Having spent time during my career working in private equity, the potential of many business owners being able to sell one day is largely dictated by advanced preparation and awareness of what buyers and investors are looking for. Even if your exit strategy maybe many years away, the practice of thinking and acting like an investor, will only be positive for your business in the long run. After recently stepping into my role here, I often wonder why insurance isn’t offered consistently as a core product in an advisory service. This is from the perspective of servicing a client need alongside a mortgage, but also from a business lens of strengthening the foundations that occur from a recurring revenue flow.

Lost recurring revenue

Across our industry around £367m of potential recurring revenue is lost over five years because advisers do not provide insurance advice consistently. To put that into perspective, a mid-sized mortgage firm advising 35 insurance policies a month will create about £212,000 of additional recurring revenue over the next five years, simply by adding a few minutes of advice. It equates to around 30 per cent growth in revenue per mortgage client, but on top of that, it creates a book value that can be sold at a multiple to create a future income.

For many advice firms today income is largely transactional, one-off proc fees and indemnity commission. The model is sensitive to cash flow challenges and the assets are hard to value. Plainly speaking, a single change in the market, not to mention a global pandemic, has the potential of destabilising a business overnight. The ability for businesses to absorb short to mid-term shocks to cash flow is therefore a common deterrent for buyers, if not probably one of the biggest risks.

Quality data

Another area of interest for potential buyers is a data source that can comprehensively and accurately evidence revenue, margin and multiple product holdings per customer. 

The questions I would ask myself as a business owner are how active is the client base? Is it growing? What engagement do I have with clients between arranging one fixed rate mortgage to the next? The simple and most relevant answer for firms thinking about an exit strategy is general insurance. It may not have instant value, but there is certainly value over the longer term. It can help weather the storms, drive regular client engagement and most importantly create saleable value that reflects the effort, time and daily grind that you’ve put into your business.