Episode 188: Your Largest Asset and You with Carey Wallace

Welcome to the Unstoppable Profit Podcast. This podcast will give independent insurance agents all of the tools to grow your business and live life on your terms. Wherever you are today, if you're starting with nothing or well on your way to the success you desire, with the right people, processes, and promotions in place, you will be unstoppable. And now I'd like to introduce your host, Mike Stromsol.

Foreignings, everybody. Welcome to the next episode in the Unstoppable Profit Podcast. Super pumped, super excited to bring on to the podcast today a guest who I've gotten to know, know, and gotten to know well. She is becoming quickly an industry icon along. Not only that, a good friend, awesome individual, awesome lady, awesome industry leader. I could go on. Terry Wallace, welcome to the podcast.

Mike, it is so great to be here with you, and I feel the same way about you. I love that we've gotten to know each other, gotten to know a little bit about each other's families, which is most important, and got to spend some time working together, you know, casually together, which is fantastic. So I feel the exact same way about you. Yes. Yeah. And I'm.

I'm still telling the story about flying up and down the highways of Napa with the top down with your husband Kevin, which was awesome. We had a great, memorable time and getting to shop downtown in the whole nine yards and finding out more about each other. It was awesome. Building relationships. So speak about building relationships for anybody who may not have heard of you, and that's quickly becoming something that it's not the case, but in case there is somebody out there give us a little insight. Who's Carey Wallace and what are you doing for the industry now?

Yeah. So I've been in the industry about 15 years. I am truly a financial person. I have a finance background. I am not an insurance person, but I love this industry probably more than anybody else you'll find. You know, I entered this industry by chance, just like everybody else, but I love it. And it is the place that definitely is home for me. And I spend my time helping agency owners plan for their business, wherever they are. If they're a scratch agency, if they are an agency looking to transition ownership, if they're an agency looking to grow, I engage with them. I help them understand the value of their business, how to maximize the value of their business, and how to plan for their agency.

Yeah. And absolutely true. I didn't wake up when I was 21, 22, or even before that, what they said to you in school, what are you going to do with your life. It was certainly not, oh, I'm going to be an insurance agent. But I was so fortunate to fall into it when I was 24 years old. Phenomenal, incredible career. I would do it again in a heartbeat. I love the industry as well. But, you know, to something you just said, love serving people, love helping people, but numbers don't lie.

That's right.

And for those of us who have worked very, very hard for so many years or are working very, very hard, even if they're just starting out, there will come a day that your hard work will be, you know, your prize business reward, if you will, or the thing that you want to pass on to somebody else. And there will be a financial reward for that based on the value of the business, right?

Absolutely.

And that's exactly where you come in. Numbers don't lie. And that's a sheet that we use there. It's a KPI sheet in upping. So let's dive in. You know, somebody who, even with the end in mind, you know, let's talk about the agency entrepreneur who might just be starting out. And I have found great value in helping agents recently. Reverse engineering.

Okay.

Starting with the end in mind. You know, we're standing here 1231. Shall I say 20, 40. As crazy as that sounds, right? 1231, 40, 40. We're standing, you know, out on that date. Have an incredible celebration. We just transitioned. What does that look like? That's where you come in.

That's right.

Want that celebration to be massive. So transitioning the ownership of an agency is something many agency owners keep close to the best. I mean, we hold it close and we can't talk about it with too many people for various reasons. What do you think some of the biggest misconceptions are out there in this subject?

Yeah, I think that, Mike, it is. It's really a. It's a strange phenomenon because it's your largest asset, but yet a lot of people don't talk about it. They don't share. Or what they share can be misleading to those that are listening. So I think some of the biggest misconceptions are all agencies are created equal. And whatever experience one agency owner had that you could have the expectation that that would be your experience, that couldn't be further from the truth. Because when you're transitioning the ownership of your agency, it is specific to you and your goals, your situation, your requirements, your level of comfort with doing that. So listening to other stories or headlines or I'd like to call them sound bites, really is the misconception. Because when you only hear a piece of the story and you try to apply that to yourself, you're not going deep enough to know how to set those expectations. So that.

