Acquisitions Anonymous - #1 for business buying, selling and operating - Insurance Broker Secrets for Business Buying - Tom Gilroy - Acquisitions Anonymous Episode 98

Episode Date: May 27, 2022

Michael Girdley (@Girdley) is joined by Tom Gilroy (@TomG_GKG) to talk about insurance. We talked about the role of an insurance broker, how to be proactive and minimize claims and risks, how to structure a deal, the different types of insurance you should be looking at, and much more.-----Thanks to our sponsors!MicroAcquire is the #1 startup acquisition marketplace. It is simply the most efficient way to buy and sell startups when you’re ready to make your next move.-----* Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel.* Do you enjoy our content? Rate our show!* Follow us on Twitter @acquanon Learnings about small business acquisitions and operations.-----Show Notes:(00:00) - Intro(1:09) - Microacquire(3:02) - Tom Gilroy Insurance Broker(4:35) - Insurance Broker vs Insurance Carrier: What should I expect from each?(6:22) - When do I need to call someone to assess me on Insurance?(8:15) - What should a buyer expect from an insurance broker as a customer? How does the process work?(12:05) - How do you interact with the lawyer and the buyer?(14:20) - Let’s talk about gap analysis: What are the major areas you’ll be looking at?(16:44) - Best practices to minimize claims? Can you find out which losses have occurred?(20:48) - How does special insurance work?(22:47) - The rating review: Why do sellers lose money and how could they avoid it?(25:06) - Walk us through insurance fraud, risks & examples.(30:00) - How does the universe of insurance brokers work? How can I find a good broker?(32:40) - Is geographic location important? Is size important? How?(36:10) - Representation & Warranty Insurance: How does it work & who is it helpful for?(43:01) - Connect with Tom-----Links:* https://gkgrisk.com/-----Past guests on Acquanon include Nick Huber, Brent Beshore, Aaron Rubin, Mike Botkin, Ari Ozick, Mitchell Baldridge, Xavier Helgelsen, Mike Loftus, Steve Divitkos, Dzmitry Miranovich, Morgan Tate and more.-----Additional episodes you might enjoy:#96 From W-2 to Business Owner - Patrick Dichter tells us how to cold reach seller and we discuss 2 Deals#92 Wait... what? You laid-off 90% of your staff?!? - Pete Erickson joined us for an exciting WarStories episode!#Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, Michael here. Welcome to another episode of Acquisitions Anonymous. We pulled off a miracle with today's episode. We made insurance exciting. And as somebody who's been in business for a long time and has insurance tied for number one, as the things I find most boring in business, our guest, Tom Gilroy, did an amazing job

of helping me understand how important insurance is, especially as you're looking at a business to buy and getting that to be something in your possession. So we talked about everything. How do you find a great insurance broker? What is your insurance broker's role in looking at a new business to buy? How do you be proactive to minimize claims

and minimize risk in how you structure a deal and then how you operate it and run it? The types of insurance you should be looking at and the dangers of not doing this kind of work in terms of risk mitigation and talking to the right insurance partners before and during you on the business. So with no further ado, here's Tom,

and we had a great time chatting about this stuff. And right before that, here's a quick word from our sponsors, and then we'll be right into the episode. Thanks for being here. Today's sponsor is Microacquire, and Microacquire is the number one startup acquisition marketplace, and it is simply the most efficient way to buy and sell startups when you're ready to make your next move.

So we've had Andrew, who's the CEO, and founded the company on the pod before, He's been great. The cool thing about Microacquire is that most of the conventional options for buying and selling your company, especially a Tech One, are expensive for founders. So Microacquire puts all the cost

and flips that the other side around. So they are free and anonymous listings, and they apply a rigorous vetting process where actually only 50% of the startups make it on average. They have over 2,000 online businesses listed today at any given time, and a buyer can expect to see a range of startup

types that will fit any profile from SaaS to e-commerce to apps and agencies, and of course, more. So different sizes as well, anything from $5,000 all the way up to a million or more in asking price, really, for buyers of all sizes. So founders like Microacquire too, and they come with the expectation that serious, vetted buyers will be showing up in great numbers when they decide to bring their business to market. They've helped hundreds of startups successfully get acquired and facilitate a hundred of startups.

hundreds of millions in closed deal volume. So if you're thinking about buying or selling an online business, then you definitely want to check out Microacquire. And thanks to them for sponsoring our episode today, good friends of the pod. So looking forward to all that and definitely check out microacquire.com. And if you're somebody looking for the right business, definitely go visit there and consider upgrading to one of their premium accounts

where you pay a bit to start the conversation and see deals and more information than just the other options. So thanks again, and here's back to the episode. Tom, thanks for being here with me today. Yeah, super excited to be here. I have enjoyed the podcast in the past, and just happy to speak, dive into a little bit of the secrets, and give insight anywhere I can.

