SO, YOU WANT TO BUY AN AGENCY, Pt. 2: IMPLEMENTATION

Understanding the scope of an

integration project makes all the difference

There will always be surprises;
taking the time to consider everything possible is no easy task–but well worth the effort.

By Cheryl Koch, CPCU, ARM, AAI, ACSR, AFIS, and Mary Belka, CPCU, ARM, ARe, RPLU, CIC

Our first installment dealt with due diligence—gathering and analyzing as much data as possible regarding the agency you may be planning to purchase. If all goes well, the deal is completed, the contracts get signed. Then, the real work begins! 

Combining agencies is a study in detail, timing, and execution; understanding the scope of an integration project makes all the difference. There will always be surprises; taking the time to consider everything possible is no easy task—but well worth the effort.

The quality of the plan will define the experience and assure that the agency achieves the expected ROI (return on investment).

Assign responsibility for project oversight. The potential for success is exponentially higher when one individual, optimally the agency’s operations manager or COO, is responsible for project implementation. We do not recommend assigning this responsibility to a department supervisor, or account manager handling a book of business.

Everyone will participate at some level; however, one person at an operations management level should have full responsibility for the project.

Create a project blueprint for completion of the project. This is the guiding document for the operations manager, to make certain that all components are identified prior to and just after closing the sale, and are completed quickly once the sale is complete.

We like to keep this document simple in format, yet comprehensive. All components large or small, should be captured, placed in the appropriate category, and assigned to the responsible individual, with a completion date.

A blueprint can be integrated with generic project management software, for instance, Traction™ or MS Project™. We have found it works just as well with a simple five-column table in Word™. The column headings are: department/project; responsibility; planned completion date; date completed; and notes. Blueprint progress and “next steps” should be shared with staff weekly.

Essential implementation components—timing is everything. The project rollout is heavily front-end loaded. You will want your staff to be as caught up as possible and ready to handle change. Many items will occur somewhat simultaneously—coordinating planned completion dates is critical.

We include examples of those steps to illustrate how an agency might navigate the process of integrating a newly purchased agency with their existing organization.

Important note: We repeat our recommendation that any agency considering purchasing or merging with another engage a qualified agency valuation expert who will also work closely with your competent legal counsel and CPA throughout the journey. The information provided here is by no means complete or comprehensive, nor does it guarantee any particular result; its purpose is to provide agencies with an introduction to the operational implementation process.

Initial steps

There are a number of very important elements to consider as part of implementation.

• Location decision. Buying and absorbing a book of business into your existing book is much simpler on many levels than purchasing and adding a separate location. Servicing staff should be in one location if possible. Create a timeline for consolidation, as applicable.

√ All mail should be rerouted to home office; no mail in remote locations.

• Introduction of staff to buyer/management team

√ Set up one-on-one meetings with key staff; department meetings; group activities as appropriate.

√ Address primary issues and answer questions, for instance, “How will this affect me?”

• Provide structure and context for changes that will occur: How you will guide everyone through the process—and how it will benefit them.
• Client notification

√            Identify key clients to be contacted preliminarily by seller via phone regarding sale; carefully script this message.

√            Create and send positive joint email/letter regarding new ownership to clients being acquired, signed by both buyer and seller.

√            Schedule meetings with clients to be transitioned to new producers.

• Re-branding/name-change considerations

 √ Timing

√ Email signatures in the meantime–staying the same? Or changing to buyer’s email signature?

√ Business cards (as appropriate)

√ Existing advertising/signage

• Reception/phone

√ We recommend a real receptionist.

√ Initially, calls will likely be forwarded to a centralized reception at home office, with separate ringtones and existing company names. Coordinate timeline for name change and script receptionist and staff as appropriate.

√ Determine scripting as accounts are reassigned, depending upon circumstances.

√ Record new staff voicemail messages.

• Insurance

√ Make appropriate changes to all buyers’ existing policies based on new exposures, and review limits for adequacy.

