My start in the automotive industry is not unlike the experience of many others. I started in the business in 1999 and worked my way up through the ranks from a background of direct employee organizations. I learned a great deal and wanted to do more for dealers, by truly representing the dealer, not the insurance company. I liken it to “Jerry McGuire,” where he worked for the giant agency where the goal was more and more athletes leading to more and more revenue. However, he wanted to do it his own way with a more personalized approach.
I felt that there was a better way of being an agent, and in 2014, I started my own agency. The dealer principal is the boss. I wanted to do what was best for the boss and his dealership.
While many agencies have long legacies of work passed down through generations of families, I was relatively still a new entrepreneur, moving mountains at just seven-and-a-half years into my own business when I sold. A lot of our colleagues have asked me what I was thinking.
I had seen so much change in the past three years, far more than I had seen in my first 20 years in the industry, that I knew I needed to take action. I was alarmed by the consolidation of dealerships, administrators, and agencies. Large groups have been buying up the family owned stores. My company had grown to the point where it either needed an infrastructure overhaul to establish itself as a national organization, or I needed to combine forces with the right company to grow.
After two years of due diligence and much soul searching, along with meetings with several companies looking to acquire my brand, I made my decision to expand. I needed a partner that could help take my company national with the right infrastructure. My dream team was going to be aligned with my values, goals, and initiatives. The merger had to be powerful enough that together what could be accomplished would be far more substantial than what was accomplished on my own.
Humble Beginnings to Great Success
When I opened my agency, we were in a tiny warehouse that was the office, essentially a storage unit with a carpet and two desks. The company was like a child, and I nurtured it and watched it grow. The growth was tremendous and wonderful, however, it wasn’t scalable. I had gotten to the point where we either needed to build a wall around the business and defend our position, or double down and expand significantly. The market conditions today made it a perfect time to move ahead with a merger. In my case, with my priorities, it provided the best solution for growth with a savings of several million in expenses, had I chosen to expand on my own.
Why Due Diligence Matters
As a prospective seller I had a great deal of concerns in finding the right buyer. My primary concerns were my loyal customers and employees. What would their future look like? More specifically what changes would my dealerships experience? Being administrator agnostic was a critical factor for me. Some buyers are very provider focused, and while I believe synergies are important, I did not want to cause any disruption or change in my dealerships where it wasn’t warranted or in their best interests.
Regarding my employees, I knew that the success of my company lay squarely upon my shoulders, and that I wanted to provide employees with the security of continuity. I’m certain many of you with your own agencies can relate. Today I can say with absolute certainty the company will go on regardless of my involvement.
Another concern was whether I would maintain the ability to manage my company, or would that all be subject to change? I needed assurances that we would going to build upon the success of the company I founded and that I would be able to continue to grow it.
Culture was a significant factor as well. Culturally you should not be too far apart from the organization you join. You and your staff will need familiarity. Gaining tools and resources is great for the employees. Organizational culture must align and enhance your local culture.
In my instance, I decided it would be prudent to hire a company that does due diligence to assist me in my search. They provided research, reports, and predictions that would have taken me weeks, even months, to compile on my own.
Timing is Everything
I also focused on key employees who had been with me since the beginning. They did not have equity and were not shareholders, but they believed in my vision. Their continuation of employment and providing them with improvements was very important to me.
News of the merger caused a bit of nervousness, but in short order, they felt confident that it was the optimal plan for the company going forward. They realized that they needed the stability of a parent company, not just a company that centered on me.
My best advice to those of you who are thinking about selling would be to consider what our industry will look like in five years. If you have no intention of selling, then you need to invest today — not tomorrow — to assure a successful future.
If you don’t have the vision for what that may be — and some of you frankly don’t even have the time to think about it — then you should move ahead and consider selling your company. Consider what you want your life to be like if you sell. Do you want to continue to lead, or are you looking for an exit strategy? These are things only you can answer. For legacy business owners, consider what our business will look like in five and 10 years, and ask yourself if you are taking the right steps now to be set up for it.
There are absolute certainties in our industry. Five years from now will be different from today. Consolidations will have accelerated with far less independent car dealers to call on. The competition is fierce and is well poised to become fiercer. Administrators are consolidating, which takes power and opportunity away from agents. One can assume it will change the agency business landscape significantly. The model has changed and continues to change. You need to have a solid training solution, ultra-competitive fees, transparency, the right technology, and the right people to work it all.
Amazon could be bankrupt and obsolete some day because businesses evolve. Staying lean, relevant, and scrappy is important to an agent’s survival. You must reinvest in your company and look at fresh, new ideas.
By and Large
Yes, I was nervous about selling. However, today, my only regret is not having done it sooner. There has been no downside. Selling has provided me with tremendous opportunities, as well as a great deal of relief. I have partners, and we all share the same ambition.
Through the acquisition, many of the ancillary obligations were taken off my shoulders allowing me to get back to the customers. We had gained so much including human resources, payroll processing, marketing, and more. Now our sales team could focus more inclusively on customers and sales.
Very quickly we realized that by way of the merger we have become much stronger. We now have the ability to service customers with a high-quality experience from coast to coast. There are no limiting factors. We have become a national agent.
This has been my experience. I hope the information provided helps you find your way.
Dylan Doran is President of Western Fidelity Insured Services