For those agency owners who are considering a sale of their agency, the tax changes that will occur after the end of 2012 add one more factor to consider in determining when is the right time for such a sale. You may have heard about the coming “fiscal cliff” at the end of this year when the Bush era tax cuts will expire and the automatic spending cuts mandated by the deal that allowed the debt ceiling to be raised take effect. That “fiscal cliff”, as well as Obamacare, have significant implications for agency owners who are seriously considering a sale of their agency.
If Congress does nothing before the end of 2012, which most experts and others consider to be likely, the tax rate on long term capital gains will rise from 15% to 20% on January 1, 2013. To the extent there are any short term capital gains involved in a sale, the tax rate on them will be equal to the income tax rate paid by the owner, which will also rise to as much as 39.6% for the highest income earners. The same thing is true for dividends, which will primarily affect any agency owners whose agencies are Subchapter C corporations. A sale of the assets of a Subchapter C corporation will be subject to double taxation, first at the corporate income tax rate and then at the individual owner’s income tax rate when the sale proceeds are distributed to the owner as a dividend.
Although the additional 3.8% Medicare tax on unearned income that is imposed under Obamacare will generally not apply to the sale proceeds of an owner who is actively involved in running his or her agency, if the owner has other passive investment income and the sale proceeds push the owner’s individual taxable income over $200,000, if single, or $250,000, if married and filing jointly, this additional Medicare tax could be imposed on the other passive investment income. One way to potentially avoid this possibility is to structure the agency sale as an installment sale. Under an installment sale, tax is only owed on that portion of the sale price that is paid in any one year. Of course, if an owner does that, he or she will be paying tax on the installments paid to them in any one year at the tax rate then in effect for that year, which in 2013 and beyond will most likely be higher than in 2012.
As you can see from the above, any agency owner that is considering a sale of their business has some work to do to determine when and how to structure such a sale to minimize the taxes paid on the sale proceeds.
The Agents Council for Technology (“ACT”) sponsored a webinar a couple of weeks ago (“Measuring Your Social Networking Success”) that contained valuable information for any insurance agencies interested in, or currently, using social media to market their business. Its presenters included an agency owner who is having great success in using social media to increase his agency’s premium volume and a consultant involved with IIABA’s Project CAP. The bottom line seemed to be that social media (Facebook, LinkedIn, Twitter, etc.) can be a valuable marketing tool for an insurance agency if used correctly, but should not be relied on to the detriment of an agency’s other marketing efforts.
The presenters discussed how an agency should use social media to complement its other marketing efforts and how that, beyond sales, social media can be used to enhance an agency’s reputation and strength its relationships with its customers. What I found particularly interesting about the webinar was its explanation of how the success of an agency’s social media marketing efforts can be accurately measured using tools found within Facebook and in Google Analytics, so an owner can know whether his or her approach is working and if not, figure out what can be done to correct the problem. If you are interested in listening to the webinar and/or downloading its PowerPoint presentation, click here and look under “Upcoming Events and Recorded Webinars“.
The ACT website also contains numerous other articles, recorded webinars, and other materials that can be used by agency owners to improve their business practices. It should be bookmarked as a Favorite by any such owners who want to keep up with the latest in technology trends for insurance agencies.
The IIABA’s Fall Leadership Conference will be held this year in Atlanta at the Westin Peachtree Plaza Hotel on September 5-9. Included in that event will be the Young Agent’s Leadership Institute, which runs from September 6-8. On Friday, September 7, in the afternoon, two Georgia agents will be on a panel discussing their experiences as young producers and how they have made themselves essential to the success of their agencies.
The Georgia agents on the panel will be Mike Royal of Partners Risk Services and Kelli Dean of Physicians Insurance Services. It’s no surprise that both Ms. Dean and Mr. Royal have also been active in the Independent Insurance Agents of Georgia. Ms. Dean is currently the Vice Chair of YAC and Mr. Royal recently left the post of Chair of the Government Affairs Committee. Agency owners with young producers should give serious consideration to having them attend the Leadership Institute, not only to hear what Ms. Dean and Mr. Royal have to say, but to benefit from the many other programs that will be presented at that meeting. Click here for more information on the Leadership Institute.
The July 19 issue of the Big I Advantage newsletter in the News & Views section contained an interesting article on what the author referred to as the “holistic approach” in dealing with complaints by customers. The author, John Graham, provides an eight step approach for handling all such complaints that is intended to show the customer that you care about them and thus, further strengthen the bond between the customer and your agency in the course of resolving a situation that could easily have led to the deterioration of that bond.
His formula for accomplishing this feat is (1) Act Immediately, (2) Show Empathy, (3) Thank the Customer for Calling the Issue to Your Attention, (4) Express the Customer’s Concern in Your Own Words, (5) Never Argue with the Customer, (6) Make Sure There isn’t Something Else Bothering the Customer, (7) Offer a Solution Now, and most importantly, (8) Follow Up Afterward. This approach will take time and patience, but it will most likely pay off in the long run with a satisfied customer who will tell others about his or her positive experience with your agency in resolving their problem. For more information on the “holistic approach” see Mr. Graham’s article on the website for IA Magazine.