If you are just starting
How this usually goes
It's likely you've never sold a business — the truth is, most people who sell one never have. For most it's a once-in-a-lifetime event. Here's the shape of it, and where to find the people who know more than I do.
How a sale might unfold
A conversation
Someone asks whether you've thought about selling, and you find out whether they're serious and whether you are. This can go on for years without needing to go further.
A confidentiality agreement
Signed by both sides before numbers are revealed. It's what lets you talk freely without word reaching a carrier, a competitor or your staff.
A first look at your numbers
Every buyer asks for roughly the same handful of things here — think a commission summary by carrier, retention, and headcount. Don't worry, it's not the full file at this point.
An offer, informally
Usually a price or a spread, plus the thinking that got there. Nobody's bound by it yet. Even a figure you turn down flat is worth having — for most owners it's the first real information they've ever had about what they built.
A letter of intent
The price and the shape of the deal in writing. Still not binding, but might come with exclusivity that stops you talking to anyone else for a set period.
Due diligence
The detailed review. Contracts, financials, carrier agreements, employment terms, claims history. This is the long part.
Closing, then handover
The money moves and the ownership changes. Most sellers stay on a while afterwards — as a producer, a consultant, or just somebody who answers the phone when a carrier calls.
Some Vocabulary to Know
- Book of business
- Your clients and their policies, taken together. It's the thing being bought.
- Commission mix
- How your income splits across carriers and lines. A buyer reads it for concentration of clients, lines, or carriers.
- Retention
- The share of your book that renews each year. It plays a large part in what an agency is worth.
- Perpetuation
- The industry's word for succession — handing the agency to family, to staff, or to a buyer.
- Asset purchase
- The buyer buys what's inside the company — the book, the files, the phone number, the name — and the company itself stays yours to wind down. Anything that ever happened inside it stays with you, not the buyer. The usual shape for an agency this size.
- Stock purchase
- The buyer buys the company itself, including everything that ever happened inside it. Less common here, and it changes your tax position considerably.
- LOI
- Letter of intent. The deal in outline, before the lawyers. Mostly non-binding except the parts about exclusivity and confidentiality, which are.
- Due diligence
- The buyer's detailed inspection between the letter of intent and closing.
- Seller note
- Part of the price the buyer owes you and pays after closing rather than at it. It's a loan you're making to your own buyer, and its terms matter as much as its size.
- Earn-out
- Part of the price you only receive if the agency hits agreed targets after the sale. Fair when the two of you honestly disagree about what the book will do next; a lower price in disguise when the targets sit where the book can't reach.
- SBA 7(a)
- The Small Business Administration loan program commonly used to finance the purchase of a business this size. If a buyer mentions SBA financing, this is what they mean.
- EBITDA
- Earnings before interest, taxes, depreciation and amortization — roughly, what the business makes before financing and accounting. Agencies are more often priced off commission income, but you'll hear it.
A question to ask about a seller note
If part of your price is a seller note, the size and terms of it are the obvious questions.
Depending on how a buyer's bank financing is put together, a seller note can be required to sit on standby: no principal and no interest reaching you until the bank has been repaid in full, which can be a long time. The note's still yours and the interest still accrues. You just may not see any of it until the end.
The SBA tightened the rules on this in June 2025, so anything you read from before then may describe the old arrangement. Your own accountant or attorney will know how it applies to you.
Where to go for more detail
- HBR Guide to Buying a Small Business
Ruback and Yudkoff, two Harvard Business School professors who teach this for a living. Chapters on finding a business, valuing one, and negotiating — all of it from the buyer's viewpoint.
- SBA — the 7(a) loan program
The program itself, from the agency that runs it.
- Starfield & Smith — what changed in the SBA rules
A law firm that does nothing but SBA lending, on the June 2025 rule changes.
- Big "I" — the Agency Universe Study
The industry's own survey, run every two years by Future One. The 2022 edition put the average agency principal at 54, with more than eight in ten agencies holding a perpetuation plan and four in ten expecting an ownership change inside five years. A 2024 edition is out.
- IBBA — the International Business Brokers Association
This is where to find an intermediary who does these deals for a living.
Something here you'd want explained properly?
If a term or a step is missing, tell me and I'll add it.