Growth = Wealth

05 Sep Growth = Wealth

Tim Cunningham of Optis Partners (one of the great mavens of agency valuations) said, “Growth Equals Wealth.”

He made the case:  High Growth Agencies command a 15-20% premium in agency values over their no growth peers. So, as a High Growth Agency, not only will your firm get twice as big twice as fast, your twice as big is worth 15-20% more.  That is wealth!  Factor in a performance based earn-out if you sell and that gap could be as great as 50%.

Then he put a formula to his words:  your agency is worth about five to seven times EBITDA (ebita= earnings before interest, tax, and amortization).  How do you grow earnings?   You can do it organically by writing more new business and watching your expenses, or you can buy growth through acquisitions.

Acquiring agencies has its benefits, but also has its risks.  Any agency you buy will have its culture, and there’s a good chance it will be different from yours.  Acquisitions mean debt and acquired producers may or may not produce.

Growing organically has a few risks too. Controlling those risks, while producing High Growth is what this book is all about.   You stand to learn a lot from your High Growth peers.  What I plan to reveal to you can make High Growth less risky and more profitable.

Almost everything in your life runs on a system if you stop and think about it.  What happens when a car comes to an intersection?  There’s a system for who gets to go and who has to stop.  There are rules in place, and when people break these rules, someone gets hurt.  Follow the rules: there are few accidents.

Look at the garbage man.  Ours comes on Thursday morning.   You have to roll your containers out, facing the alley.  Blue containers (regular trash) are grouped together and the green container of recyclables separated.  If not, they probably won’t pick up your trash because they have a system.

There is an excellent chance that once an account is written in your agency, some system takes effect.  Someone gets the binders out, bills the account, processes certificates and sends a thank you note.

All great sales organizations have systems.

• They have systems continually to build both the technical and soft skills (prospecting and sales) of their sales force.
• They have a system for strategizing new business appointments to beat the incumbent and ensure their producers win new business.
• They have a system for producer goal setting and business plans, with scheduled reviews.
• They have systems to run effective sales meetings that drive top line revenues.
• And they have systems for recruiting and hiring new producers to eliminate costly mistakes and generate performance and income right out of the box.

Their systems create sustainable High Growth, and you can do it too.

For more information on the iWin Agency Growth System, click here.