2. Funding. MGA Zen – The art of building a well-run intermediary.
By David Plummer Group CEO, Bluefriars Group
2. Funding
Is there a magic formula to funding a Managing General Agent (MGA) or broker? Probably not. As a firm specialising in this field, Bluefriars sees multiple business plans each month. Two of the many risk criteria Bluefriars uses to decide which offers have the best chances of success are existing book size and funding.
Clearly, a “warm” book of renewing clients is one way to ensure your new offer takes off quickly, but not every firm can rely on this. They are then faced with the question of what funding is needed to get move their project from the pages of their business plan to real life trading. There are many routes to this:
1. Self-funding
2. Book funding
3. Equity funding
4. Loan funding
5. Commission advance
All these options have both benefits and consequences, some more obvious than others. The key consideration in adopting any of these approaches is what is the pay-off between funding gained versus capital (typically working capital) or equity eroded. Clearly, in option 1, it is personal capital that is eroded in return for future gains.
Laid on top of this are the stakeholder goals of the firm, which are typically, but not exclusively, a balance between:
1. Income for senior managers and employees
2. Growth to achieve business value
3. Exit value, where the goal is to sell-on stakeholder value
Bluefriars has built its team to manage the funding risks of each enterprise it partners with, be it new-to-market or an established offer. We provide the expertise needed to build, grow and, where required, exit business streams, in a risk mitigated and well-governed environment.
At Bluefriars, we can help risk assess, plan, and launch your big idea. Contact us at principal@bluefriars.co.ukto discuss funding options and our free risk assessment of your big idea.
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