Opening an Insurance Agency in NJ - Need advice please help?

Question

I'm buying an Insurance Business( Auto, Homeowners, Life etc) from a lady that has been in the business for 13 yrs. The price isn't very expensive and covers training, the location(as well as 2 yrs lease), computers, desk, clientele, etc. With our current economy would buying this business be too risky at this point? The business has done well in the past, however, the seller has let it decline over the last two years. She has worked minimal days, not been organized, layed off all employees, and I'm not soo sure how much clientele there is left if any. Would learning the business and attracting new clientele be that difficult and with our current economy does buying seem ok? Is there anything else I should know or ask before this business is purchased? There are a few small agencies in the area but will they pose great threats to the success of this agency? Records have been poorly kept, but the seller has stated income of 160k yearly is that realistic based on the above?

Answer 1

Instead, you start afresh.  That would be a better idea.

Answer 2

Be careful, if records have been poorly kept, what do the policies look like?  Are you an experienced agent?  Do you know what to look for to prevent an E&O claim?  How many clients does she have?  What is the premium volume, not just the "income"?  The minute you purchase the agency, you are on the hook for ANY & ALL errors she has made in the past.  It may be a long hard road to audit all of the policies.  Have a GOOD E&O policy.  See if you can look at the latest commission statements.  She may have some very annoyed customers & as soon as you purchase, you will be fielding a LOT of calls.  Believe me, we purchased an agency on a downturn, it was difficult for more than a year, even now there are some issues 3 yrs out.  Our whole dept (8 of us) had to work overtime to audit files -  and there were only about 700.  There were some huge errors, luckily they were caught before any claims happened.  We also sent letters to each & every person telling them the coverage they had, on what vehicles, limits, limits on homeowners & had them sign off that it was correct.  Always, remember CYA!!!

I would think long & hard about it.  Good luck to you.