Taking in a Business Partner... Blessing or CURSE???!!!??

[MattKnowledge]

Here is the back drop: I have a total of 5 years experience. 1st year and a half in the biz I was strictly personal lines P&C with an Independent agency. Being a rookie I was spending more on marketing that I was making from commissions so I hit the road for Greener pastures. The next 3 1/2 years I was a producer in a StateFarm agency. Life, Health, P&C, small commercial accounts, blah blah. I went through the state farm Aspirant program and was approved to open my own office but something never felt right... (whole other topic). I built a business plan around being an Independent agency owner and acquired 3 direct appointments (personal lines only). The entire time people were saying I was crazy and I kept smiling.
Now to the point... Someone recently came to me wanting to come on board but only if they get 50% ownership. My agency has been open and producing for 3 months. It is just me. The book size just hit 100K. I have known this person professionally since my first year in the biz and he has always been supportive and helpful. I trust him but remain aware of human nature. If he walks from his current captive role he looses out on a book "payout" since he would break his non-compete.

My thinking is that with two of us there will be a synergy aspect and that my personal production will increase. Also, we may be able to secure another appointment quicker and add Life & commercial to our portfolio. The agency's name will gain recognition quicker in our community and we will hit profit sharing sooner. What I produce I keep 100% commishion including renewal and visa-versa. Once profit sharing is reached we will split on prorated basis.

Eventually we plan to split the costs of hiring and training additional producers and then split the revenue 50/50 that comes from their production and renewals.

There is a million ways to skin this cat... Have any of you going through a similar experience? If so, do you have any regrets? Any advice?

I really want to have someone share in this new excitement and he brings 10-years experience but am I letting this cloud my judgment?

Thank you in advance for all serious answers... BTW this forum was extremely helpful in helping be get to where I am today!

 

[rousemark]

Here is the back drop: I have a total of 5 years experience. 1st year and a half in the biz I was strictly personal lines P&C with an Independent agency. Being a rookie I was spending more on marketing that I was making from commissions so I hit the road for Greener pastures. The next 3 1/2 years I was a producer in a StateFarm agency. Life, Health, P&C, small commercial accounts, blah blah. I went through the state farm Aspirant program and was approved to open my own office but something never felt right... (whole other topic). I built a business plan around being an Independent agency owner and acquired 3 direct appointments (personal lines only). The entire time people were saying I was crazy and I kept smiling.
Now to the point... Someone recently came to me wanting to come on board but only if they get 50% ownership. My agency has been open and producing for 3 months. It is just me. The book size just hit 100K. I have known this person professionally since my first year in the biz and he has always been supportive and helpful. I trust him but remain aware of human nature. If he walks from his current captive role he looses out on a book "payout" since he would break his non-compete.

My thinking is that with two of us there will be a synergy aspect and that my personal production will increase. Also, we may be able to secure another appointment quicker and add Life & commercial to our portfolio. The agency's name will gain recognition quicker in our community and we will hit profit sharing sooner. What I produce I keep 100% commishion including renewal and visa-versa. Once profit sharing is reached we will split on prorated basis.

Eventually we plan to split the costs of hiring and training additional producers and then split the revenue 50/50 that comes from their production and renewals.

There is a million ways to skin this cat... Have any of you going through a similar experience? If so, do you have any regrets? Any advice?

I really want to have someone share in this new excitement and he brings 10-years experience but am I letting this cloud my judgment?

Thank you in advance for all serious answers... BTW this forum was extremely helpful in helping be get to where I am today!

He approached you saying, "give half" ? Just based on what you are saying, I would pass. Have been involved in successful partnerships and one that has gone sour. Believe me when I say there is not much worse than being tied up in a partnership that isn't working.

 

[LostDollar]

I'm not an agent.

You described a situation in which you have slowly and steadily created a business which matches your goals and your ideas.

I don't remember the specific post right now but somewhere dhk posted a link for staff that a financial planner would find useful and the order in which to hire them. I don't have time to hunt for it right now.

It seems to me that if you are interested in synergy you would be much more likely to obtain that with a good office employee who believes in you and what you do and can help you manage your customers===rather than having a 50% partner who will be competing with you for every customer that comes in the door.

I am not qualified to comment on whether two producers allow more rapid appointments with insurance companies.

If you have the right person, a partner ship could work well. However; it does seem to me, that in the situation you described, you are taking the higher level of risk. Do you think that the person you are talking about really wants to develop a business with you or just finds you a handy way to provide cash flow and escape a captive business relationship?