Holding close to the vest creates a little bit of unrealistic expectations for many agency owners, in my opinion.

So really, you know, one of my favorite thought processes that I learned years ago is money follows trust.

And listening to what you were just saying, it's all about the trust. So you need to have somebody that you can not only relate to, that you match personality wise. Wait a minute. Insurance agencies are like personalities. They're all different.

Exactly right.

But, you know, you have to have somebody that you can match with personality wise and completely trust.

That's right.

That's one of the things that I love about you. I mean, you're so down to earth, easy to get along with, and you know how to meet people where they are, and that's fantastic. And you have to have somebody on your journey. I mean, we have a cpa, we have bookkeepers, we have other people in our lives that we completely trust and, and somebody like you to help with the valuation. Because, I mean, people keep throwing around, oh, I'm worth, you know, three or four times commission, or, you know, 10 to 12 times EBITDA. Brilliant. Sunshine is the acronym. And some, some people call it something else. Right?

Yeah.

And that's where you help people get into the trenches and really figure out what's going on in there. So what are three key ways that an agency owner can best prepare for the transition of their agency, whether it be in three years, whether it be in eight years, or further away than that, and give us some timeframes as well, because I know you're big on that thought process.

So here's what I would tell you. I think, day one, if you have an agency and you have people that are working for you, even if it's just, you know, your numbers, Listen, independent insurance agency owners are some of the best relationship people I'll ever know. They understand coverage, they understand more about other people's businesses in order to match their risk needs and their coverage before their clients. I mean, they are incredible in their community, but a lot of them truly don't get training in financial acumen. So honestly, their numbers are almost something for some that they avoid. And I would tell you, you can't position yourself better by knowing those numbers, understanding what your numbers are telling you, and being able to prepare based on those numbers. And what I mean by that is run a Profit and loss statement every single month, create a budget, have a plan and really manage to that so you have an idea of where you are and as an agency owner and it'll empower you to make decisions. So step one, everybody should know their numbers. And that should be from day one. Number two, know what the risks are inside your agency. You are. Agency owners are so good at knowing their clients risks. Kind of like a doctor, they're the worst patients. I would say the same thing about agents. They don't think about their own business and the risk inside that business. That's where I come in. And I actually can help assess what that risk is. And that is what determines the multiple factor that is applied inside your agency. The earlier you know those risks, the more you can do something about them. So timing wise you should always know your risk number one. Number two, but let's say you know. One of the other misconceptions I would tell you is I don't need to know any of this until I'm ready to transition. And nothing can be further from the truth because unexpected things happen. We all know that. And so if you're waiting for some magic date to start knowing these things, you know, it might creep up on you and your transition is happening to you rather than you being prepared in doing that. So knowing your risks and planning at least five years prior to a transition, three to five years, gives you the power to do something about those risks, to minimize them and maximize your value is all what I would tell you. And I mean risks like concentration of your book of business, concentration with a producer, concentration with a carrier. Your performance numbers are those where they need to be. What is your growth rate, what is an expected growth rate, what is your profitability rate and what is the expected profitability rate? So all these factors are risk factors that you can do something about as an agency owner. And the last one I would tell you is know what the options are for your agency before you are faced with making a decision. The more options you have, the better you can match them with what's most important to you. And the options are not what your friend did or what other agency owners know or did. It's really there. I think in our industry today, there are more options for agency owners than there ever have been. So if you are informed and know your numbers, you know your risk and you know your options, you're going to be so much better prepared than someone who decides to do it six months before a transition. The options are limited for someone like that. And so that those are, that's my advice. Of the three key things that you should do as a business leader, absolute gold.

And, you know, the better and more prepared you are when that happens, the higher the value is going to be. And I can go in a long story about that. I'll save that for another day. In addition to that, think about who the beneficiary of your largest asset is. In many, many cases, it's a family member or your kids or whatever. Whatever. Is it fair to them to wait till the last minute and not be prepared?

No.

Yeah. I mean, the other part of that is, Mike, if you don't prepare, is it fair to put them through trying to navigate that without you? That's the most unfortunate situation. Someone who doesn't know anything about your business and now has to navigate it and you've never talked through it with them. Super difficult.