√ Make certain that appropriate changes have been made to seller’s policies (for instance E&O tail increase, additional insured, etc.) per purchase contract.

Tech stack

Automation issues require focused and extra attention.

• Network considerations

  √ Engage agency’s network security
   provider to conduct review and
   coordinate tech issues/migration.
√ Equipment. Consistent set-up/installation for any new employees, including email, 
   shared drives, web meeting and password software, etc.

√ Cloud-based approach

√ Ancillary software licenses

√ Devices encrypted: phones, notebook computers, laptops, etc.

√ Eliminate on-site servers; migrate data/software in cloud as appropriate.

Agency management system (and ancillary system) data migration

√ Schedule preparation and migration with agency management system and any ancillary vendors.

√ Agency setup: separate or combined?

√ Coordinate with CPA to determine opening balances; set up financials accordingly in system.

√ Review checking accounts. Consolidate and/or set up in system as appropriate, depending upon agency set-up decisions.

√ Client files. Is manual entry required? Determine scope and create equation for completion in less than two months.

√ Policy migration is mission critical. Determine any expiration documentation issues.

√ Retain “view only” license for seller’s management system once migration is complete. Arrange for storage of any paper files.

√ Enter/consolidate carriers, providers, commissions, producers, account managers, etc.

√ Enter all open activities from seller’s system into buyer’s system. Track these carefully to avoid any missed items.

• Determine compliance with record retention rules.
• Phone system

√ Consolidate to one system if multiple locations will be maintained.

√ GoTo™ or similar phones/software, especially for remote/hybrid employees

• Website

√ Work with webmaster to update/consolidate content under buyer’s website.

Human resources

It is important to work with competent legal counsel regarding employment practices liability (EPL) questions and procedures. Note: Adding employees may change your Federal and/or State compliance requirements regarding applicable employment laws.

• Business model and reporting relationships. Create and review organization chart with employees.
• Position descriptions should be provided to all employees, including non-exempt/exempt status.
• Create employee files for any new employees.

√ Review documents in seller’s employee files for appropriate records retention; consolidate files as appropriate.

√ Provide employee handbook and acknowledgment to all new employees.

√ Note any differences in hours, paid holidays, PTO (or vacation/sick leave) and document for each employee.

√ Resolve any accrual issues; set up tracking with payroll provider.

• Adjust compensation as appropriate for service and administrative staff.
• Finalize producer contracts as appropriate. Include sales and marketing goals, including adherence to procedures and target marketing parameters.
• Add any new employees to payroll.

√ We highly recommend that you outsource payroll to a professional service. Most national level services also offer compliance resources at a reasonable cost. This is especially valuable in helping your agency to comply with various—and often fluctuating—State and Federal employment-related laws.

• Schedule benefits meeting with your provider and handle addition/transfer of new employees’ benefits as appropriate.
• Coordinate any COBRA notices as appropriate.
• Eliminate 1099 or producer book ownership situations; work with attorney to update/change contracts.

Client files

As you address client issues, consider the following:

• Once all clients are in one system, including any manual entry—within two months, if possible—realign and reassign books of business, preferably by alpha, in each department.
• Forward bios/photos/intros of service team once assignments are made.
• Make certain all open activities transferred to buyer’s system per Tech Stack note above.
• Implement primary/next available handling of calls.
• Forward risk management renewal reviews and appropriate changes for purchased accounts 120 days prior to renewal, within first year.

Procedures

If your agency does not have formal, written, audited procedures in place, you should not consider purchasing an agency until you have implemented them—for your sake, and for the sake of your clients. The procedures section is likely the broadest; we include only the basics here.

• Implement CaughtUP™ system immediately agency wide, and identify all backlog and prep for handling, whether paper or digital.
• Convert all paper to digital for handling. No paper, including phone notes. Automated agency mantra: “If it’s not in the system, it didn’t happen!”
• Carrier website retrieval of all policy contracts and front-end scanning, by receptionist