When Selling Your Agency Does NOT Make Sense

The process of selling a business involves an amalgamation of financial, personal and external factors. Sellers should work with their advisors to create a wish list of what they want.

It is equally important to create a list of what they do not want and other deal breakers. The final deal does not need to be perfect, but should meet all of the sellers’ needs and expectations.

Recently we have had six clients that wanted to sell their business. We worked closely with them throughout the process. At the end of the process, two of them decided not to sell for good reasons.

Based on these two recent experiences and others we have seen over the years, it is important to know when it makes sense not to sell, even when an agency owner initially thought they should.

Consider an internal sale of the business. The seller can negotiate a loan for themselves and have the key employees or family members pay the owner off over a reasonable time.

The following are scenarios when it makes sense not to sell the business:

1. Know Your Value

Do not sell if the buyer is lowballing the value and will not pay a seller what they or their consultant think the business is worth.

Instead, consider an internal sale of the business. The seller can negotiate a loan for themselves and have the key employees or family members pay the owner off over a reasonable time. The owner can then keep some stock and their pulse on the firm, while continuing to pull some money out of the business and build value in their remaining equity.

2. Milk the Business

Sometimes, the business makes too much money. We once had a client who was taking home 70 cents of every dollar. That amount of profit was hard for the prospective buyers to consider, despite the historical financial proof.

Buyers would have a hard time replicating that performance. The risk to a buyer would far outweigh what the risk is to the original owner, as they have all of the control.

In this situation it is often best to continue running the agency until there is nothing left. The owners should make more money keeping the business, instead of selling it.

3. Run It Yourself

When there is more than one owner, sometimes the owners choose to sell the whole agency to an outside buyer. However, one owner might not be ready to sell.

Instead, that owner should consider buying out their partner(s) and run it the way they want to. If needed, some stock or stock options can be sold or given to key employees and family.

It is important to involve the next generation – to allow the remaining owner to transition out when he/she is ready.

4. Sell Only a Portion

Look for a buyer willing to take a minority share of the business.

Sometimes, the owner really needs to pull some of their equity out of the business to diversify their investments. Look for an internal buyer, a new partner, or a friendly competitor to buy into the business.

Keep the majority position, so that business management is also still controlled.

5. The Business Is Not “Sellable”

Once in a while there are times when the sellers have tried to sell and cannot, because the agency is not desirable to a third party buyer for a variety of reasons.

Perhaps, the accounts have too much risk in continuing without the owner, the firm is not yet profitable enough, the firm has a reputation for employee turnover or there are no young people to perpetuate the sales efforts.

The owners need to revamp the business if they want to sell. Outside advisors should be brought in to help make the right changes quickly.

6. Combine Forces

Some owners need to sell, but they are not quite ready. A good solution is to merge with an agency that has younger owners for a fresh perspective.

The first owner can usually maintain some ownership and have an equity position.

The second agency owners should protect themselves by having a planned buy-out of their new partner, in case that person “retires in place.”


Having an exit strategy is necessary for business owners. The first step is to know the parameters of what would be considered a successful exit as an owner. If it is time to perpetuate the agency and one or more of the scenarios above seem likely, discuss the situation with an advisor. It might be best to NOT sell the business to a third party. Instead, there are usually options that can be done to provide some relief to the owners and perhaps resolve most of their concerns.

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