges, it sounds like it can vary pretty dramatically. And again, obviously there's all these different scenarios or situations that you reference that obviously impact that. But generally speaking, in the normal kind of run of mill, sell side process, what really distinguishes kind of the average valuations, like what I would consider to be the average?

you know, agencies from maybe the extraordinary ones, like are there any factors, metrics, things that, you know, when you see something that are like, wow, this one, this is gonna bring a premium based on what I'm seeing.

BR: Yeah. Okay. So the fundamental driver of purchase price and what's going to be the, what's called the multiple of earnings or the multiple of revenue is the size of the agency or the size of the business. Larger businesses get higher multiples of revenue or EBITDA or earnings. And so

The larger your business gets, which for the folks out there planning their future and want to build the greatest equity asset they possibly can, the bigger you get and the more profit you have, the more you're going to get, not in a linear way, but in an exponential way. And I can give you a quick example of that. if you've got, I'm going to use very simple numbers. If you've got $500,000 of earnings,

And a purchase price for that might be six times those earnings. So six times 500 is $500,000 is $3 million of purchase price. So you've got a $500,000 book or business, $3 million. Now take that $500,000 earnings and take it way up for say, you know, for ease of the example to $2 million of earnings. You might get 12 times the

two million, so you got $24 million. So you've had an eight times increase in the value of the business in terms of the purchase price by taking the business from four times. So 500,000 went to 2 million of earnings, but the purchase price just went from 3 million to 24 million. so bigger is better in this business. Now,

Most pricing is within a range at certain sizes. like if you take the $500,000 business earnings in earnings, it might go for like six to eight times EBITDA might be the range that you see in bids, maybe a little bit more than that. You some people might say, hey, we don't want it. It's not in the right geography. It's not the same mix of the right mix of business that we want. So there's a lot of factors that come into play in terms of who's the right potential buyer. But in terms of the pricing piece,

BR: The factors that drive it to the top are one, is it going to be a stable book is a requirement to get towards the high. But to truly get the highest price, it's got to have a history of growth and likelihood of continued growth. So maybe you're bringing a benefits book to a P&C agency and right off the bat, they say, you know what? We can completely cross sell into your benefits book, our P&C services or retirement services or whatever it might be. And we've got no benefits thing. know it. So

they're gonna pay more because there's a need. I've gotten a lot of really great deals for people by knowing who's not, the acquirers who aren't in a certain geography will generally pay up to get into a new market, especially if it's an agency of size that has scale that they can build around. geography, and so that's actually more about how to shot like, of some of the art of what I do.

is try to figure out like, who'd really want this and for what reasons? And then is it a cultural fit? And so it's a puzzle that you have to put together and figure it out. You you might get an extra high purchase price because I've got a P&C firm that's really looking hard to find a benefits book. And they're going to pay a lot more than, you know, people who already in the market just to, just to get into the space. So, you know, the, so the basics are one, is it stable? Can it grow? Is it complimentary to the, to the buyer side?

of course the culture, not, you know, the reputation, the lines of business that you're in, like benefits is, more valuable probably than, individual and Medicare. Now there's a great market to sell individual and Medicare books of business or agencies. However, benefits group benefits tends to have higher multiples. It's more scalable, tends to, have it has less,

CS: Interesting.

BR: legislative risk associated with it. You know, there's so much change going on in individual and Medicare all the time and so much political wrangling that people are, you know, what's going on there and where's the future and uncertainty is not the insurance investor's friend.

CS: Yeah. I also wonder if the employer benefits market just tends to be a little bit stickier, you know, in terms of they don't have to worry maybe quite as much about the customers churning year over year, right? As I assume the businesses are a little more maybe stable or maybe not. don't know.

BR: Yeah. Well, the commissions on the individual and Medicare side tend to vary and some of them, um, and some of them have a declining balance, you know, or declining rate of commission over time. And benefits tends to be, um, benefits tends to be stable. The customer relationships are longer. It's harder to move a group. And then it's just, you know, it's just scale. It's like, can sell a $15,000 group case as kind of a, a really nice size case. It's one customer, you know, of revenue and

To get to 15,000 of individual in Medicare, you're working for, that's hundreds and hundreds of sales calls. it's a very, it's just a, it's a less, and that's why the Medicare and individual markets on the private equity side have been dominated by folks who really have achieved scale and are moving things into call center type environments to make sure that it's profitable and can keep cranking along.