Yeah, absolutely. And it's like not having a trust. If you've got, you know, high assets and you don't have a trust, you're going to be subject to probate. Probate and the government, I mean, is that fair? I mean, talk about, you know, I don't like the dentist, but almost worse than the dentist. Probate in the government. But let's think about your business like this, right? And I Learned this over 20 years ago. This visual. It's your shining jewel. And what are you doing every single day to continue to polish that shining jewel, which is your business. And that's what you help with. You help people polish their shining jewel, their largest asset. So thank you for the important work that you're doing and strongly recommend that anybody has any questions you might be watching or listening to this hearing something that perks your interest, get a hold of Carrie. We'll give you some information before we wrap up today on how you can do that. So in the current environment, in current times, interest rates are a conversation back to leadership and we'll leave that one alone for now. How can higher interest rates or increasing interest rates affect an agency owner's options?

So this is a great question. It's one that comes up all year long. You know, we've been in an environment where interest rates are at an all time low for several years. And obviously this year is definitely not that situation. So here's what I would tell you. Number one, independent insurance agencies are in demand. There are more buyers than sellers. No question about that. Someone throws around a 20 to 1 ratio of number of people looking to acquire and versus those that are looking to sell. So the demand is not going anywhere. And I think people need to remember that. I will tell you rising interest rates will change what the power is for different buyers. So if.

Is it going to change the cash power as well? I'll just.

Absolutely, absolutely it will change what different buyers will be able to do in this market. So if an agency owner is, is buying another agency owner and there is a bank loan involved, it absolutely will impact what the cash flow will be in order to make that purchase happen with a bank loan. It will also change what will happen in an internal sale if you're not running your agency profitably. And there is a owner held note which I highly discourage. But if there.

Can you repeat that please? Owner held note, you highly discourage. Got it.

Please do not do that. It is a ruiner of families. It could be. And your future needs to. Needs to be set. But if. Here's the thing that I don't like about owner held notes. It doesn't go through a process to make sure that that price and that mechanism you're using to transfer the ownership of your agency will cash flow. And if it doesn't go through the.

Process, which would be a bank review or a lender's review evaluation, all of these things.

Or an outside third party due diligence company.

That's right. If you don't do that, you can set a price that's unrealistic. And now your future as the exiting owner is dependent on getting those payments. The current owner now is trying to make payments that they can't sustain. It impacts the, the performance of the agency that they're trying to continue to run. And it's this vicious circle that doesn't make sense. So that's why I highly discourage owner held notes. But my point is you might think, okay, I'll do an owner held note with the lower interest rates. Just make sure you set a price that makes sense for the cash flow inside that agency. External sales, for instance. Private equity is, is very, very active in our industry and it's not going anywhere. But they will. Some of them are pretty heavily leveraged and they might have difficulty raising money in the. Over the next period of time. So you might see that activity drop. My point is there are still buyers. You need to find the buyer that matches with you as the seller with what your goals are. Transactions will happen. And I think like anything, almost like what we talked about in the, in the first question, which is setting the right expectations and is key and comparing your transaction to someone else does not make sense. You need to make sure that your transition fits with your goals. There are buyers out there. There are buyers with strong balance sheets. There are buyers for every agency owner that wants to sell. There will still be plenty of options, although it will change what those options are in a high interest rate marketplace.

And I've heard cash, and I'm not going to name any names, but when I first met you, I saw you do a presentation, which was phenomenal. I said, I need to get her to know her better. And I'm so grateful that I did and still have the ability to grow our relationship. But, you know, there was a, an organization at the top of your chart in one of the slides. And I recently heard that organization is not offering cash any longer. Right now I'll suggest interest rates probably had a play in that.

Oh, for sure.

So, I mean, you know, that's why you need to get ready early. Carrie, let me throw some things out and I want to have you build on this, okay? Adopting processes in a business. I mean, people, processes and promotion. Right. The core of the three Ps, creating efficiencies, marketing and adopting technology, new technology. The shiny object syndrome. Right. What kind of impact do all these things and more really have on the value of an agency?

