Transition Time Opportunity

June 18, 2012 by

Transition time yields an opportunity in the insurance business.

That’s according to a recent survey from BizBuySell.com. The survey from the San Francisco-based business-for-sale online Internet marketplace shows businesses spend $3.9 billion annually on insurance suppliers and vendors during business-for-sale transitions.

In fact nearly all buyers and 30 percent of sellers of small businesses indicated that they either increased spending, added products or services or switched vendors within the insurance industry as part of the ownership transition process, the survey shows.

The expenditure numbers are based on information collected by BizBuySell.com and U.S. government that indicates roughly 500,000 businesses change hands each year.

According to the BizBuySell survey, 69 percent of new business owners either added a new insurance provider or switched to a new provider. Another 16 percent added or switched to new insurance products after buying a business, and nearly 15 percent of business buyers extended the coverage provided by their existing policies, the survey shows.

More than one-in-five respondents in the survey who sold their business reported they added or switched to a new supplier prior to selling.

BizBuySell.com estimates show that business buyers spend more than $3.4 billion on insurance products during the first year of business ownership, while business sellers spend about $460 million more each year to help prepare their businesses for sale.

“There’s no doubt that newly launched businesses provide an excellent opportunity for service providers,” Curtis Kroeker, general manager of BizBuySell.com said. “However, this survey reveals a new opportunity that has largely flown under the radar — that owners selling and, especially, those buying established small businesses are a huge target market. It’s a bit counterintuitive, but it makes sense. In most cases, someone who has recently purchased a business has more capital available, more concrete needs, and is managing a much larger business than his counterpart starting a business from scratch. That’s definitely something all insurance providers should keep in mind when pursuing new sales.”

In fact, one of the most interesting findings in the survey was that business buyers tend to buy more insurance than do startups.

The survey shows the average business buyer spends more than $95,000 during the first year of business ownership. That’s 25 percent more than the reported $76,000 spent by the average startup.