Yeah, super cool. Well, you're going to help expose us to a world that, I mean, at least me as a buyer, like I don't spend enough time on insurance. It's certain things like, yeah, I get a lawyer, yeah, I get like all the other kind of diligence done. But like I'm excited to dig into this because I feel like I've been putting myself at unnecessary risk and some of the stuff we've done. And hopefully you'll educate us on that. So before we get started, maybe give us like a minute overview of your background and how you got to be in the insurance business.

I know it's family business, but I think the audience would love to hear kind of your story. And then we'll go start to dive into insurance and the world of kind of M&A. Yeah, sure. So personally, I'm living in New York City in Brooklyn, New York, originally from upstate and haven't been in insurance forever. I actually started in the finance side and loved that area and got to see a lot of things. But ultimately, I was looking for something where, you know, I could really differentiate, make an impact, and then happened to talk to my dad about the family business. And after a six-month discussion, decided it's something that could really benefit both sides.

So I will say I semi-stumbled my way into the insurance area, but with any family business, you can't dip your toe in and say, just kidding. So it was a very thorough decision, and that was about three years ago that I took the plunge back on the insurance side. Yeah. So, okay, so let's say I'm a small business buyer. Like, let's say I'm going to buy a Main Street business worth, say, $4 million. And let's say it's a plumbing company, just for, just because everybody goes filming companies.

Like, what role, like, before I'm a buyer? you know, what is, what role does kind of the insurance side of that business play in terms of how I should look at it? Like what kind of risks am I running if I don't pay attention to insurance? And then like, you know, what kind of danger? What kind of landmines am I potentially walking into if I, if I don't pay attention to kind of your segment of stuff? Yeah. And just as we talk about for the audience, I think it's important an insurance broker or insurance agent and the carrier. So we're the broker, which is really that advisor role. And the carrier is the one who actually insures the risk and will pay out, investigate the claim, underwrite, etc.

So as the insurance advisor, we're really there to navigate on the client's behalf, to help advocate if something comes up and really set strategy to make sure that claims aren't even happening in the first place. So when we talk about a business that's about $4 million, things should be more straightforward. but you guys know from diligence, you can't just assume that's where things go wrong. So really is that potential buyer, you need to understand the summary of insurance, what policies are in place, is there proper coverage? Look at the loss runs. Has anything come up before? Make sure that's wrapped and that's there. Little things like making sure the policies rated correctly,

and then just understanding the culture of risk and safety. So, you know, depending if it's software to industrial, those could be incredibly quick things, say in our review, up to much further applicable. Yeah, totally dig it. So when I'm looking at a deal, I'm considering doing one, like just a very nuanced thing. So I'm thinking about, okay, I've got a company and I'm about to put it under L-O-I, and then maybe I get it under L-O-I, and I haven't closed on it yet. Is that when I need to call somebody in your role, right?

Is that the moment or does it happen before that or is it happen after? Like when should I have my insurance broker or insurance agent involved in the process? Yeah, sometimes we'll get a heads up pre-LOI, but it's really once it's signed and there's serious intent to close that we get involved and start to look. We want to make sure that everything else has really come together and then we're that final piece of diligence. We say that because there's a lot that goes into it and you just don't want to engage an insurance broker before you. you know it's going to close. Some will do that diligence as a one-off fee, and some will incorporate it based on the intent that they're going to be your broker moving forward. So typically, that's why we get to the LOI when other things have been straightened out versus right off the bat when the

data room gets going. Yeah, so I should look at you probably as one of the advisors that we bring in once we already have a deal and I need to do diligence the right way. Is that kind of how I should think about it? You nailed it. It's that it's that LOI when things come in. The, the, the place where we can come in and, you know, we hate to is after a deal is closed and then we find things, uh, because that means you're then fighting with legal disputes, potentially going after the escrow, the hold back or the seller's note. And when these deals close, oftentimes the seller is a huge advocate for you in the future as you look at other deals. And so the worst case scenario is that we find things after the fact. It gets ugly. It gets ugly. You may recoup your money,

but you've lost a key relationship if you're looking at acquisitions in the future. Yeah, dig it. So you talked about sometimes you get paid, you know, and you'll do this work as a broker just through like the normal kind of client analysis you're going to do anyway, and that's just kind of the process of how y'all

would potentially be selling a new client. But then I think you hinted other times, there's times you get brought in as a paid analyzer of what's going on with a potential deal. Could you walk us through those two scenarios? is what is more typical in your mind and what do you see more often? What should I as a buyer be expecting in terms of how you're going to get paid through that process? Yeah, I'd say the most typical would be the non-fee arrangement where the broker would be stepping in to work with you.