So listen, this is your largest asset and you're trying. But all of these things are ways in which agency owners are trying to create predictability and scale inside their organization. They want to create an opportunity for them to operate efficient, efficiently, maximize their profits while still growing a business. If you adopt processes and create efficiencies, that means the profit of your agency goes up. And typically technology allows you to help create that. Not every time. So technology and shiny object syndrome that is not integrated appropriately can actually be a cost center inside an agency. So let's talk about that for a minute. But all of these things are, or things that we're doing as agency owners are meant to create efficiencies and increase the predictability of the performance of that agency. The more predictable your agency is, the more valuable it is. So if you have defined processes, you have technology that's very well used, you have consistency across your agency, and you're operating efficiently, that agency will be more valuable than one that has many different processes depending on who's doing it inside the agency. Technology that doesn't have documentation so you can know exactly how to pick up and move the ball forward as the next owner. So all of those things will absolutely increase the value of an agency, allow them to use their own data in order to be proactive in Their approach with their clients rather than reactive. So again, but they have to be done well and they have to be done consistently inside your agency. You know, I think data is one of the most valuable things you can invest in, but there's tons of dirty data because the processes aren't there, the procedures aren't in place, the consistency among your. The training doesn't exist. So the whole goal of that is to create efficiency, increase your profitability. That is the number that gets multiplied for the value of your agency and the value goes up.

Gold nuggets are being dropped, friends, I hope you're paying attention and taking notes. And if you're not, go back and replay this. Don't think it, ink it. Because if you don't ink it, you won't sink it where it belongs. The more predictable your agency is.

The more valuable it is. That was a huge gold nugget that I made sure I wrote down. And there is tons of dirty data out there, so. And who's in control of our data? As agency entrepreneurs, we need to be in control of our data.

Yeah, always.

The other thing is, you know, you know, I've had this thought based on my transitions in the industry recently.

Smaller if you will, and meaning 25 team members or less, agency owners in today's world, based on this predictability comment.

Have more opportunity out there than they ever have. And I'm going to start a teaching series on this exact subject because I can teach people how to be predictable in the mind of the client, culturally and from a nurturing standpoint. I ran. I ran into somebody this week downtown. Yeah, Mike. Constantly in touch. We always heard from you. It was so awesome. And that predictability isn't there anymore. More on that later.

It sets you up for success, though. I will tell you, it is a. It's a differentiator when you can be predictable. There's no two ways around that.

In so many ways, not only with your team members, but your clients, your communities. Yeah, your opportunity out there. If you're 25 team members or less, you have gold before you. I mean, this acre of diamonds is being set up to be polished like nobody's business. And when you have somebody like Carrie, you know, walking by your side, helping you identify good move, bad move with. With your largest asset. I hope we're getting clarity on this. Let's see if we can pull some more. Go ahead, please.

Not only good move, bad move, but what do I weigh in order to know what move do I make? Really the key, you know, I'm not here to tell you it's good or bad. I'm here to tell you these are the things you should be considering in order to carve the right path forward for you. That's the beauty of our industry. There is no one right way, but there is a way to do it informed. And that's what I believe agency owners need is. I need a sounding board to say I'm weighing all these things. What should I be thinking about? That's what true help looks like, in my opinion.

Well, I mean, it's like what we do for clients, right?

Yeah.

We're not as an independent insurance agency, we're not beholden to any one company.

That's right.

We work with you, the client first, and we serve you first to provide you the options to make the best decisions for your insurance program. And it's the same kind of thought process.

Yeah. I mean, I can bring insights of what other agency owners have done and what that looks like, but at the end of the day, it's about what should I be weighing and how do I build? What's the best thing for me, my team, my clients, my community, my family? And, you know, if I do that, my job is I feel like I've done something beneficial for my clients 100%. So the wrong and right is really determined by you. Just make sure that you're actually considering.

What you need to do, considering the options to make the best decision.

That's right.

That's exactly where you come in. So let's talk about the biggest factor. What is the biggest factor, at least right now in your work with agencies across the country and everything you do for agency, you being in the trenches, etc. Etc. What's the biggest factor that influences the value of somebody's agency out there?

