Brokerage Ops the May 2023 issue

The Numbers Game

Your agency’s technology and data are key to telling your story in a cooling M&A market.
Sponsored by Vertafore Posted on April 30, 2023

The good news is there’s still strong interest in M&A activity, but buyers are also more cautious and looking to maximize their investment.

What does that mean for agencies, brokerages and MGAs/MGUs looking to attract new investors, partners or a buyer? The short answer: your technology—and the data you glean from it—matters more than ever.

Know Your Numbers

You’ve likely watched this scenario play out on the TV show “Shark Tank.” Eager entrepreneurs step up to deliver their well rehearsed elevator pitches. They hand out samples, and the sharks start asking questions. “What are your costs?” “What is your overhead?” “How much have you sold?”

If the contestants hesitate or stumble to answer, things tend to go downhill from there.

Potential investors and buyers are looking for detailed numbers to evaluate your agency’s worth. Agency owners certainly know if they are making a profit. But knowing your numbers goes deeper than the bottom line. Where are you making money (or not)? How are you spending, and what’s the ROI? Why and when are clients converting? Where are your growth opportunities?

This is where your agency’s technology takes center stage.

Ultimately, the combination of your CRM and AMS provides the ability to understand and—most importantly—to show how your agency is doing. These tools hold the data you need to present the story about your business that investors are looking for.

CRM + AMS: Telling Today’s Story of Your Business

In your day-to-day operations, your customer relationship management (CRM) tool is the engine to track leads, close business, and stay on top of your client journey. As you prepare to attract a buyer, the snapshots of those daily activities become a gold mine of big-picture data about the current state of your business. In addition to overall visibility into your sales rate and pipeline, a CRM can surface the how and what of your agency’s success: the most profitable lines of business, where prospects are converting into clients, average
sales cycles, renewal rates, and much,
much more.

But the real power comes with having a CRM that integrates with your agency management system (AMS). For most agencies, their AMS is the tech that’s powering their most essential functions. It’s the system of record for their clients. It’s where their employees spend most of their day. It’s where they see their relationships with their carriers. And perhaps most importantly, the AMS is the window into an agency’s revenue and profitability.

Ultimately, the combination of your CRM and AMS provides the ability to understand and—most importantly—to show how your agency is doing. These tools hold the data you need to present the story about your business that investors are looking for.

Machine Learning: The Crystal Ball for Where You’re Going

It’s one thing to know how you’ve been performing historically. But in addition to evaluating the current state of your business, investors and buyers want to know the long-term potential of their investment. To do that, you need technology that can uncover trends and surface your prime opportunities for growth.

We’re at the point where big data and the power of artificial intelligence and machine learning are accessible to independent agencies of all sizes. The best of these tools integrate directly into the systems your agency is already using (like your AMS and CRM). And they don’t just process and visualize data; they can predict things like which clients are most likely to churn, the best prospects for cross-selling, and the likely outcomes of moving into a new region or line of business.

Think of your AMS and CRM as the tools to level-set where you are and where you’ve been. That’s your data set. Now you can use technology to model and project where you are going in the future. With those data-backed predictions, create a crystal-clear picture of the value of your agency based on where you are headed and how you plan to get there.

Potential investors and buyers are looking for detailed numbers to evaluate your agency’s worth.

Watch Out for This Stumbling Block

Numbers and data are the secret sauce to tell your agency’s story—but only if they are accurate. The numbers that come out of your systems are only as good as the data you put into them in the first place.

Whether a merger is on your immediate horizon or part of your long-term business strategy, now is the time to shore up (or create) a solid data governance plan for your entire agency. That plan should include standardizing workflows to ensure data consistency, automating processes when possible, and leveraging APIs and open platforms to reduce redundant data entry. The bonus is that those steps are good for your business overall and can only enhance your current success.

Dana Pasquali VP of product management, Vertafore Read More

More in Brokerage Ops

Your New Employees Are Risky
Brokerage Ops Your New Employees Are Risky
There are some things your new hires need (and want) to know.
Brokerage Ops Toppling the Reign of Regulation
The Department of Labor’s proposed fiduciary duty rule may have already been s...
Insurtech for Insurance Brokers, by Insurance Brokers
Brokerage Ops Insurtech for Insurance Brokers, by Insurance Brokers
Irys Co-Founder & CEO Margeaux Giles discusses the core problem of legacy tech a...
Sponsored By BrokerTech Ventures
Don’t Be Risky
Brokerage Ops Don’t Be Risky
Here are three ways your client service talent strategy can supercharge (or sink...
Fearless Feedback
Brokerage Ops Fearless Feedback
You can take the dread out of performance improvement conver...
Building an Inclusive Workplace
Brokerage Ops Building an Inclusive Workplace
When you get serious about diversity in your company, you’...