And then they would be compensated based on the premiums paid to the carrier. I'd say really 80-20, that's the model you're going to see the majority of the time. sometimes if there is a significant amount of work being done, it may be fee-based because it's just not within the normal model. You may also see that on the small side if someone's looking for a really technical quantitative review and the premiums may not warrant what someone normally would work on. But I would say the majority of the time people are partnering up with a broker they have that relationship with and they're collectively working on the assumption. that that business closes, it's going to benefit both sides.

Totally dig it. Okay, so we're working with you. We're looking at a company that we have under LOI. We're getting ready to close. We have a path to close. My lawyer's been involved and he's helping negotiate or she's helping negotiate, you know, the legal side. I've brought in folks that are helping me with financial due diligence

and you're going to help me with the insurance due diligence of looking at the business. So, you know, tell me how does that work? like what are you going to ask for? What sort of things are you going to do as a consideration? What sort of things do I prepare you to both start and then deliver me the answers of what we need to know about how to make this business insurable and safe for me? Yeah, the beauty of it is you need to connect us to the seller to figure out who we can request things from.

We'll use an M&A checklist that's pre-built out and have a lot of clarity for them to package it together and put it in the data room. Once it's there, we're going to go to work, review everything, summarize and then come back to you as the potential buyer to look at what we've found, ask a couple clarifying questions, and then really have the findings in place. So it's pretty easy as the potential buyer where you just need to let your agent or broker go to work, but you need to make that connection for them to get started. Once we review, that's really where the context is going to be critical.

Something like workers' compensation insurance, let's say you're in the industrial area, But the class code is how they rate risk. So it's critical to understand what type of work is being done. So we may look to the buyer and the seller to make sure that's done correctly. And that's just one area where having the wrong code could raise costs or decrease costs over time. But, you know, I think the biggest thing and the reason why it's so critical to do this is, one, risk is incredibly complex. And so even if there are the best of intentions, people don't always understand. what they're doing in this space. I think the other is that risk is dynamic. And so some people

fall in to the trap of they've solved for it in the past. And with risk, you can't just do it once and let it slide. So a lot of times you have sellers who have solved for insurance in the past, they want to sell the business and it's up to the next person. Well, not reviewing it for three to five years could create a lot of holes that that isn't important to the seller, but it's critical to the buyers they understand what they're buying. Yeah, totally dig it. So one of the things I'm curious about, like how does my insurance broker

or insurance agent kind of interact? You talk about how they interact with the seller. How do you interact, say, with the legal side of stuff and then also with me, the buyer? Because one of the things I see in buyers a lot of times or the lawyers a lot of times is, you know, nobody really sits down and kind of understands all of the issues

and quarterbacks the whole thing. And like, you know, they end up just and not to pick on insurance burgers, but like you guys are often motivated by how many policies you can sell. And like, I'm curious, like, okay, well, me as a buyer, like, how do I get up to speed?

How do you interact well with my lawyer? Like, how do I make sure all of that just like stays like coalesced together? And maybe I'm asking two questions at once, but hopefully the concern I have is coming across It's like twofold. Like, how do I keep this from spinning out of control? And then second, like, how do I keep you involved with the holistic picture of the deal?

Yeah, well, I think one of the most important things in the relationship is trust. And so you need to work with someone that you truly trust, understand, you know, and has credibility in the space. There can be a misincentive in times where the higher the insurance costs, the more the broker gets. But, you know, our philosophy is that while that's a short-sighted win, if the business truly grows and performs over time, that's going to lead to a mutual benefit. So you certainly want to make sure you're not working with someone who's Harris slicked back and they're just trying to get every extra dollar they can out of you. But our job as we put this information together and summarize it is to present the options to you. So we're going to give you both sides, but ultimately

that's going to be your decision. Same thing with legal. We're going to present you with what the options are and what we're seeing, and you can decide if it's worth the fight or if it's even something worth considering. We know how valuable everyone's hours are in our feed base, so the last thing we're trying to do is delay the deal or run up the hours. But, you know, we need to make sure that you as the buyer are informed and have the awareness to make the decisions. And, you know, from you, that's where it goes. Yeah, dig it. So, super helpful. So one of the things in the prep work that you did with us before this episode

was kind of talk about this term of gap analysis where you're going in and you're looking at all the things that are happening in the particular business to be acquired and then identifying

kind of gaps and holes in there. So, you know, I think it'd be super helpful. Kind of go through what are the major areas that you're going to be looking into, cyber employment, all that kind of stuff

so that like, say, a new listener or me could know like, oh, when I hear that, that's, you know, I'm familiar with it. What are those major categories that you're going to go in and look at a particular business about?