CS: Yeah, interesting. When you were talking about the book of business, understanding the mix, and also what's been the growth rates, what's been the churn rates within the customer base year over year, what's the primary source of all of that information and data? Is it largely like they're looking for financial statements? I remember back to when we went through the process and we were just...

BR: Yeah. Yeah.

CS: pulling data from everywhere constantly, you know, to try to fulfill kind of the due diligence process. And, you know, and Adam and I, my co-founder and I, we often chuckle about that time period, about how hectic it felt. You know, it was like every time we turned around, there's another ask for a different set of data or a different cut at the data. So I'm just kind of curious, like, what does that look like when you're working with a seller and how do you navigate?

all the asks that typically the buyer is placing.

BR: Sure. So, peace of mind is one of the main things that we look to deliver. It's a unique process that most folks only go through once in their life. Now, you've got an incredibly thriving business and you have investors that get in at one point and then they want to monetize their investment and you'll get other investors just like a lot of these insurance agencies do. So, you'll do it more than once, but most don't. Most just sell one time.

And so, you know, I've been part of, we have 80, 80 deals now or whatever, whatever it is and looked at hundreds and hundreds. So it's very comfortable. It's not like remarkably complicated what I do. but it is when you do it the first time it's remarkably complicated, you know, time I'm 10 might not be, but, anyway, so we've got a very methodical process of gathering data, you know, right up front. And even, even as part of our, like M&A education, like when I spoke at Agency

CS: I'm sure.

BR: Bloc last year, we talked about what are the requirements that you're going to need to pull together to get bids. So having organized financials in QuickBooks or have a really good accountant with access to data and a really good commission system makes your life remarkably easier at the time of a deal. If your paper or Excel

it's just gonna take so long to pull it all together. it might, if you end up not selling and you end up pulling it together, it'll be a great exercise for you because you'll finally be organized. But it's a stressful time already and you don't need added stressors because you're disorganized. having really good online books, always get, I get access to our clients, we get access to our clients' QuickBooks.

Only one time has anyone I think ever used anything other than QuickBooks to do their financials. And then, you know, last three years P&L, your balance sheet, your general ledger, agency, you know, the bidders are really looking to understand growth rates and expenses in terms of have they been consistent over the years, legal documents, you know, any and all agreements that you have, it's really important to have organized in some type of...

online format. you, I'm kind of getting the weeds a little bit here, but it's an important one if anyone's listening and doesn't have this. If you've got outside referral sources and you don't have agreements with them, and you just have the handshake, which is very common, that's something you want to talk to your advisor about right away because you're going to need those and people don't want to buy, it's like, the way I would put it is,

If you don't have a referral agreement and that person decides that, and they've got any control at all or perceived control by the buyer, the buyer doesn't really consider that case your asset. They're like, well, wait a minute, this other person over there owns it and they referred it to you and you're doing the work on the case, but they own it. So it's a really important exercise to make sure that there's a really clear ownership on the...

BR: on the seller's part of all of their business and having those documents in place. Being able to run commission statements by carrier and different carrier and time periods is really important. it's, you know, it's a lot of times people just have it the PDF and the statements, but if you have it in a real commission system, it's a heck of a lot easier to slice and dice and move faster during this process.

CS: Yeah, interesting. Yeah, obviously, you know, we have a commission solution. And so we talk a lot about how we think it's important to digitize that full book of business and also just to have visibility into how you're getting paid by your carriers and being able to slice and dice that you can't do that with a PDF and you can't understand, you know, over time, how things have changed with your commission payments and also be able to spot, you know, where you're not getting paid commissions and things like that. So obviously we...

BR: Absolutely.

CS: We have a vested interest in wanting to make agencies successful in that realm. I do think like based on what I've seen, there are many benefits, not just paying, sometimes I feel like customers leverage a commission solution just to pay down lines, but there's so many other benefits, I think, to actually digitizing that process. we obviously try to educate folks on that and really push that.

BR: Let me take that in a slightly different direction from where it started. If you're a business owner, part of what I recommend people do, last year at your conference, I gave a talk about being a five-star M&A planner and what it means to be thinking about M&A and value creation throughout your entire business lifecycle. And having organized data helps with one of the items on that list of being a five-star M&A planner.

which is, are you a producer trying to build the biggest income you possibly can? Or are you a business owner trying to create the most equity value that you possibly can? And that mindset, and a lot of times it's blended. It might be highest income I want on Mondays and Tuesdays. And when you're...

