investment in hiring another person to join the agency. That’ s when I met Duncan and Kurt at a PTRA conference and the subject of succession planning came up. We decided at that point to merge our agencies and developed a plan that would allow me to buy out Duncan. Now Kurt and I are partners.”
According to Gunstream, thankfully EIP had two previous buyouts in its history.“ Duncan and Kurt purchased it from a previous owner and that owner had purchased it from his predecessor. Duncan and Kurt knew how it was done before and I was brought up to speed with the process.
Valuing the Agency
“ Bottom line, we’ re a service business and you can value us similar to how you’ d value an attorney’ s or doctor’ s practice. Our challenge was there are no guarantees in our business. We have 30- or 90-day contracts in place. And your lines are a bit of a mixed bag where some of your partners are stronger than others. What we decided on was to value the agency based on one year’ s growth revenue.”
He describes the entire succession planning process as relatively easy.“ We were all on the same page because we were all in favor of the action. No one felt rushed and no one was left feeling this was something that they were forced or didn’ t want to do.
“ We sought counsel through our accountant and had our respective attorneys look over the paperwork. Basically, we were able to make 90 percent of our decisions over dinner. That remaining 10 percent( i. e., checking details with attorneys), however, took a good six months. That was the only frustrating part for everyone.”
All along, Gunstream emphasized that the agency’ s manufacturers were on board with the process.“ They were overwhelmingly in favor of what we were doing. We didn’ t speak with our customers all that much until the transition had taken place. What we did was to make sales calls with each other to alert them to the merger and let them know what was going on. Altogether we got very favorable responses from both manufacturers and customers.”
With the new plan firmly in place, Gunstream was quick to note how important effective succession planning is to an agency.“ Regardless of industry, age or stage of ownership or even potential owners, succession planning is absolutely critical. Remember there are no guarantees in life. You never know how the stock market is going to behave or when a death will affect ownership. The rep firm owner who operates with no plan could be faced with a catastrophe if people make assumptions in the absence of a solid plan.”
The Important Role of Rep Associations
As a 35-year-old, Gunstream positions himself firmly as a millennial when he makes the following observations about rep associations.“ I really feel the millennial generation isn’ t a joining generation. We don’ t form groups. That’ s a mistake. Rep associations such as PTRA