Yeah, there's a whole stream there from your property insurance to the various forms of liability that you have. You know, the common one, you know, most people have property in place or they have their general liability. So we're going to review those limits to make sure they're appropriate. But the places where we're seeing that people are uncovered often is cyber insurance, which has just rocketed in the amount of cost. claims over the last five years. Employment liability. And depending on your state, some states are

extremely employer-friendly, which if you don't have the proper practices in place could leave you exposed. Umbrella policy is another one, which people might not be familiar with or might be familiar with it known as excess liability. So people might put that base layer in, but they're not really thinking about the total exposure that they can. So, you know, it's anything from the things you own, such as buildings, cars, equipment, to the liability that you're exposed to, um, to generally risk practices, the way not necessarily solve with an insurance policy, but might be a practice that needs to go in place. Uh, and I think the trap that people fall into there is some people just think risk is insurance. You slap a policy against it and you've

solved for it. Uh, and we tend to think of risk holistically. And, you know, that's really the proper way to do it. You know, you can always buy a cyber policy, but if your team doesn't have multi-factor authentication in place, you could just be opening up the door to exposure and a hacker coming in there. So you can't just think about the policy. You need to think about how you proactively manage the risk and prevent things from happening in the first place. Yeah. So, you know, let's say I am a business owner and I want, you know, I guess the best way to save money on insurance is don't have any claims. And the best way that not have any claims is to be smarter about it? What are the ways that I as a business owner can be smarter to minimize

claims, right? And then secondarily, like, is there a way I can find out how many claims the business I'm buying has had? So anyway, I do it again. I asked you two questions and one. So pick which one you want to answer. Let's do that one. Let's answer the other one. Let's start with a second because it's really easy. So can you find out what losses have occurred? Yes. So any insurance that has been in place, you can request something called a loss run, and that loss run is going to be a summary report of claims that have occurred over each period. So the current agent for the seller will be able to request that from each carrier and package it together. So that loss run analysis is critical to what we do. Additionally, if there isn't coverage in place, we'll ask the seller

if an uncovered claim has occurred, and we'll have them rep if nothing has. for. But it's really easy to request the runs where policies are in place, and it's really important to ask what's occurred where there aren't policies to cover it. And then remind me the first part of the question as we're going there. Well, the first part, sorry, yeah, the first part of the question is, how do I, as a business owner, a business buyer, run the business in a way that's going to minimize those number of claims, minimize the number of times that people are going to go to my insurance company and try to recover, recover damages or funds.

Yeah, I think you need to have a proactive process in place where you're reviewing your risk, at least annually. And you should have some form of assessment that helps you understand it. You can't lose weight if you don't know how much you weigh. And so that first step is really awareness looking at the risks and then deciding, you know, what you can work on. And a lot of times when we're partnering with clients, when we put a plan in place, there's things we can accomplish over the next year and things we put aside.

Because, you know, as much as you want to fix everything at once, if you try to, it's going to go nowhere. So you have to figure out what priorities can you actually action and what do you need to put on that roadmap in the future. Yeah. So what, I mean, just maybe as a dumb question, what is the motivation for me as a business owner to like be, to have fewer claims, right? Like, I'm getting lumped in with a pool with like everybody else.

Like, why do I care? how does that come back to me? And maybe this is all on how it gets priced, right, on a per client basis? Or how does that all get kind of, why do I care at all if I have done? Yeah, that's exactly right. I don't think a lot of people realize that you have a credit score within risk. And so your experience matters for the future. So the more claims you have, the more expensive it's going to be to ensure those policies.

But, you know, the reverse is also true. where if you're incredibly proactive, you're arming your broker with a story they can then go to the carriers with and explain why you're a better at risk. Each insurance carrier has underwriting standards, and they all have thresholds where they can move the needle. And that can be 20, 30 percent at times. So if you're coming in just as a blank sheet of paper without a real story or risk management program in place, they're not going to be incentivized to give you a discount.

But if you can point to the strategies you put in place, the past experience you have, you're really armed to go to them and fight for discounts as a best in class risk. So, yes, definitely, if you're thinking the policy is just going to keep paying, you're in big trouble because ultimately, if carriers see continued repetition without change, they're just not going to ensure the policy. And you're going to be left in a place where you know, you're paying could be 10 times what the market average is, and just losing huge margin relative to the years. Yeah, super cool.

