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How Much Is My Insurance Agency Worth?

This article breaks down the question, “how much is my insurance agency worth” in further detail, but the table below provides a surface-level overview based on varying degrees of revenue and operating expense: 


How Much Is My Insurance Agency Worth: A Breakdown

Answering the question, “how much is my insurance agency worth?” essentially boils down to three major steps: 


  1. Determine your insurance agency’s EBITDA

  2. Determine the standard valuation multiple for an agency of your size

  3. Multiply your EBITDA by the multiple to determine your expected payout (i.e., the worth of your agency)


Note that a smaller percentage of insurance M&A deals are conducted based on finding a multiple of revenue rather than EBITDA, and an even smaller percentage is conducted based on the seller's discretionary earnings (SDE), but we do not include those calculations here because a.) finding revenue (earnings) is already included in calculations for EBITDA, and b.) the percentage is small enough to justify leaving it out. If you’d like more information on how to conduct these calculations, speak with a member of the Sica | Fletcher team here.

The following sections explain these calculations step-by-step, providing additional insights for insurance agency owners attempting to get an idea of their businesses’ worth.


EBITDA: The Standard Insurance M&A Valuation Model


EBITDA (Earnings before interest, taxes, depreciation, and amortization) is the standard valuation model within the insurance M&A industry. It is calculated using the following formula: 


EBITDA=Earnings- Operating Expenses+(Interest+Taxes+Depreciation+Amortization)


  • Earnings: Net Income

  • Operating Expenses: The day-to-day cost of running your agency, including salaries, commissions, rent, utilities, departmental costs, etc.

  • Interest: Money paid toward a loan or debt accrued from delaying the repayment of a loan

  • Taxes: Governmental income provided through a company’s taxes

  • Depreciation: Decrease in value of the agency’s assets over time

  • Amortization: Amortization means paying off the principal and interest on a loan at regular intervals, or the process of accounting for the initial cost of an asset over time


Calculating EBITDA begins by subtracting operating expenses from earnings, the result of which provides you a reasonable idea of the agency’s profitability based on core operations. Interest, taxes, depreciation, and amortization are then added to this number. This removes the effects of non-cash expenses on the agency, thus isolating the agency’s profitability because they can be different under the buyer’s management. 


The following table provides three examples of insurance agencies (small, mid-size, and large) and what EBITDA might look like for them.


How to Calculate EBITDA: 3 Examples


Small 

Mid-size

Large

Earnings

$500,000

$5,500,000

$30,000,000

Operating Expenses

$300,000

$3,800,000

$16,500,000

Interest

$8000

$92,000

$2,475,000

Taxes

$50,000

$450,000

$2,400,000

Depreciation

$10,000

$110,000

$600,000

Amortization

$15,000

$175,000

$900,000

Total EBITDA

$283,000

$2,527,000

$19,875,000

Remember, these are merely examples; your agency’s figures may differ greatly based on your operational spend, the taxes levied according to your agency’s location, or how long you’ve been in business. Consult your own documents when making these calculations, and use the examples in this article only as a template.


Finding The Correct Multiple for Your Agency


Determining the appropriate multiple for your agency is less a matter of calculation and more of discovery; there are methods to calculate a multiple using your enterprise value (known as your EV/EBITDA), but we strongly recommend against using this method yourself, because it can provide an unrealistic expectation of what agencies on the market actually sell for. 


Instead, do some research on what EBITDA multiples insurance agencies are currently selling for and work from that. Generally, most insurance agencies sell for between 5-7x EBITDA, as represented in the table below: 


EBITDA Multiples for Insurance Agencies


Small 

Mid-size

Large

EBITDA Multiple

5x

6x

7x

Agency owners who wish to keep up with the latest developments on EBITDA multiples for insurance agencies would do best to follow M&A advisors specializing in the sale of insurance agencies. Sica | Fletcher’s own SF Index, for example, tracks the top 40 active buyers in the insurance space, providing up-to-date information on EBITDA multiples and other sector-specific deal information. In addition, third-party M&A institutions like S&P Global Data or Statista can provide more generalized data. 


Multiply Your EBITDA By Your Multiple


Having done all the preliminary steps, the final step is relatively simple arithmetic. By multiplying the agency’s EBITDA by the multiple that most closely matches the size and complexity of your agency, owners can get a sense of how much their insurance agency is actually worth. 


For example, consider the following table that details the EBITDA and multiples for three fictional small, mid-size, and large insurance agencies. 


How Much Is My Insurance Agency Worth?


Small 

Mid-size

Large

Earnings

$500,000

$5,500,000

$30,000,000

Operating Expenses

$300,000

$3,800,000

$16,500,000

Interest

$8000

$92,000

$2,475,000

Taxes

$50,000

$450,000

$2,400,000

Depreciation

$10,000

$110,000

$600,000

Amortization

$15,000

$175,000

$900,000

Total EBITDA

$283,000

$2,527,000

$19,875,000

Multiple

5x

6x

7x

Total Agency Value

$1,415,000

$15,162,000

$139,125,000

Sometimes, it can be helpful to consider a range of multiples, especially if your agency falls above or below the average industry value. Consider the following adjustments made for the mid-size agency example in the table above: 


Under Average

Average

Above Average

Total EBITDA

$2,527,000

$2,527,000

$2,527,000

Multiple

5x

6x

7x

Total Agency Value 

$12,635,000

$15,162,000

$17,689,000

As a final comment, readers should note that the “Total Agency Values” listed in the tables above do not necessarily reflect the amount you should expect to receive during a deal. That number is often complicated by what percentage of your payout is cash vs. equity, the timeline in which it is paid out, and additional considerations like post-closing employment agreements or milestone earnouts. Rather, they provide agency owners an answer to the question, “how much is my insurance agency worth,” connoting a generalized value that they can take with them to market.


“How Much Is My Insurance Agency Worth?” Ask an Advisor


Not only will an experienced M&A advisor have a better idea of how your insurance agency will be valued, they can also help you negotiate an even better payout when you take it to market. The team here at Sica | Fletcher has represented thousands of insurance agencies just like yours – with strategic buyers and PE firms alike. Reach out to our team using the contact information below or through the contact page on this website to get more information.


About Sica | Fletcher:  Sica | Fletcher is a strategic and financial advisory firm focused exclusively on the insurance industry. Founders Michael Fletcher and Al Sica are two of the industry's leading dealmakers who have advised on over $16 billion in insurance agency and brokerage transactions since 2014. According to S&P Global, Sica | Fletcher ranked as the #1 advisor to the insurance industry for 2017-2023 YTD in terms of total deals advised on. Learn more at SicaFletcher.com.


Contact: Mike Fletcher

Managing Partner, Sica | Fletcher


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