Fully describe the business's activities?
Independent Short Term Insurance Brokerage with a focus on commercial lines. The practice was established in 1996 and has evolved through marketing to life clients.
How long has the business been established?
More than 20 years.
How long has the owner had the business?
The owner started his Financial Planning Practice more than 20 years ago and his wife joined him to service existing clients with their short term insurance needs.
How does the business operate on a daily basis?
As per the norm for this type of financial service provider most of the day is spent on attending to client instructions with regards to policy amendments, claims and other other admin related activities. The owner focuses on policy renewals and sourcing new clients.
How are the clients attracted to the business?
Lots of word of mouth referrals. It seems that this FSP has created a very stable and loyal client base.
What Advertising/Marketing is carried out?
No formal marketing plan with only sign board at the offices.
Does the business have any contract work?
This is an independent FSP with contracts with major insurers and underwriters.
What competition exists?
The short term insurance industry is an extremely competitive sector with lots of direct insurers.
What are the seasonal trends?
Claims administration increases during the school holidays.
Is the business VAT Registered?
What VAT documentation is on file?
VAT201 Returns will be made available for a due diligence process. The returns will however reflect income from other sources.
Are there up-to-date Management Accounts available?
The owner does not use any formal accounting system to manage the business. Commission earnings and figures can be verified via insurers.
What Balance Sheet and Income Statements are available?
On file we have available the February 2018 Financial Statements
How could the profitability of the business be improved?
This particular practice represents a huge opportunity to increase the fee income with introduction of policy/service fees. A potential acquirer that has access to an administration platform may also be able to unlock further value with claims administration process and related fees.
Is Seller finance available and for what amount?
The owner will be comfortable to remain involved in the practice for an extended period of 3 years. Our client will consider terms for suitable buyers only.
Explain the recasting of financials on the broker report
The Financial Statements for this practice includes the income from Life and Investment Advisory Fees. We have therefore deducted these commission earnings from the turnover. We have also recasted the expenses in order to create an accurate reflection of the expenses associated of the operation and management of the short term insurance book. Potential buyer to conduct a proper due diligence to confirm the commission earnings and operational expenses.
What is the total staff complement?
Five administrative personnel
Give a breakdown of staff/ functions/ length of service?
Most of the staff have been with the business for many years.
Do any have management potential?
The staff is not directly involved in marketing and sales but mostly office bound with administrative duties. The owner is satisfied that the staff is more than capable to manage the daily activities in his absence/holidays and the like.
How involved is the Owner in running the business?
The owner is 100% involved and committed to the business.
When does the current lease end?
The business is operated from two separate offices. One office adjacent to the owner private residence on which a lease agreement can be negotiated. The second office is located in a rural town where it serves an established base.
Is there an option of renewal & what period?
To be negotiated
What is the annual escalation %?
To be negotiated
What are the trading hours?
As per industry standard - Monday to Friday 9am to 5pm
Do you require a licence?
Potential buyer must have a valid FSCA Category 1 license for both Advice and Intermediary Services, for the following sub categories: 2 Short-Term Insurance Personal Lines 23 Short-term Insurance Personal Lines A1 6 Short-Term Insurance Commercial Lines
What are the main assets of the business?
Being a service orientated practice the core assets consists of a computer system and filing cabinets
Very stable client base. Annual growth for the past 15 years. Established protocol and processes in place. Capable staff. Intermediary agreements with insurers
This is an administrative driven business and the current workflow process leaves room for improvement
Initiating client fees and policy/service fees. Cross selling of other products and related services. Expanding the business on the back of the established office and administrative staff.
Single owner with associated risk of death/disability.
What is the reason for the sale?
The owner is planning for a smooth exit pre retirement.
Why is this a good business?
Proper office setup with consistent monthly cash flow. Loyal client base. Critical mass. Potential for cross selling of products.
What is the price plus stock and the net profit?
Asking price at R 20 million. The owner will consider terms and a structured transaction to suite their retirement planning.
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