So a couple kind of very nichey, nuanced questions. There are some industries that general insurance carriers don't cover. For example, like carnivals, right? They don't get covered. You can't insure those through a regular carrier. There are specialty carriers for those. So could you kind of explain maybe a little bit of that for people that are potentially looking at like an oddball business and like how that ends up working, you know, like,

does a broker like yourself deal with those oddball carriers, or are there specialty captive brokers that only deal with them? Like, how does that go down in terms of me looking at a business that's maybe not super mainstream? Yeah, it might not be a mainstream carrier, but there's always a market for it out there. And the most sophisticated would be Lloyds of London where there's an open marketplace and syndications that look at, you name it, someone's come up with it. So, you know, we love complex risk because that gives us a chance to differentiate and help and really tell someone's story. So I would say if you're in a market that isn't a traditional cookie cutter risk, your broker is critical because you need to make sure you're accessing those

right markets and they're advocating for you in a way that makes sense. You know, it happens all the time to us where we'll talk to a carrier about a specific risk and they say, no, that's not in our appetite, and then we sit down and really walk through exactly with what they do, and they can get comfortable with it. So understanding the story and how it comes across is extremely critical, say, if you're running a carnival. The other piece is that, you know, as you're running a carnival, the risk management program strategy, safety that you have in place really, really matters. People might be willing to write that risk, but only if certain things are in place. So there's just a bigger microscope and it's even more important to look at versus say, you know,

a software company might be on the other end of that spectrum. Yeah, super cool. So, just looking back on our prep, one of the things we talked about it, and you hinted about it was this kind of the rating review. And the sentence that stuck out, because I think maybe we want to reiterate what you said, you said, it is astonishing how many sellers screw up the rating exposure that they have and how that affects their premiums. So maybe let's just come back to that once again, because Nothing else we did in the prep had that much emotional charge in the sentence the way you described it. You said it is astonishing how many sellers screw this up and have under or misstated their policies. So anyway, maybe it may be helpful just like hit on that again because part of our goal with this podcast is like,

how do we keep people from losing money and making mistakes? And this seems like one that has to frustrate you a lot when people do this. Yeah, it can be frustrating. It can also create an opportunity. So usually on the property side, you don't see it because people understand values. You can still see gaps there. But I had a recent one where the seller was reporting their payroll instead of sales. And so it wasn't intentional, but they misunderstood it.

And the insurance tripled after it was corrected. And so that's just one example of there was good intent, but it created a massive swing and cost and hit to the EBITA calculations that were in place. And so just to back up a little bit, in that case, your general liability, since there's no building in that example tangible to rate it off of, they rated most times off of your sales. And so that sales number each year is updated to reflect what the exposure is. And in this case, it was completely wrong. But in other cases, they just sign the paper and auto renew year after year after year.

And so if the business has grown, it might not be obvious, but the cost could be twice as much. And if you continue to report it incorrectly, that's insurance fraud and you're at risk. So that's oftentimes the biggest hit that we see. Even if there's no intent to deceive, things can get really out of whack because people aren't reviewing every year. and the risk changes. Yeah, I dig it. So you just talked about this topic of insurance fraud. I know about bank fraud.

I know about mortgage fraud. I know about general fraud. Like, maybe real fast, like, what's special about insurance fraud? Like, what is it? I mean, I know what fraud is, but maybe the audience doesn't know what is. But so, like, what is that kind of explain to us what the risk you have if somebody is intentionally or even unintentionally committing insurance fraud? Yeah, the one, it's illegal.

so you've always got that risk. But two, if you're caught, then the carrier has the right to retroactively go back and recoup the premium that should have been in place. So, you know, let's say that you're paying $50,000 less a year. That could hit you on the current year and in past years. So there could be $200,000 worth of out-of-pocket that comes up. So first and foremost, it's illegal. second, it could be a massive financial hit to you if it occurs.

Yeah, and are they, is there also risks they might not pay out? Like if I have a claim on my insurance policy and they dig in and understood I've been misrepresenting or some that stuff, is there a liability that I might not actually get paid if I make a claim against insurance that I've been paying for? There is, and oftentimes there's language in place that talks about co-insurance. and that just means they'll only pay relative to what you've put into it. So if you misrepresented and you're only paying, say, 20% of your exposure, they may cap what they'll pay.

So you could still receive payment, but there's protections in place to make sure if this does occur, that they're not on the hook to the full extent that the fraud was committed. Yeah, take it. So I think one of the other things I wanted to achieve today, I wanted to scare people a little bit. You talked about this thing where the seller was potentially committing unintentional fraud

through negligence on their reported revenue by reporting their payroll only. What kind of other things have you seen where people have made big dollar mistakes by mishandling how they're doing insurance? Yeah, another one is on workers' compensation, like I was saying, with those class codes. And so when you're classified into a category,

if there's two that it's in between, if you do anything in the riskier one, you're 100% in that class code. And so one of the things that we see is people will split job responsibilities and say they do this risky activity, but it's only 25% of the time and the rest their clerical, say, at their desk.

