Another amazing episode with the dynamic insurance duo! This time they interview Bill Snow, an author, a speaker, and a seasoned professional in mergers and acquisitions
The Idudes kick off the episode with a lighthearted discussion about coming up with unique business names in today’s overcrowded market. Moving on to the crucial takeaway from the conversation that is, the importance of considering your personality when venturing into the world of insurance acquisitions. Perseverance and resilience are emphasized as essential traits for success in this field, where rejection can be a common experience.
Another important point touched upon is the evaluation of the quality of the book of business. With justified light, that is shed upon client retention and renewal rates.
📻 Tune in for a fun-filled view of the experts on the Insurance landscape as well as Mergers and Acquisitions.
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Bio of Bill Snow
Bill Snow is an experienced M&A professional with over 30 years of professional experience, including almost two decades as an investment banker. His work includes business sales and capital raises for middle-market companies as well as buy-side services for acquirers seeking middle-market companies. Bill’s clients have included water works manufacturers and value-added distributors as well as firms focusing on packaging, medical supplies and equipment, automotive parts, drink dispensing equipment, security, apparel, refined fuels, and more.
the wildest thing that has ever happened to me in m&a. I don't know if it's the wildest thing but it's a good story we were working on a transaction is a very difficult transaction. The buyer tried to reprice the deal numerous times, we had a lot of fights and anyway, long, long story, we got the deal done. And a couple years go by I write a book called mergers and acquisitions for Dummies, one of the PE guys shows up in my office, he wants to meet by now all the dust is settled, we're best friends. And he says, I have a copy of your book. And I want you to give me an autograph in it. And I want you to write something and make it funny. So great, and I'm under pressure to come up with this. I thought about the transaction. I thought about what happened afterwards. And so I simply wrote in there, Justin, thanks for the House bill. That's the story. I bought a house with the fee that I earned. My name is Bill small with focus investment bankers, and author of m&a for Dummies mergers and acquisitions for dummies and I am an insurance dude. Insurance dudesCraig Pretzinger:
are on a mission to escape big handcuffed by our agents.Jason Feltman:
How? by uncovering the secrets to creating a predictable, consistent and profitable agency Sales Machine. I am Craig Pretzinger. I am Jason Feldman.Craig Pretzinger:
We are agents we are insurances Yeah, oh, anybody that comes on here becomes an insurance dude. You don't even need to get a late. TheyBill Snow:
forced me to say that under false pretenses but I'm happy to play alongCraig Pretzinger:
urethane weapons across state lines. Yeah.Bill Snow:
Good to be here, guys. Thank you for having me, Bill. It's likeCraig Pretzinger:
we got to talk for so long before that. I felt like we're gonna use up all the good stuff, but I think you got lots of goodBill Snow:
stuff. I got nothing but good stuff. To test me here. Guys, don't look like insurance. Guys. You look like you have a personality. What the heck's going on here?Jason Feltman:
Oh, I love her.Craig Pretzinger:
Bot is just heard it off.Bill Snow:
Can we make fun of insurance people? I speak to I speak to accountants. I tell accounting jokes all the time. Yeah. How do people become an accountant? They go off to college and they ask somebody, what kind of job can I get where I don't have to talk to people, and they say accounting. And it's great. When you're in front of a CPA group and you've got 100 200 CPAs out there, and you think we're gonna boo and hiss. They are so excited when somebody talks about them. I'm making jokes left and right at the expense of accounts. And they look at each other very excitedly say, Oh, he's talking about us. Isn't this great?Craig Pretzinger:
Yeah, they're like, Wait, should we laugh?Bill Snow:
Are we supposed Yeah, these he's talking about us? Yeah, they get really excited. It's great. So I don't know if insurance agents are the same, the same way. So if there's any they're offended, too bad. Okay. Next question.Jason Feltman:
Most people if you say you're an insurance agent, I don't even really say that. Because the reaction is pretty poor. Oh, yeah. Sure. Like saying your lawyer.Bill Snow:
Sure. You see like that guy and Groundhog Day who kept trying to sell Bill Murray insurance.Craig Pretzinger:
That the head needlenose head?Bill Snow:
Yeah, yeah. Got that. Bang. Yeah, that's what you guys do all the time. Right. That's, that's why golf trips. Yeah.Craig Pretzinger:
So we ran a split test where we said bang out the end of every sentence versus not saying it and we did perform better when we said the bank.Bill Snow:
Just just talking to Yahoo's like me who are schlepping a book or? Or when you're trying to sell insurance? We're trying to sell insurance. Oh, interesting. Yeah. Okay.Craig Pretzinger:
Mail. The reason why we don't look like guys bill, the reason why we don't look like agents is because what we've been able to do is get old No, well, we're older we've we've done it a long time. And we've kind of gone through a lot of the building periods. So now what we're, we're in that phase where we're helping the other agents to build that right like so we're giving out this information and all these things that are going to actually get them there. So and that's more fun, right? Because now this is kind of the agencies themselves sort of go on autopilot.Bill Snow:
Excellent. Excellent. Yeah. What kind of insurance what kind of insurance are you guys saw?Craig Pretzinger:
PNC property and casualty? Oh, Manado. Yep. Okay. Good stuff with to do with micro margins? Yeah, yeah, IBill Snow:
know, like your margins. It's it's a it's a tough racket. Yeah, someone's gonna do it. Yeah.Jason Feltman:
Yeah. Most agents do buy books of business. So this is a very good conversation, but you don't work on the level of scale of an agent. You're a little bit higher. Right?Bill Snow:
Yeah, yeah, we we typically work with what we call middle market, lower middle market companies, and that's revenues of roughly 20 million up to whatever 300 million earnings this horrible acronym that you hear in business called EBIT da Earnings Before Interest Taxes, Depreciation Amortization, invented by a cable TV exec he'd have, we love him. Seriously, John Malone was the guy's name. We are love acronyms in m&a. There you go. In fact, we love ampersands in them too. So if we could put an ampersand in EBIT da, that'd be even better. We'd be almost as wild and crazy as insurance guys. So we're getting there. We're getting there. Good work. But so at least 2 million in earnings is what we're typically I mean, they can make exceptions, but we want to have some meat on the bone, that the smaller transactions are, frankly, getting more difficult to place because the buyers want more size and scale when they buy something.Jason Feltman:
I think agents are feeling the same. Same thing. Same thing with buying books, our scales a little bit smaller. But let's let's go back real quick. How did you even get into doing this? Because I mean, yeah, how did you even?Bill Snow:
Yeah, I wonder that question myself all the time, too. I fell down a flight of stairs one time bump my head. And then I stumbled out of the house, I got hit by a car. I got out of college back in the dark ages. It was in a previous century 1819, something like that. And I didn't know what I wanted to do. And I did a bunch of things. I did sales jobs. I got into management. I was working for a retailer, we were buying up little mom and pop retailers. I was in the southeast for a while. And then I got interested in entrepreneurship and where to businesses come from and how do they start? So I worked for you name it friends and family Angel funded venture capital funded kind of worked my way up the food chain, learning the business, a lot of ins and outs still haven't really accomplished much, bought some companies or pieces of company. So I was a owner or minority owner along the way. And some things to add, almost 20 years ago, I was contacted by somebody who worked with me at one of the venture deals I worked on, and he had gone to a middle market investment banking firm. And I thought what the hell is investment banking, they do nothing with investments, and they're not a bank, they call themselves investment bankers. It's not fancy, if we could if we could make that an acronym and put an ampersand in that we. So I, I met with the the founder of the firm's a little investment banking firm, it's a boutique. And I turned down the job offer four or five times to be an investment banker, because I didn't think I wanted to do it. And then the owner called me one day, and he caught me at a moment of weakness. And so I said, Okay, fine, I'll go be an investment banker stop bothering me. And so I exaggerate, really not that much. That's how I got into it. And I was not looking forward to doing a sales job, because that was the main focus, executing the transaction. So calling up buyers, getting the materials out setting up meetings, don't explain to me by the way, that that's what the job was, I had to figure that out when I'm doing the job. Oh, that's the next thing. Maybe we should do something else here. And we'll just switch it the best way to learn. So I did not have the benefit, by the way, have a fabulous book like this called mergers and acquisitions for Dummies at second addition. So I learned the business and one of the great things about it is the selling of a business, you're actually buying because the number of buyers out numbers, sellers by a great number, because you have a good company to sell, you can only sell it one time. If you have three 510 buyers who are interested in put offers together, only one of those will win the mandate. And so it is difficult for whether it's private equity firms, strategic acquirers to find companies to buy. And so when you have a company for sale, you tend to get reaction from the buyers, they call you back, they want to look at the materials. One of the things that I would always tell the younger people at the firm, when somebody would say, well, you're selling the company, what's so special about it, I would say, Well, it's a company, and it's for sale, especially. So that's how I got into it. So I also do m&a standup, as you can tell here, but it's it's good. It's been material. It's a great deal of fun in this business. It's actually quite quite boring. You need to be a good writer, you need to be good at math, good at accounting. Those are the skills everybody wants to do this job for some reason. They want to analyze the tar out of everything. Well, that's, you know, who cares about that? That's a dime a dozen accounting skills, being able to write and having good math skills. If you play golf, and you know how to play poker, those are skills. When you move up and you start trying to find clients, you need to have those skills, but that's going to be an investment banker. There you go.Jason Feltman:
And usually those skills aren't synonymous with that somebody that likes to be outgoing and funny. And so how did how did you end up there?Bill Snow:
I think I think I lost a bet. Like I decided a long time ago that I'll use my personality. I did a very deep dive actually when the first book came out which was 12 years ago what am I good at? What am I bad at one of my strengths? What are my weaknesses and I always encourage people to do this because most people do not have a good handle on what they're good at. And more importantly what they're bad at Ask a young person ask yourself and you'll hear a bunch of nonsense I call them the you know, they're just BS answers right? What are your strengths? Well, I'm a people person, you know, who cares? Anybody can say that? What are your weaknesses? And then these ill formed minds must say, well, it's your must phrase weakness in form of strength. I work so hard. I irritate people. That's my big weakness. I'm excellent everywhere else. I work so hard, I irritate people. It's, it's all it's all about you, you know. And so being able to really understand that so one of the things I realized is, I do not have the politician's gift for remembering names and faces. I think that I write your names down here to remember who you guys hope so and I wish, I wish I was better at it. I'm terrible at it. So now, I just don't care. And I guess I did. I'll be the memorable one. And I can't tell you the conversations I have with people. But I'm walking around downtown Chicago, and I walk away. I'm thinking I have no I've met them. I have no idea who they are. They remember me. So I thought I'll be the memorable one. And I'll do the underwriting if anybody says Do you know who I am? No, I don't forget, I bet. Remember your name, I don't care. And I'm not going to try and put on airs, I'm not going to try to lie. And I found that the the honest approach is much better than to try to pretend that you're, you're somebody that you're not. So that's one of my weaknesses, names. AndCraig Pretzinger:
you can only be good at a certain number of things and remembering names doesn't seem like it's the most important thing to be good at.Bill Snow:
Yeah, some people I think, I think maybe there's things you can do to get better at it. I don't know, maybe pay attention when people are talking. I'll try that.Craig Pretzinger:
When there's only two megabytes of RAM. Yeah, difficult.Bill Snow:
Yet? Well, I do think that some people have a gift for that, just like anything else. It's I mean, some people are mean, I have not visually, you can just see how beautifully decorated my office is the only picture there's me with three different dogs about the stage of my life that my mother framed for me 20 years ago, the only the only picture? Well, actually, that was that was what kind of spurred my thinking about strengths and weaknesses. So when the first book came out, you know, m&a For Dummies. When that came out in the spring of 11, the publisher sent me a copy of the book. And I was so proud of myself. And this was a Friday, I was at home that day, housekeeper was there, and I was so I'm holding up the book, hey, look, I wrote a book and who cares? She didn't care. That's nice, Mister, you know, she didn't care. And I'm looking at this book. And I'm really proud of myself. In all seriousness, I wrote this thing. It was 300 Plus pages, holy cow, I put this together. And I thought, Yeah, I'm pretty good at this writing thing. I've always had a talent for that or an interest and do I've done a lot of writing and different things. And I'm looking around at my house and I see all these empty walls, I'm thinking, I have no idea to do with with walls, and some people just drooling because they have a good flair for it and a good eye for that. I don't and I thought, clearly, I don't have any kind of visual design skills because I can't draw I wish I was a great visual artist, a graphic designer, I don't have any of those skills. If I tried, I would just be aping other people as opposed to something that's really coming from inside the writing comes from inside. Okay, I did work hard at it. And so that's what got me thinking, what am I good at? What am I bad at. And it's a great exercise. And I implore everybody else to do that. I realized I was pretty good at sales from from doing sales. When the publisher contacted me, I did a sales job to get the book. And they sent me a book. Right before it was published. It was a little PDF, and they call it the author toolkit. I call it how to market your for dummies book for dummies. And I'm going through that. And I realized I don't know anything about marketing, the marketing. This is the big surprise when you write a book, it's the marketing is left up to the idiot who wrote the book. Okay, what is marketing? And so I thought, I don't know anything about marketing, maybe I can teach myself. So what I've come up with is the shorthand for marketing and you can test people have a marketing marketing degree, most fail at the answer. What's the difference between sales and marketing? I'll test both of you and stop talking. Jason Craig, what is the difference between sales and marketing? insurance sales guys fire away?Craig Pretzinger:
Is the is the magnetic pole to get them in sales actually converting them?Bill Snow:
Okay, you've given one of the better acts. I'll give you a B plus bordering on A minusCraig Pretzinger:
B pluses? Yeah, way too good.Jason Feltman:
It's the least aware but the least aware. And then and then sales is most aware to conversion, right? Yeah.Bill Snow:
Yeah. Yeah, not not bad. Sounds like you guys are selling insurance for a living so you know a thing or two. What I say and you guys are you guys are actually most people completely flounder at that because they get lost on the tactics. They talk about TV ads, or internet ads or face to face marketing events. Those are all valid unless we good marketing, depending what you're selling. But it's a very simple way to explain the difference. Marketing is what you do to get a chance to make a sale. That's that's an easy pick, pick the tactic and there you go. And then I thought about that, that's probably my, my best skill is I can take something complicated and explain it in a simple, easy to understand manner because of course, you know, I wrote a for dummies book. And so it's been very helpful. The visual design, I hate doing research. I've tried to find people that have skills where I don't have skills or they really enjoy doing what I don't enjoy doing. And I implore everybody to do that. And if you're honest with yourself and trying to say you're an expert in everything Where you know where you're weak you can find people good there. It is the most freeing thing in the world. So I don't mess around with things where I don't have a good eye for. I don't mess with it anymore. It's been fantastic.Jason Feltman:
And if you want to know what you're bad at, you can always ask your wife, my wife's really good at telling me what I'm not good at. So everything I can get that I can pull that list pretty, pretty quick. Yeah, yeah.Bill Snow:
We've we've all we've all been there. But yeah, so anyway, there you go. That's that the only other for dummies book I could write, by the way is how to write a for dummies book for dummies. So I'm very fortunate that Wiley Wiley Publishing owns the the domino. So I was talking to Jason and Craig before this, they were asking, Okay, let me get all the questions out here. No, I did not get around the copyright. Yes, it quote unquote, real m&a. It's a real for dummies book, someone owns the brand. It's Wiley Publishing. They're a big behemoth. They contacted me I did not write the book and sell it to him. If you try to contact them, they'll tell you go away. Oh, really? Oh, yeah. Don't contact us. We'll we'll contact you. Because everybody, everybody in the world wants to write wine for dummies. Hey, there's an idea why for Dummies I can write. But nobody's thought of it. Yeah, it's like trying to come up with the name of a rock band these days every name has been thought of. And it is very difficult to come up. I'm good with coming up with names by the way. But try it look up, look up on all music.com every name you can think of, unless it's just something really obscure a bunch of random words put together has been probably grabbed up sartorial splendor. Ironically enough, I just looked this up, I think is available seriously, you would think that would be like a, like a Human League ABC cover band, right? Start sartorial splendor. But Roxy was nobody has picked that as a name. So you kids out there looking to put out insurance rock and roll band together. There you go. sartorial splendor.Jason Feltman:
I love it. Write that down. So. So tell us I would love to know, since you wrote the for dummies book, which is your probably the perfect podcast for that because we're your audience. Yep. As far as an insurance agent goes buying an insurance agency, like what are some tips like, like most insurance agents that get into this game, and buying agency, there's a lot of trust in other people. And we don't know as much about the m&a world. A lot of times, it's like, he said it was a good book. should I should I buy this? And you ask a couple people and they're like, Yeah, I think it's a good idea. What other tactics than asking your buddy, if it's a good idea,Bill Snow:
you you sound like my mother when she walked me to kindergarten, when I was five years old, and she picked me up. And this went on for a few days. And then typical for my mother, she walked me to school, and she said, Okay, Billy, today you're gonna walk home alone, you know how to get home, right? And I said, Haha, like I probably got lost. Yeah, and coming home. And then years, decades later, 50 years later, my mother was asked me about that. And she said, What would have happened to you if that nice lady didn't see you crying and call me I said I'd still be walking. It's kind of the same thing with with buying an agency. Yeah, you're right. You know, coming up with a good questions to ask, Should I buy this? Don't ask a question like that. Because what somebody's gonna say, especially if they don't like you. Yeah, it's a great idea. It it go buy it. Yeah. Okay, so you have to ask yourself, if you want to buy an insurance agency, first of all, do you like rejection? Do you like people making fun of you? Okay, right. So if you're not in the insurance business, you have to ask, do you have that kind of personality where you have stick to itiveness? And, and and perseverance. A million people are gonna say no, before somebody says yes, and buys a product, okay? If you don't like that, if you don't like getting on the hamster wheel, and dialing for dollars or emailing or whatever you can to jump drum up business and have most people say no to you probably with a bit of invective, and a few expletives is probably not for you. So if