Maybe tired from the weekend. And then by the end of the week, you're thinking, I'm to build the great, I don't know, maybe it's the other way around. Maybe on Monday, you're like, I'm going to build the, I'm gung ho. I'm going to build the biggest agency I possibly can with the most value. Remember the, you know, the $500,000 to $2 million example, you know, four times your EBITDA and you've eight times your net worth on that asset. And having really good financials, starting with commissions and revenue tracking is crucial to...

being able to think like a business owner instead of just reactive, reactively saying, my God, I have to do commissions this month and, and, at this time of the month. And, and, know, it's just, it's a different level of rigor in terms of your mindset and your ability to think more like an owner. so I kind of took this in a different direction, but it's really important that people understand who they are, where they are and what they're building towards. And if you're thinking.

If you're thinking about being a producer where commissions fits in is stop wasting time on that and get it, get it done the right way by having a great system in place because time is money, so to speak. And then that's important also for the person who's thinking about building their equity value, but it takes on a whole other level of like, wait a minute. we too concentrated with one carrier or, you know, how, how else might we use this, this, this commission revenue data to make decisions about how we want to move forward.

BR: business. Does that make sense?

CS: Well said. It does. Yeah. Well said. I definitely agree. And I think the importance of, know, I always, I always repeat the line, you know, your book of business is your greatest asset. You've got to think about how you're going to manage that, maintain it, understand it, you know, and, and stay on top of it. Not just waiting for a carrier commission statement to tell you who your, you know, who your customers are. It's really important to stay on top of that through and through. So yeah.

BR: I'll give you an example from, on the buy side, going back to my buy side days, if someone, if I was recruiting someone and they didn't have their financials together, it was like, eh, you know, it didn't, it wasn't, it's not the best brand builder for you as an owner. And it tells you like, okay, this person's a producer. They're not a business owner.

CS: No, yeah, do it.

BR: And producers don't get paid as much for their book of business as a business owner, someone who's considered like, Hey, I'm going to build my business and scale it and think that way versus, okay, this is a fold in producer. And you want to create the greatest perception possible that you're more than just a producer and being disorganized in your financials isn't, isn't the best brand builder for you with, with buyers. And, so I work with my clients if they're extremely disorganized, the first thing we do before getting going to market is getting organized and.

And really thinking about, um, you know, how, we're presenting this and, know, it also ends up taking probably three times as long to get started on a process of selling than it would otherwise. And, um, you know, it's really hard for, for sellers or business and owners. Um, you're still doing your day job and, and, it's, you know, being organized in your financials, if you're not like really buttoned down in that area.

CS: Interesting.

Brett Rosen (35:32.802)
I would describe as the number one thing, you know, the old Stephen Covey, that's probably the number one thing I can think of as an example of important but not urgent. And just like make it urgent because it's helpful in so many ways.

CS: Yeah. So assuming an agency owner, an agency is kind of ready for the process, they're organized, they have all the data, all the financials that you need to be successful Brett and marketing their organization. What is the typical timeline of a selling process in your experience?

BR: Yeah.

BR: If someone comes to me and says, I'm ready to go and I've decided it's time to turn the page. it's almost unequivocally like six months. takes about two to three months to, go through three stages of the process. One is the preparation and getting the financials together, building an executive summary or a con.

A lot of people call it a CIM C-I-M, confidential information memorandum. I would just call it an executive summary. try to simplify it a little bit more than the CIMs but you put together the executive summary or the CIM and or the CIM and that takes, you know, maybe three to four or five weeks, depending on just how organized the person is. If they're not organized, takes three months or they get frustrated and decide not to sell because they just get frustrated because they don't have their stuff together. And that does happen. It can happen sometimes.

CS: It's too much work. It's too much work.