Well, that's just not how it works. And so they would be 100% in that riskier code. And so that, if you had been reporting it wrong, you know, could be three, seven, 10 times increase in cost per employee. So that's a big one that we see. Another side is employee benefits, which I don't think it's looked at as much either, just in terms of benchmarking the plan, the richness available, or the strategies that have been

put in place. Sometimes you'll see that people will allow spouses and families to be on the plan for protection. But one thing that catches people is they make their plan so attractive that oftentimes spouses, even if they have an employee benefits plan at their company, join the other plan because it's that much better. And so what they end up doing is instead of providing a benefit where it's needed, they're actually pulling in much more people on top of it and adding costs where it's not necessarily needed. And so it's little things that can hit across. the board and it really depends on the industry or the type of business, but it can it can

hit from all angles. I would say another piece is deductibles. Oftentimes that gets overlooked, but if you've got a $5 million building and deductibles, say, $10,000 versus $100,000, that can make a significant difference in price. And so sometimes people aren't looking at all of little details that can move the levers. Because again, you know, if you've got 5,000 of shrub damage, you might be willing to pay that. But if the whole building burns down, you know, that's what it truly is for. And so if you can save $1,000 a year on your policy, you're going to self-insure that shrub if nothing happens over a period of time.

So it's not a great answer because it really depends and it can hit on all sides, which just goes back to the importance of looking at your risk and having someone there as a partner. Yeah. And so digging a little bit into what you kind of hinted about earlier, you know, the employee benefits and health insurance and stuff like that, is that something you all do in addition to kind of the more classical risk stuff? So you're selling both those types of policies. And is that common? You know, do you have one that's very kind of risk property casualty-centric and you're getting health insurance through somebody else?

How does the universe of kind of folks in your business do that? Is your business unusual that you do both of those? How does that all work? Yeah, you see a mix out there. Some will specialize in just that property and casualty or commercial line side of it, and others will be just employee benefits. So we are a little unique that our advisors do both sides. But for us, as we try and take a step back and really say,

okay, strategically, how do we review this and look at it annually, we think we'd be doing a disservice if we just did one side of it. And you can't fully understand the impact if you're siloed in one is our thought. So you do see some focusing on one and you do see some doing both. But we definitely play on both sides. And that just helps us really overall assess the risk and work with people on their one year, but also more of their strategic plan three to five years in the future. Yeah, totally dig it.

Cool. Well, I think the last thing I really want to hit on is just understanding, let's say I'm a buyer. And besides calling you, because you seem really smart, and like how do I go about picking a broker? Like, how do I figure out who the right, if I'm new to this, how do I go about figuring out who the right insurance broker is going to be for me? What advice do you have for people to do to go run a search and find the right partner? Yeah, you know, I would love to work with everyone, but, you know, there's a lot of good people out there doing good things. And so I think some of the qualities that we talked about, find someone that's credible, find someone that you can trust, and find someone that you're aligned on their philosophy or approach. You know, for us, we talk about it's critical to be proactive, do an annual assessment, really be looking at things against the vision in the future. That's a lot of work that can have a lot of dividends. but might necessarily align with everyone. If somebody just wants to renew every year and not think about it,

they should work with someone on that side. But I would say start with people that you know and trust and could provide referrals, and then talk to the brokers, find out how they work, what their process is, and if it lines up with what you're looking for. Yeah, so maybe next we can click into specifics, like how important is it that you're in the same city

or the same state as me as a buyer, or for the target company. Like, is that important? So maybe start there. Like, how should I think about geography relative to the broker I would work with? Yeah, I'd say it's important that your broker can access markets in the area that you are. And so, you know, you've got the gigantic publicly traded brokers out there that are in every state. But as a small company, they might not give you any attention.

So it really depends if there's access. We're in New York State, and that's really the roots of where we are, but we do business all across the country. And so we have the ability to go everywhere. So I wouldn't say it's critical to have feet on the ground. I think the other change recently, and this ties in with COVID, but there used to be a lot of relationships where people needed to look someone in the eye in order to be their partner. And now we're seeing those walls and those barriers are kind of broken down as people do

a lot of things more virtually. So state, regional can be very important, but I wouldn't rule someone out just because of the radius that they are. I'd say the other thing is that you're starting to see a lot more people specialize. And as you talk about sophisticated risks, that can be very important. So, you know, let's say you're in the waste management business. If there's a big broker that specializes in waste management and has national expertise in New York, but you're in Nevada, they might be better than your next-door neighbor

who's just a general list. So it's really important to discuss that fit and if it lines up that they have the markets and they have the ability to help you with what you need. Super cool. So, well, I mean, I think it's good for your business that the zoomification of work is helping y'all's geography spread a lot more.