Yeah, so I'm going to answer this a couple different ways, but first and foremost, the biggest influencer of your agency is its performance. So let's talk about what that looks like.

An agency that is growing historical performance too, right?

Absolutely. So an agency that is growing and doing it profitably, those are the two biggest keys that is important, but those are very clear metrics that you can absolutely know what that is. Here's the biggest factor, though. If that agency is growing, doing it profitably, but it is not transferable. So it's dependent on that current agency owner's relationships, expertise, or a key person inside that agency that isn't going to be there anymore or not protected by maybe contracts with the employee. So it is not transferable and you can't predict that it will continue to operate that way in a transition that will hurt the value of that agency. So I often say this, and it sounds super counterintuitive, but as an agency owner, the best thing you can do for your business is to have it operate without you. You need to be. That's the goal. That it is so transferable that when you're ready to make a move to the next generation, to make a move to exit, that it isn't dependent on you, your relationships, your expertise, your connections, whatever that is, you need to make sure that you've transferred all of that and now you have value when you walk away and. And everything you've worked for is at the highest value it could be. And I think people miss that. They think, no, no, I'm the best producer. I have the best relationships. I'm a pillar in my community. I'm. And those are all fantastic. But what happens to your agency when you step away? Are all those things stepping away with you? And if they are, work hard to transfer that to someone you trust, and then you've got true, true value.

You want to have a business, not a job.

That's right.

And having a business means the business case. You said it so well. That can operate without you.

Yep.

And can you step away for a month? Can you step away for three months? And will it continue to run without you? One of the biggest compliments that I used to get somebody, one of my team members would come running in the office and they say, hey, Carrie was on the phone, and she wanted to know if you're still here. She said to say hi. That's because I never spoke with anybody.

Yes.

We pushed out the nurturing, you know, communications to let them know, and I was the face of that. But I didn't speak to customers or anything else because we had team members that did it.

Yeah, it's brilliant. It's brilliant.

It's a thought process, and it's really all about having the right strategy. So, Carrie, this has been absolute gold. Thank you so much.

And it has been a pleasure. I mean, building relationships. Right. You know, money follows trust and all that kind of stuff. When I first met you, you came back to me and we had a conversation about nothing to do with business. I learned more about your family and your daughter, Morgan, and it was awesome. Had the opportunity to share some stuff that I've had through experiences due to our large family, which was fantastic. So it's been incredible. Yeah, yeah, absolutely. So with that being said, I shared some books and I want to learn because we were talking before we started today, another large issue out there in business, industry, period. A business, a business, a business, whether it be insurance agency business or otherwise. Right. And business industry, period, is mindset.

Oh, yeah, right.

Our mindset's our skill set. The agencies between our ears. But we were talking about how we, you know, feed our own mindset, which is our books.

Oh, yeah. Oh, yeah.

So we had a quick conversation. So what's your favorite book?

So it's funny, I just picked it up. I read it literally every December. It is something I will read every single December until I find something that will replace it. But my favorite book, to make sure I get grounded and centered is Atomic Habits. I think that it is an incredible tool. It reminds you what's important. And the reason I read it in December is it allows me to get in the right place or the right mindset to set my goals for the next year. Listen, I am. I'm ambitious and I'm an entrepreneur like everyone else that I work with. And there's this tendency to try and do everything. But the difference is when you read a book like that, it allows you to place importance in the right place and, and really think it through and create a plan and be intentional about what you do. So I love Atomic Habits. I. I live by it. I actually get something out of it every time I read it. So tell me what your go to book is. I would love to hear that.

Wow, that's a loaded question. I have. I. I'm a digester of study material, books and everything else I do two or three a month. I mean, if I go back in, in my career, 15 to 20 years, which is real, when I really got into studying.

It's a little tiny book and it's not complicated. It's called the Strangest Secret.

Ah. You shared that with me.

Yeah. And I've not only gone through the book, but bigger than that, the audio, which is free on YouTube. If you just search the Strangest Secret by Earl Nightingale on YouTube. You want the one that's the put up by the coconut code. I don't know. That's the original one. And I love coconut. That's why I remember it. So, yeah, I've listened to that, I'll bet, a thousand times. And I tend to listen to it on my tougher days and it brings me right back to where I need to be.