BR: It's like, I, you know, and, it's like, I'll get, I got to get you my data. got to get you my data. and, you know, if I'm looking at my screen over here, I've got about seven prospects that I'm just waiting for their data. you know, and, it's all good, but you go through that process, is preparation, couple months, at most, but it, along that, like, if you think of the, the, the Gantt chart of like, okay, we're doing the, the gathering, the data and we're talking about their objectives.

during that kind of first two month or first few week period, you know, really, I always go and sit down with folks and like spend a day with them and make sure to have dinner and maybe have a drink and everyone's get a little bit of loose lips can help in terms of, hey, what are like truly who are you and what do you want to accomplish? Because I'm not here to judge you. I'm here to help you. And so I really want to know the inner workings of their thought process in terms of what they want to accomplish and what's most important in terms of

What's in it for them, what's in it for their team and what's in for their customers. And then putting together a panel of potential buyers that really fit those objectives and not wasting time with all the buyers that's just like, look, this is, you don't want to go to a corporate environment, then we're not going to go to, you know, anyone in the business insurance top 10, because you're going to be in a corporate environment or, you know, top 15, you know, and figuring out what's important to, you know, in those objectives.

Then once you go through a round of meetings with, you call your list down, you go through a round of meetings, you have follow-up meetings, you decide how do you want to get to know these people and how much relationship building do you want to do? A lot of times I find then the process kind of gets stuck with, not stuck, but gets kind of slower by virtue of making sure that we have a really good in-person meeting with the key contestants, so to speak, or the key buyers and bidders. I think I've ever used the word contestants in this business, but I don't know, first time for everything. So anyway, you go through that and then, so the time you make your decision and you sign a letter of intent, it's almost invariably three months from the time you sign to the time they go through their diligence, review all the agreements and get to close. I think I've had one deal close inside 90 days.

BR: of 30, so that's like, you know, a couple percent will close inside of that. It's really not common. Just, it just the way the, and it's, look, this is a very mature industry. There's been thousands and thousands of acquisitions done. And so there is a, it's a, there's a process and this, part of the business of letter of intent to, to close is generally 90 days. 60 is possible, but not common. And then sometimes there's additional diligence items to be done.

Something happens along the way. it could just be something like a lot of deals end up getting year end, end up like, hey, I gotta take December off. I just can't go through this diligence process anymore and we gotta move out to January. I've got too many renewals and open enrollment period and whatnot. So you end up moving out to the next year. so, but outside of those types of things, it's a six month process or call it five and a half to seven to get everything done.

CS: Yeah, makes sense. Good. Well, this was, there's a lot more I'd like to talk about, but we try to keep these informative and not too lengthy, but I'm very interested to continue this combo. think you and I'll have a chance to do that. Maybe a BlocBuilder. believe you're, I know you're going to be there, right? Speaking at BlocBuilder this year.

BR: Yeah. I'm going to be there speaking on, I'm going to make it different from last year so that people don't say, Hey, I to this last year. But I would bet that most people, most people wouldn't remember that anyway. But we're going to talk about being a five-star planner and talk about how to maximize the value of your business kind of based on who you are, where you are, and take people through some interactive questions and discussions.

CS: It was the same session.

CS: cool.

BR: and make sure that they leave feeling like, know what, I understand how to enhance the value of my agency maybe more than I did before I went into the room. So I'm super excited to be part of that and see you and your great team. I really enjoy working with your team. They're good people and I'm excited to golf too out in Arizona.

CS: awesome.

CS: Yes. Yes. Awesome. So that's mid April. And if anybody's listening and interested, it's at BlocBuilder.net. You can get more information about it. We've got a, I think a really strong list of speakers and topical areas that kind of span the gamut. You know, and I think this is one that's very interesting and it's a fascinating, you know, area M&A and I've learned a lot from you, Brett.

Any comments on the best way for folks to get in touch with you if they're interested in Rosen Advisory or just learning more from you?

BR: Sure. Yeah, I really appreciate you asking me that. So my email is brett, B-R-E-T-T at rosenadvisory.com. And my phone number is 404-992-5541. And my website's www.rosenadvisory.com. And all that contact information is there as well.

Happy to talk to anybody anytime, anywhere about M&A. I love it. I love helping people, whether they're a client or not, really doesn't matter. just really love talking to owners about who they are and what they've built and what they're looking to accomplish.

CS: All right. Well, thanks so much, Brett. Again, really appreciate all the insights here. I know it's of interest to our listeners and yeah, really, really appreciate you taking the time.

BR: Thank you so much. really appreciated our time together as well.

CS: All right, thanks everyone for tuning in. We'll see you next time.

Posted on Wednesday, March 5, 2025 in Podcast