So kind of second question, like, how does size start to play into choosing a broker? Do I need a broker that's done my type of is very experienced? And my size of deal, say it's a $10 million enterprise value deal. That's obviously very different than, say, a $50 or $100 million, one and very different than a million dollar purchase of a business. How does size play into who I should look for in a partner here? Yeah, I think the larger something is, the more there's an ability to differentiate.

And so when you talk about deals that are under $10 million in revenue, let's say, it can be heavily commoditized. So it might not take as work and a lot more people can do as good of a job there. But once you talk about getting over 50, 100, 100, 1,000 employees, it gets very sophisticated on the benefit side. And similarly on the property and casualty, as you get above 10, 20, 30 million, it gets more sophisticated. And then again, the operation.

So we do a lot with manufacturing. A $30 million manufacturing company is very different than the software. a company we use, for example. But I would say, certainly as you get over 50 employees and $10 million, it really starts to matter who you're working with. And there's plenty of people that play in those different lanes. So some people do small business all day. It's their passion.

It's their bread and butter. And others really love dig into that complexity of helping people as they grow and hit that size. Yeah, dig it. So one thing I do have experience with is just reps and warranties insurance. So that's where either the buyer or the seller pays for a policy that has a limit on what it can pay out if something represented by the seller turns out to not be actually true. And I think there's been talk I've seen on Twitter where people are like, yeah, I want to get Reps and Ortiz insurance or RWI for these little tiny deals. And I'm like, I don't think you want to do that.

And by tiny, I mean like a $500,000 or a million dollar deal for a company to be bought. So like A, did I describe RWI insurance correctly? So please correct me if I'm wrong. And then B, like, where does that start to show up in deal sizes? Does it show up at $20 million, $50 million, like in terms of the size of the deal? Yeah. Traditionally, people have always been nervous that as they do deals, there's things that are going to come up that were unexpected. So they wanted to hold back money in escrow.

And traditionally, the only way that you could do that was with cash. And that made people feel very safe. But for the seller, you know, there's a lot of anxiety that things are going to get held up or they don't have that money that they've worked so hard for. And so reps and warranty insurance really stepped in to say, we will ensure that cash hold back because it's going to get the seller their money that they've worked so hard for and desperately need. And it's going to allow the buyer to move on. And so typically we'll see reps and warranty insurance come into play on deals that are 50 million and up. and deductibles might be 250,000 on that deal. So when you're thinking of the deals sub 50 million,

one, the carriers don't like to play in it. Two, there can be minimum premium, and three, there can be huge deductibles relative to the size. So most times we'll just see the seller notes and the escrow holdbacks on those sub-50 million dollar deals. And then as we get 50 and above, some people still prefer cash, and some like to do the reps and warranties as we discuss,

because for a buyer, it could be a sweetener in the deal, and sometimes for both parties, it's just more attractive. Yeah, dig it. Well, and then the other part, the thing we didn't talk about with RWI insurance, you have to pay for that type of insurance, you have to pay them to underwrite you because they have to do a bunch of work. So you might spend 50 grand in money that you'll never get back, even if the deal doesn't close, to have RWI insurance in place.

until I started getting involved in much bigger stuff, I didn't even know it existed because it's just, it doesn't make any sense to spend that kind of money, you know, when you're doing something on the smaller side. Yeah, definitely. You're taking on more diligence as you pull in reps and warrants. So you got to be ready for that because if they need to get comfortable and put that much money up, they're going to dive in and look at the books. So it's another party and another microscope, but the idea of moving $100 million that could otherwise be frozen for years is really attractive for people. And again, just in terms of scale and some of the bigger things that you've looked at, that's where it starts to come in play versus the smaller ones.

It's just holding something up where the economics might not make sense. Yeah, dig it. Well, and to any advice for buyers that we haven't really covered, I know you've get a lot of wisdom here about things that somebody buying a business should look out for. Anything that we didn't really talk about or anything I didn't ask questions about out of, well, probably out of ignorance, but anything that comes to mind we need to make sure people know. No, you know, I think we've joked about scaring people, but this isn't a fear of podcast. It's supposed to help everyone learn, put best practices in place and get an edge.

And so, you know, a lot of times this really doesn't have to be that complicated. The important piece is that you're proactively looking at it and coming back. to it yearly. So if you're a first-time buyer, get a good partner, make sure you request the information. But once you have your company, you know, don't be that bad example of the seller that just closes their eyes and signs the paper every year. Put in the work, even if it's one to two hours a year to make sure you're staying on top of it. And it can really be that simple sometimes. You know, if you're doing carnivals, please give me or somebody else a call because you do not fit into that category.

