It's a challenging time to be an insurance broker in Canada. In addition to increasing consolidation, the insurance industry is facing a number of headwinds related to digital disruption, changing tax legislation and regulatory requirements, shifting age demographics, and the COVID-19 pandemic.
To prepare for and manage these market changes, it is crucial for owners to obtain an accurate, reliable business valuation.
Values for insurance brokerages have grown over the last few years and are expected to hold steady for the near term, but they have reached a plateau. The next five years will be a turning point for many brokers. As a business owner, you will need to decide if you're willing and able to adapt to the changing market, or if selling your insurance brokerage is the next step.
Why is a valuation important for insurance brokers?
Typically, an insurance broker requires a valuation in the following situations: as part of a transaction, such as selling the business or bringing in a new partner; to obtain financing; to assist with tax planning; or for compliance needs, such as financial reporting or tax filings.
A valuation can help a broker determine the optimal time to exit the business. Sell too early and you risk losing significant cash flow gains. Sell too late and the business may be worth less in only a few years' time.
Offers to buy your business can happen at any time. Owners must understand the true worth of their brokerage and be prepared to respond to opportunities.