Here is a simple and effective strategy to sell more insurance to business owners: before talking insurance, sell the owner a business valuation first.
Why? An owner with an appraisal showing his company is worth (say) $3 million is more apt to buy a $3 million key person life insurance policy than an owner without an appraisal.
Agents are discovering business valuations are a powerful tool with which to sell more insurance, financial planning, and investments.
Why target business owners? If you are not targeting business owners, you are missing a huge and highly profitable market. According to the IRS, over 6.6 million “small businesses” (defined as having up to 500 employees) filed tax returns in 1999, and a significant percentage have made their owners rich.
The best-selling book “The Millionaire Next Door” noted that 2 out of 3 millionaires got wealthy by owning a dry cleaner, a car dealership, or some other successful small business. Do not look for these companies on Wall Street; look for them on Main Street instead.
What is the successful business owners most valuable asset? His or her company, of course. And why is it so important to know what the business is worth? The following instances make clear what can happen when owners do not know:
?–One business owner was ecstatic to sell her business for $3 million–until the new owner resold it four weeks later for $6 million.
–When one business owner died, he willed his business to his son, but the IRS said it was worth twice what his father had estimated. The son had to sell the business at a fire-sale price to pay the tax due on his father’s estate.
–Two partners never funded their buy-sell agreement with life insurance pegged to the companys value. When one partner died, the surviving partner had to borrow money to buy back the decedent’s stock. The decedent’s value was so high, the loan bankrupted the company!
These are just some of the reasons why owners should know what their companies are worth, and according to recent studies, most owners want to know. A 1999 study conducted for Inc. magazine found that 57% of small business owners either had or planned to have their businesses valued.
Why does selling business valuations first lead to higher insurance sales? There are three reasons why selling valuations to business owners increases the likelihood they will buy insurance from you.
First, the more you know about your clients, the easier it is to sell to them; through the appraisal process you will learn more about your clients than you ever thought possible. In many cases you will know more than their spouses know about the owners financial condition!
Second, focusing on a business valuation first (rather than insurance) alters how the client perceives you. In the clients eyes you become more than a salesperson, you become a trusted advisor akin to the owners CPA or attorney. As a result the owner is much more open and receptive to any insurance recommendations you might make later on.
Third, when an expert appraiser says a company is worth, for example, $2 million, owners find it more credible than a value based on a “rule of thumb” or do-it-yourself software (especially if the insurance agent determined the value, which strikes the owner as self-serving).