But please don't come away from this overwhelmed. Just understand that how important it is to do the little things up front so you don't get burned on the back end. Yeah, I think that's a great advice. By the way, just full disclosure, you know, as a CEO multiple times and business owner, like there's two things I have hated more than anything. One is accounting and accounting processes. Number two is dealing with insurance.

And like, I just hated it. Like, it just felt like there was nothing. there was nothing rewarding to me about the whole process. And it's so inspiring to talk to you today and be like, oh, like, he is so pleasant. I really enjoy speaking with him. I think that's a genius thing to do in the insurance business is just be likable in somebody that you want to spend time with

because the content is just horrid. Like, I can't take it. Anyway, thank you for making insurance exciting for me. Yeah, you're not alone at all. A lot of people feel like it's something they have to do. They have no control over it. And it's because they just react to it. But, you know, the other piece and the reason I wanted to come back is because we, we consider ourselves a far from ordinary approach to risk. We were voted the number one company to work for in New York State.

You know, don't get me wrong, we nerd out insurance, but we also have a lot of fun, a lot of great people. And, you know, ultimately, we love what we do because we're helping protect people. So if, if you hate insurance and who you're working with, we're happy to help. flip things around. Well, I think what you're saying is really cool. You know, me and one of the CEOs that I work with at one of our companies, like, we talk about the difference between being an actual partner and being a vendor. And he loves to work with folks like yourself that have this idea that I'm going to be a

partner for the company that I'm working with for the clients, as opposed to be a vendor, right? The vendor takes your PO, maximizes income, and then moves on. and you know, I think you can hear that in your attitude and the way you do stuff that's pretty inspiring. It's like, oh, like, we'll forego short-term premiums or commissions for ourselves in order to do what's best for the client and the people working in the company. And I think that's super cool.

I'm glad you guys do, and it's pretty impressive. Yeah, I appreciate that. And, you know, listen, the more people that we can help, the better. I'm fourth generation, but I still consider myself an entrepreneur. and I think the whole audience here is entrepreneurs. So if we can help people earn an adger, get a little bit, you know, happy to do it. Yeah, dig it. Well, so in closing, you've helped a lot for me to, we talked about those ways,

but also you've helped the audience a good bit. How could people connect with you, follow along in your journey, be helpful to you? Yeah, they can feel free to look at us online at gkGrisk.com. They can follow me on Twitter. we can link that to the episode, and we've got our social media profiles as well. We truly are at our best when you can differentiate, and a lot of times that can mean working at scale. So if you're a company that's in complex risk or is over that 10,000, 50 employee size,

and you think there's opportunity, that's where we have a blast and would love to partner out. Yeah, totally dig it. Yeah, we'll put all that stuff in the show notes. I do think on your Twitter, you might want to calm down. You appear to be tweeting twice per month. that's really maybe too much. You know, I... Actually, you know, I...

I love Twitter and I love the S&B ETA space because I think there has been incredible peer sharing and, you know, people have talked about cool behavioral tests like Colby or different things we can learn from. But it also turns into just an engagement booster, give me followers, help me monetize. And that just goes against my core. And so if I'm helping someone through Twitter, it's always in the DMs.

I don't want credit or more promotion. I just want to help somebody get the answer. Yeah. I love how your PIN tweet is, solemnly swear to never post a thread. I was like, ah, that's a good man. I'm taking a stand. I mean it.

Well, as somebody writing two threads per week, yeah, I'm insulted. No, but you're genuinely giving people value. you're one of the fun ones out there and you know you can do it and also mention chilies and give a big laugh and so um to all those people out there that are truly helping giving back like thanks for being the reason and i'm still engaged on twitter uh it's a good time it's a good time though you know i'm i'm about to break 98 000 followers which is a vanity metric it doesn't mean anything because the algorithm doesn't really care how many followers you have um and it cares how much people engage with what you're

doing. But it does seem like the higher the number gets, the more number of kind of just bizarre replies I get on stuff. And it's just like, okay, well, I guess I deserve this. Yeah. Well, let's hope we get you over that hundred before Elon gets some of those bots out there. We don't need to see you tanking back down towards 90. I do, I have seen that. Like, I'm in a group chat with some of the people that are working hard on their follow accounts and stuff like that. And like, somebody will come in every month or two and be like, hey, I just lost 400 followers. What happened? And, you know, and it'll be a purge. You know, they'll be going through and kind of reducing all the fake accounts.

So anyway, I try not to watch it. It's like watching the stock market. Don't do it. Yeah. Yeah. All right, man, this is awesome. Thanks so much. We'll have all your contact information in the show notes and stuff. And, you know, really appreciate you coming on board today and sharing your wisdom. And as I said before, make an insurance sexy for me. Like that's a heroic effort. So I really appreciate it. Absolutely. Anytime.