My, my most recent favorite book, since we're dropping books, is the Florence Prescription.

Oh.

By Joe Tye. T Y E. I've been through that four times and there's so much gold in that book. Back to business. It's business. It's business. The, the, the setting of that book is the hospital industry. But it doesn't matter. Business principles are business principles for sure. So. And I've been studying culture like crazy lately. I've been through three culture books, two of them by David J. Friedman. Fundamentally Different Culture by Design, the Service Culture Handbook.

Nice.

I can't remember his name. It's Jeff Toister right over there. So. And I just got the new Goggins book, never finished. So I've. He was in my mind this morning as I was jogging in my now new running shoes. Because anyway, this isn't about me. This is about you.

So.

Have you heard, have you ever read the book the Hero Effect?

No.

So it's by Kevin Brown and I actually got to.

I know of who Kevin Brown is.

Yeah, it's an exciting.

I've seen him speak.

He's amazing.

That dude.

Got to meet him and his wife and we actually. That book was so inspiring, but hearing him speak was even more inspiring. And you know, my daughter went with.

The Disney story, right?

Yeah, we went and met Aunt Bee. We actually took our daughter Morgan and we went and met Aunt B to thank her. Yeah, we did. She's an incredible person and you know it. That's the thing. Books can inspire you to do all kinds of things. But that book will stay with me forever. But it was really that I got to meet him, I got to meet his wife, we got to share our own family stories. And the coolest thing is, you know, most people go to Disney to be entertained. And we went to be inspired by her. We literally went to her restaurant and spent about a half hour talking to her. My entire family went, which is pretty cool. So anyway, if you haven't read the Hero Effect, you don't know who Aunt Be is, but you will. It's a super quick read and it's about doing ordinary things that are extraordinary to someone else. And you know, I think that's a, that's a pretty cool book. Anyway, so if you haven't read it, read it. It's amazing.

I love Kevin Brown. So I'm going to have to revisit some things on that. Thank you for bringing that up.

Yeah, for sure.

See, that's the kind of stuff that I get out of the relationship with Kerry Wallace. I mean this things come out of left field. It's game changing and it doesn't take on a big door swing. On little hinges.

That's right. That's right.

Kerry, thank you for joining us on the podcast and I have a sneaky suspicion that we're going to be in touch sharing further information into the future. Thank you. I am super grateful and thankful for you.

Yeah, thank you so much for having me. And I look forward to it for sure.

Ditto. I look forward to it as well. And speaking of looking forward to it, if this is your first time on the podcast, welcome. My name is Mike Stromso. I'm widely recognized as leading author, speaker and coach for the independent insurance agency industry. You can learn more about us at Unstoppable Profit Producer. If you're interested in joining us in any of our virtual events or our live events, our virtual event portal is upp fast start.com and our live event portal is be unstoppable boot camp dot com. Both of these events and all of our events are designed to share with you our best money making strategies developed over 35 years of research as a 100% of the time proud independent insurance agency sharing with you so you can grow your business, create wealth and have more freedom to live life on your own terms. That wealth is what Carrie was just talking about. Your largest asset, your shining jewel. We want to help you with that and so much more. And please make sure that you go to our podcast portal which is unstoppable profitpodcast.com go to the top hit subscribe so you don't miss one episode of of everything that we've got for you. Game changing strategies brought by awesome guests on the podcast. We're also available out there on all the channels, Apple Podcast, Stitcher, Spotify, Amazon now and of course at our portal. And you can listen to us or view us on our YouTube channel. We're out there to help you, to help you grow your business, create wealth and so you can have more freedom to live life on your own terms. And thank you for joining us today. And if you've got great strategies from today's podcast or any of our podcasts, please exercise the law of reciprocity, pay it forward and share it with somebody else. Just share unstoppable profit podcast.com with them so we can help them grow as well. Thank you so much again, Carrie Wallace. Thank you. Absolutely super grateful for you. I look forward to connecting with you again soon. And for everybody else out there, get out there, make a difference, be unstoppable, leave no regrets and remember, you got this. We believe in you. We'll see you next time.

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