First published in the May/June 2014 issue of Round the Table
With about a month left in his career as a financial advisor, Richard W. Sawyer, CLU, ChFC, was thinking about everything he would gain: more time with his family, financial security, the opportunity to explore his creative side and a burst of enthusiasm for a new business venture in an artistic field. The 36-year MDRT member from Scarborough, Maine, was too busy counting his blessings to feel any sense of loss.
For many, however, the thought of letting go of a business they worked so hard to build is too much to bear.
For Sawyer, “letting go” meant he was freed to move forward and expand his accomplishments.
Setting the stage
Finding peace in a big life transition doesn’t happen without a lot of planning. Sawyer made the first step 31 years ago when he signed on as the lone life insurance producer at a property-casualty insurance agency. The firm, Norton Insurance, was looking for someone to build their life insurance practice. Sawyer, a solo practitioner with about five years’ experience, wanted to be part of something larger. “I was given a chance that was a little bit outside the box,” Sawyer said.
The two parties approached the arrangement as a win-win scenario. “It was based on the premise that we didn’t need each other,” Sawyer explained, calling it an engagement period. He and Norton’s owners recognized they had the potential to benefit each other.
Sawyer built a successful practice within Norton, but he wanted to ensure he was building something of value. That meant establishing an entity and adding another producer. “The whole idea was to put some mechanism in place so if anything ever happened to me, someone else in the life insurance profession could continue on,” he said.
Sawyer found a younger associate, Peter J. Fendler, AIF, a 21-year MDRT member, to join his practice. With two producers in place, their clients were assured continuity if anything happened to either of them. The two worked with their general agents at their primary companies and broker dealers to write an informal letter of agreement that would shift revenue to the other producer in the firm. “Having something in place was a takeaway from the Round Table,” Sawyer said. “I was practicing what I preached to business owners.”
With an interest in growing his practice and establishing its value, Sawyer created a corporation co-owned by Norton Insurance, complete with a buy-sell agreement, which forced Sawyer into answering questions about the value and succession of his business.
“Going out into the marketplace, at that time, you couldn’t find any kind of guidelines about how to value a life insurance practice,” Sawyer said. “We had a formula built in the buy-sell agreement that we agreed would be reviewed periodically.”
As for the succession plan, Sawyer and Fendler built the business together with the thought that Fendler would eventually buy in as a partner. “A lot of times, a producer coming into the practice mistakes that for a guarantee,” Sawyer said. “In our case, we had a good working relationship, and Peter was very committed. It became a natural conclusion for him to buy in.”
Less than five years later, Fendler became a partner, and the two later added a group insurance specialist.
Building his business value and securing a succession plan meant Sawyer had to let go of some equity and some control.
Perhaps the first example of Sawyer letting go was his shared ownership of Norton Financial Services. Each party owned half of the new corporation and shared in all decision-making. “That’s a paradigm shift for a solo practitioner who’s used to doing their own thing and calling their own shots,” Sawyer said.
Coming to fruition
The three partners grew Norton Financial Services together until Sawyer faced a cancer diagnosis that changed his thinking about his future. At age 57, Sawyer decided to reduce the stress in his life and refocus some of his energy away from business and toward other interests. “I thought a lot about how much energy I really had, and how much stress I was putting on myself to continue to grow the business,” he said.
With a long-term lease on the firm’s office coming due, Sawyer and his wife decided the time was right to initiate a buyout. “I didn’t have the heart or the energy to put into the growth that others in the business wanted to,” he said. “I’ve never looked back on that decision. If you don’t let go, you’re never going to move forward.”
Sawyer approached his partners, and the three spent the next year finalizing the deal. The valuation of the business was determined by the formula within their buy-sell agreement. “The answer turned out to be something around revenue as well as a formula for projected renewals,” Sawyer explained. “If you have a formal buy-sell agreement, review it on a regular basis in terms of how you’re formulating value. The way we do business now is so different in terms of how compensation works. Laws, company contracts, products — they change, and that changes your revenue structure.”
After giving up ownership of the firm, Sawyer continued seeing clients and working a pretty full schedule for five years before beginning to taper off. Fridays off were his reward to himself — the first time he allowed that flexibility in his schedule in 35 years.
At the end of March, Sawyer completed his financial services journey, walking out of his office for the last time.
Today, you can find Sawyer’s entrepreneurial spirit being channeled in another direction: his new photography business. “I feel like I felt when I started in the business,” he said. “It’s like learning a whole new world.”
Sawyer’s lessons learned
- When you’ve identified a potential successor, consider an engagement period before formalizing a succession agreement.
- Having a contingency plan — even informally, at first — is important.
- Review the formula within your buy-sell agreement frequently to keep up with changes in compensation.
- Give yourself permission to taper off your schedule, rather than leaving the profession suddenly.
- Sawyer turned to MDRT resources to learn how to build and protect value within his business. View those resources by visiting MDRT’s Business Continuation Decision Tree.