Organic vs. Inorganic Growth in Today’s Market
This post is part of a series sponsored by InsurBanc.
With interest rates on the rise, now is the time to reexamine your growth strategy ― organic vs. inorganic growth. What is right for your agency in today’s environment? As interest rates are ratcheting up and increases are predicted to continue into next year, organic growth becomes a more attractive option.
Inorganic growth through the purchase of another agency or a book of business builds value, but it requires capital. The recent low rate environment kept the cost of funds cheap, which helped fuel agency and book purchases. However, with rates rising and the cost of capital, your growth strategy may take a turn.
Take the time to review your runway ― i.e., your goals, your agency value and your exit strategy. Organic growth requires time and patience as the agency invests in itself, allocates capital to develop staff, upgrades systems and technology and increases servicing and marketing efforts. Organic growth is a proven method to create agency value that is worth more over the long run. This enhanced value attracts more buyers down the road as you approach your exit.
While organic growth may seem like a natural extension of doing business, it entails a well thought-out strategy and plan that, to succeed, cannot ignore managing expenses, effectively using systems to help automate operations and robust financial controls. Organic growth helps you keep your house in order, enhances cash flow and prepares you to be ready to seize the opportunity to acquire an agency or book of business that fits your growth strategy.
Pause, think, regroup!
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