----------

One other comment.

I see things like books of business, commission rates and non-competes are points of significant contention. I am in no position to comment on what is fair for these things. I would say however; that if you both are willing to ignore current legal strictures upon him, in order for him to come into business with you; that may not bode well for you in regard to the actual effectiveness of any legal protection you would like to have for yourself in the new venture.

 

[Bevo]

You're wanting his 10 years experience, however don't forget that the real prize is "who you become" after digging in and fighting the battles yourself to become successful. Sounds like you want to speed things up thinking it will make you happier or successful. You keep mentioning "quicker".

I say slow down and take breath before you jump in business bed with this guy.

Business partnerships (no matter how large or how small) are relationships that should be treated like marriages. You're stuck with this guy day in and day out, and someone ALWAYS ends up working harder than the other person. I know of several successful partnerships. I know of far more that have gone South very badly making people's lives as miserable as a divorce sometimes can be.

I would honestly ask yourself "How come I can't do it alone? Plenty of other people have, why not me?" Once you get by all the excuses to make yourself feel good hopefully you'll get to the real answers.

Maybe you're just not willing to work hard enough to do it by yourself which is fine. If losing 50% out of the gate is worth it to you to compensate then go for it.

I never would.

 

[Rearden]

Business partnerships are typically always a mistake.

 

[LGilmore]

Usually the few times I have been approached to partner the offer always came from the other guy for two reasons. One they were failing and wanted to hitch onto my business to keep themselves afloat. Or they were hoping to take my business by partnering and then working to push me out.

I've met lots of sharks in this business which is why I work alone 99.9% of the time. Ever notice sharks always smile even when they bite you in half.

And I caught something in your post. If you think a partner will motivate you to produce more... well are you sure you're in the right business?

I adhere to an old saying "if I am going to work for an asshole, I'll work for the one in the mirror. " I will make or break it myself. The thought of a partner to motivate me has never crossed my mind.

 

[xrac]

Pass..................!

 

[Yagents]

What I see:

You changed paths 3 times, and made your own decision. That goes away when u have a partner.

You went Indy, and your partner is looking to ride your coat tails after you took all the risk.

It's not only the revenues that grows, but also the expenses, some u may not agree on, and he pisses your money away. My success is due to 90% margins and controlling both sides of equation.

Gilmore has the best quote, look in mirror. I answer and rely only on myself. No assistant either. Your clients know you or they can't be considered your client.

When u put in 12 hour days, and partner only does 8-10, the bitterness will follow, and it's a race to the bottom to see who plays more golf.

 

[DHK]

Usually the few times I have been approached to partner the offer always came from the other guy for two reasons. One they were failing and wanted to hitch onto my business to keep themselves afloat. Or they were hoping to take my business by partnering and then working to push me out.

I've met lots of sharks in this business which is why I work alone 99.9% of the time. Ever notice sharks always smile even when they bite you in half.

If only there was a recruiting "code of ethics" or pledge for our industry.

 

[LostDollar]

What I see:

You changed paths 3 times, and made your own decision. That goes away when u have a partner.

You went Indy, and your partner is looking to ride your coat tails after you took all the risk.

It's not only the revenues that grows, but also the expenses, some u may not agree on, and he pisses your money away. My success is due to 90% margins and controlling both sides of equation.

Gilmore has the best quote, look in mirror. I answer and rely only on myself. No assistant either. Your clients know you or they can't be considered your client.

When u put in 12 hour days, and partner only does 8-10, the bitterness will follow, and it's a race to the bottom to see who plays more golf.

I will offer some respectful disagreement here, from the client side of the equation.

I purchased a medsupp from a forum member who has an agency and uses assistants.

I had a weekend question, the kind of question that many posts here discuss as pia's for agents.

The agent was out of town and passed the question on to his assistant. Within 45 min of Monday open for business the assistant was on the phone with me.

She told me that the medsupp company could not do what I asked. She discussed the company's plans to change that in the future and then offered two ways in which the agency could help me get the information I wanted, if I wanted them to help me.

I had more interaction with her on one issue than I have had with the agent on 3 questions. BUT.... there was/is no question whose client I am -- AND -- it is very evident there is an agency team in place to see that client needs are met. That actually makes it more likely for me, as a consumer, to recommend this agency to others.

The keys here are to choose the right people, see that they have the right training; and then work, over time, to see that your clients trust interacting with them as well as yourself.