Niche is Nice: How Specialized Services Save Money

Niche is Nice: How Specialized Services Save Money

Everyone knows small businesses spend a lot of money on financing and upkeep. When it comes to owning a business owner's policy, having a small audience can be even more helpful. As you’ve heard, having a niche business can spare the cashflow, but did you know it can keep your insurance marketplace prices low? 

Today’s Do-Or-Die Environment 

Both new and established market combatants need to be quick to survive and thrive. Sometimes, being niche does more than help: It makes financing possible. In the current M&A market, potential buyers pick specialists over generalists at all turns. 

If a specialist firm has a lot of value, it’ll get the sale. Chances are, they’ve performed better than their peers for years. As such, buyers will spend more money—and even time—on BOP insurance shopping. Their success also precedes them, netting them higher savings against competitors.  

Technology’s Impact 

While the lowered costs associated with niche selling aren’t front-heavy, their value increases quite a bit over time. This modern business cornerstone will only have a stronger foundation in upcoming years due to a single factor: growing technology. 

Technology investments are causing business owners to approach specialization faster than ever. We’re even seeing entire agencies specialize—revamping the age-old idea of solo entrepreneurs being difficult to compete with when barriers to entry rise. 

Differentiation and the Dinosaurs 

While the insurance market has man entrances, businesses operating in rural areas have already seen better price if they’re specialized. Specialization isn’t a direct cost driver, however. It simply lets business owners make smart buying decisions. 

PE firms, however, are reaping the benefits of specialization. In 2017 alone, over 320 insurance agency mergers, as well as acquisitions built up private equity firms at record rate. PE firms buying into agencies isn’t new, but banking and finance tech solutions have made this case much more prevalent. 

Banks are Spending Money Differently 

Banks are investing more money than they need to, but why? Well, they want good investments. They know insurance agencies operate as medium-margin businesses. They also know there’s a higher degree of predictable cashflow. Aside from liquidation events and rapid industry transitions, the insurance world’s changes are still slow enough to catch. Can you keep up?