Against a shifting regulatory landscape, increased cost of doing business and dwindling customer loyalty, it may be that you are considering selling all or part of your business. It may be a decision you’ve reached recently as a result of something beyond your control turning against you, or one that you have planned for a few years and are now entering the final stretch.
True differentiation reaps rewards
As with anything you’re selling, timing is everything, and the good news is that multiples for good businesses are still strong. There are definite challenges coming up over the next 12-48 months with political uncertainty within and outside the UK not the least of those but, for now, buyers are plentiful. The difficulty for insurance businesses is how to convince a potential buyer to value your business on the most attractive terms. Valuations are usually based on a multiple of brokerage income, and if you are a traditional insurance broking business it’s difficult to argue for it to be valued on any other basis.
At its simplest level, displaying the ability to differentiate yourself from your peers is the entry-point to enabling the value of your business being viewed differently.
Demonstrating your identity
Let’s look at skills and resources you might have. For example, if you have moved on from merely “re-selling” insurer rates to being a business that analyses performance and flexes commission to optimise income and retention, you are already taking steps to creating your own space within the market.
Similarly if you have enriched an insurer’s product offering by incorporating your own product or service elements (not just the traditional add-ons) that suit your particular market or customer segment, again you have started to create your own identity. The key is that you can demonstrate that you have shown understanding of the market, made changes to improve your offering, and that those changes have produced a discernible (and, ideally, the expected) improvement in your results.
While enhancing value is not all about technology and data, the truth is that the more you can demonstrate a track history of using data, analysis, analytics and insurtech to help drive growth in or increase the profitability of your business, and why a future that includes those elements will continue those trends further, the greater the likelihood that a potential buyer will view you more as a tech business, rather than an insurance business.
Conversely, in a world where most buyers will view engagement with tech and data as “the norm” and a pre-requisite for a robust future income stream, can you demonstrate that not possessing or deploying those skills will keep you resilient to market development over the coming years? If you can’t, why would a buyer be interested in an asset that will probably dwindle faster than they perceive the “average” to be? It will either make your task of selling the business that much harder, or force you to accept a lower valuation than you were hoping for. Either way, you start on the back foot, which is never a good way to enter a negotiation.
In some cases sadly, that will be an inevitable outcome.
Taking your first steps
However, the good news is that even if you haven’t got a track record of business differentiation, analysis or data integration, you probably possess all the basics to be able to make a start. If you have already embarked on that journey, as you’ll know, it can be difficult to decide just how far to go in balancing investment with return.
So if you are considering exiting soon, please consider carefully how you might put your best foot forward, how you entice a potential buyer to be more interested in your business than the dozen others that might, on the face of it, look exactly the same, and force them to pay more for it as a result.
Having been through the process a number of times ourselves, we can walk in your shoes and help you answer the kinds of questions you’ll be asking yourself, and take the steps relevant to your business to help drive its value higher.