you've now crossed the Rubicon, and you've decided insurance, of all the things I could do in the world, insurances, it, it perfectly lines up with my personality, for whatever reason, and I am a masochist. I enjoy being rejected. If this is where you have become, if you've gotten to that point, now you want to buy something that I guess you want to look at the nature of what you're buying, I don't know what the multiples are, how you price, an agency. But if you're buying a book of business, well, how strong is that book of business? Are these people going to stay with you? Are they shopping? I mean, have they been there for a long time? Do they tend to be long term customers, or do they look for a new insurance carrier every time they're up for renewal because you're looking for the best price or the right price? I gotta imagine that's part of it toCraig Pretzinger:
be real quick. This is interesting, because because there are so many things that that seemed to be very unique to the insurance industry, like just weird things that normally another like you don't normally people say my industry is different, right. But actually, in this case, I think that there are some things like so for example,Bill Snow:
a different were different, like everybody else,Craig Pretzinger:
like an independent insurance agency or broker is going to go for some multiple of m&r. Right? That isn't how it works for for captive carriers. If you're a captive, if you're with a captive carrier, it's it's a multiple of commission, not not not inclusive of bonus. So you could have bonus 300k, that doesn't count as towards it when they figure it out. And that's only because this has just been the standard. Right? And what's interesting, and I'd love you to apply some of your your experience to this is price or commissions are going down right now. Right? The captive carriers are struggling with with competing with the big, you know, 800 number ones. And they're squeezing the Commission's down. So what's happening is there's consolidation right, so the the bigger agents are gobbling up the smaller agents, but we still have the there's this pressure because of the declining Commission's on that multiple. So normally in a regular business, it would be based off of okay, well, this one actually performs better has a higher retention has all these things that we have very good analytics on. But it doesn't seem to really be a driving force right now, on those multiples, and we're looking at like, two and a quarter of your comp, which is pretty crazy. It's pretty low as a multiple.Bill Snow:
So two, two and a quarter of the compensation that an agent makes.Craig Pretzinger:
Yeah, so let's say you did a million and a million and in in commissions for the year. Okay, then yeah. 2.2 5 million is what the the asking price would be?Bill Snow:
Oh, 2.5 times 2.5%. Got it. Okay. Okay. Yeah, you know, I don't know enough about the the insurance racket to to give you whether that's good or bad that that makes sense. Okay. That's kind of the industry standard that that's being used. And, you know, that's what you pay when you bought something and that's what you can expect to sell it. Hopefully, you've built up the business and, and can sell it for more. If the commission rates are coming down now, does that put some downward pressure on the price thatCraig Pretzinger:
oh, it has worked? Yeah, yeah, these things were going for three and a half or four times? You know, tenure? Oh, okay.Bill Snow:
Okay, so that's already cut down. Yeah. Yeah. More room? Yeah, yeah, no, no, ultimately, something everybody says, you know, valuation, they don't want to talk about valuation. And you might want to write this down. Guys. There's another little bit of wisdom for this. And I'm gonna give you the definition of the surefire way to understand valuation. It's very complicated mathematical formula. So get ready to write a very complicated mathematical formula. That largely depends upon what side I'm representing. That's it. So you it doesn't get better than this, okay? Don't get me started on lawyers. Okay. You know, how you become a lawyer, you go to law school, they teach you one thing. It's not illegal if you don't get caught. And then you spent two years learning how to build and you become a lawyer. It's a great thing. If you have a real legal question. You hire paralegals, and they go through all the code and then they come up with the right laws. Doctors and nurses. Yeah. Oh, doctors, the nurse they don't they don't do anything. They watched. Catch Me If You Can, and they just say concur, because they are Doctor Yeah, they just walk around you Do you concur. Yeah, the person is gonna die. Yeah, I can currently marginal. Yeah, exactly. There you go. It's a piece of cake. Plus tracker where we were so we were talking about about multiples, so something is worth what somebody's gonna pay for it. That's the bottom line. So valuation, you can come with all these models. And sometimes that's helpful to look at when other things have traded or some other matrix metrics and so forth. But ultimately, something is worth what somebody else will pay for it and what the what the seller will accept. That's the bottom line. So you might think you're selling something you might think it's worth 100 bucks. But if all I offer is 50 and I'm the only person willing to bid then it's either worth 50 If you accept it or if you don't like my my bid, you just don't sorry, I'm not gonna sell to you. It's worth more than that. That'd be your choice. But if you accept my price, that is our price. Greetings price.