Buying a Small Book

[Reign]

CPA who we refer to contacted us today about buying his little book of business.

Over the years he was built up a small book that generates $12,000 in revenues for him per year.

He is the accountant and auditor of the companies who purchased the insurance.
The plans are with Blue Cross through BenefitMall

He wants 50% upfront money and 10% a year for 5 years

He says they will stick because of his relationship with the companies

 

[Josh]

How much does he want for it?

Rarely would a deal like that make sense. Usually what people want and what it's worth are two different numbers.

 

[Reign]

How much does he want for it?

Rarely would a deal like that make sense. Usually what people want and what it's worth are two different numbers.

He wants 1x gross. So he wants $12,000.
50% upfront and 10% per year for 5 years.

 

[NWBenefitProvider]

Offer him 50% and then 10% of what stays on the books each year.

 

[b61mack]

With insurance companies canceling policys in the thousands, I would only pay for what stays on the books. Maybe a small token up front,

 

[Josh]

He wants 1x gross. So he wants $12,000.
50% upfront and 10% per year for 5 years.

Are there any expenses? On paper that doesn't look like a bad deal, I'd still only be inclined to pay him based on what stays.

It looks like he really wants out. The reality is that If everything stays on the book for a year you're ahead. If you actually take the time to work the book and build the relationships it could be a growth area for you too.

On the other hand the deal sounds like it could be more work than it's worth. If you added $6k to your current marketing budget do you think you could add $12k/year in commissions to your existing situation? Maybe not, but it's a point I'd consider.

 

[GeorgeSolomon]

Def worth it, however my book is at about $20,000 a year for group and I wouldnt sell it for $40,000. Its just not worth it. I've built that book in one year and I want to build it to about $200,000 and will never sell it. So if the broker is selling it either he is tired of this business or he feels his business will not stick. Make sure you do your homework.

 

[NWWAIns]

Would this be a typical valuation? I was anticipating more like 2x the annual revenue