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Insurance Agency Valuation 101: Understanding the Essentials

Updated: Mar 14

As one of the most active M&A firms in the insurance sector, we are frequently asked how insurance agency valuations work. This article discusses the fundamentals of insurance agency valuations, plus a few lesser-known factors that play into these processes before we give an overview of the insurance M&A market in 2024.

Insurance Agency Valuations 101

The Insurance Agency Valuation Process 

The most common question we get, especially from first-time sellers, is, “How do insurance agency valuations actually work?” The shortest answer we can give is, “You give us some specific documentation, and we’ll run some numbers to determine how much the agency is worth.” 

For those seeking more detailed answers, the sections below offer a step-by-step guide for understanding insurance agency valuations:

The following sections dive into some finer details of the steps described above, for additional insights into the process of an insurance agency valuation and what agency owners should be on the lookout for when running an M&A deal in 2024.

Insurance Agency Valuation: The Core Methods

Nearly every insurance agency valuation focuses on one of three valuation models; EBITDA (earnings before interest, taxes, depreciation, and amortization), revenue, and SDE (Seller’s Discretionary Earnings)

Although EBITDA is by far the most common model (see graph to the right) and has become the industry standard over the last several years, it’s important that business owners understand how each one works to be prepared for a wide range of deal structures. 

SF Index Deal Types


An EBITDA (earnings before interest, taxes, depreciation, and amortization) valuation is a projection of a company’s profits that also includes the agency’s potential for overall profitability. It measures how much money a company retains after it has paid:

  • Operational expenses

  • Taxes

  • Depreciation of the company’s assets

  • Amortization

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

EBITDA is the standard insurance agency valuation model because it can forecast a company’s likelihood to maintain profitability over time. Over 90% of the deals we have overseen are conducted through some measure of EBITDA, pro forma EBITDA, etc. 


Revenue multiples are a distant second option for insurance agency valuations, making up about 5% of the recorded deals we observed between 2018 and 2024. This valuation method provides a broader overview of how much an agency makes but does not account for how much it has to spend. 

Revenue is a basic metric that any business owner can calculate using the following formula:

Revenue Multiple = Commissions + Service Fees + Other Income

Revenue multiples are most commonly used in industries with a high rate of cash burn (e.g., SaaS, tech), those with very high projected growth rates, or for early-stage agencies. Typically, buyers place less favor on revenue multiple valuations because they do not accurately represent the profitability of an agency as well as EBITDA.


Seller's Discretionary Earnings (SDE) indicate how much the agency owner (the seller) makes in a year. This valuation method is very rarely used for insurance agency valuations due to its popular use case for smaller businesses, but a few smaller agencies may want to consider it. The SDE formula is:

SDE = Net Profit - Owner's Compensation - Owner's Benefits + Non Recurring Expenses + Non Operating Expense

SDE is typically used in M&A deals for small agencies (>$5M). In these situations, SDE gives buyers a simple, straightforward depiction of how profitable an insurance agency actually is by showing how much money the owner routinely makes. Because insurance agency valuations are rarely this small, however, the SDE valuation model is almost never used.

Factors Influencing Valuations

In addition to the business documentation that agencies provide in the early stages of the valuation, review teams are looking at other elements of your business to determine its overall profitability. These elements tend to be more intangible qualities that often require some degree of specialized knowledge to evaluate. They include:

Insurance Agency Valuation Trends and Challenges: 2024 Edition 

Despite many industry descriptions of Q2 2022-Q4 2023 as a poor period for M&A activity, insurance agency valuations have remained strong during this time. A few likely causes for this contradictory trend include: 

  • The compulsory nature of insurance pads the bottom end of valuations. In other words, individuals and businesses need insurance, which means that an insurance agency valuation will always reflect a market need for the service they provide.

  • Standardized Recurring Revenue. Insurance policies are renewed annually and paid on a regular basis, providing insurance agencies with a steady revenue stream that makes them more appealing to buyers.

  • A stratified market represents opportunity. There are surprisingly few large insurance brokerages. For the most part, the market consists of many small to midsize agencies that make prime candidates for roll-up deals, especially as private equity firms have played an increasingly larger role in the market over the last decade.

Insurance agency valuations did see some declines in terms of larger “megadeals” (deals in which the transaction is valued at < $5B), however, insurance agencies in the middle- and lower-middle markets actually saw modest increases in deal value and volume over the same period of time. 

You can read more in our 2024 report on EBITDA multiples for insurance companies, but it’s fair to say that the overall outlook for the coming year is “cautiously optimistic.” That doesn’t mean that running an M&A deal will be a cakewalk, however. So, what should insurance agencies expect in 2024? 

  • Deals Will Become Longer and More Complicated. Our data has shown a 30% increase in deals that feature equity as a larger portion of the seller payout since 2018. These deals require significantly more detailed levels of due diligence and valuation to calculate, resulting in a longer deal process. 

  • Valuations are Expected to Rise. Our research indicates a strong trend of insurance agency valuations increasing YoY, totaling a 35% increase in valuations between 2018 and 2024. With recent news of the Federal Reserve’s plans to lower interest rates this year for the first time in 18 months, we expect this trend to continue.

  • Guaranteed upfront considerations will become more important. As the economy has become more uncertain over the last three years, sellers have been more interested in guaranteed amounts upfront. Because that uncertainty is likely to remain for at least the next year, these considerations are likely to become larger portions of M&A deals.

Preparing for an Insurance Agency Valuation 

For business owners who are about to go through the valuation process for their insurance agencies, it’s important to consider a few important steps.

  • Documentation You need 3-5 years of documents detailing the health of your business. For insurance agencies, this list includes but is not necessarily limited to: 

    • Income statements

    • Balance sheets

    • Cash flow statements

    • Tax returns

    • Business plan & growth strategy

    • Client lists & policy segmentation

    • Carrier agreements with insurance carriers

    • Marketing/Sales strategies

  • Goals In our experience, insurance agency owners sell for any number of reasons, which can deeply affect the kind of deal you may be interested in taking. When you start your insurance agency valuation, be sure to have answers to these questions in mind:

    • Do you want to remain involved in the company after the sale? 

    • Do you want the largest possible payout? 

    • Do you want the quickest deal process? 

  • Consider the Market We speak with many agency owners who are ready to sell their agencies at the worst time possible. This has been especially relevant over the last 18 months, with macroeconomic pressures making deals more difficult to negotiate. Consider how valuations for similar agencies have risen or fallen over the last year and speak with your advisor about how this may impact your insurance agency valuation.

  • Who Is Your Advisor? Based on the thousands of deals we’ve observed in the insurance sector for the last five years, we’ve noted one consistent trend; insurance agency valuations are higher (by about 30%, on average) when the business owner opts to work with an M&A advisor. Choosing the right one for your agency will have an enormous impact on your valuation. 

We hope you’ve found this information helpful. The reality is that, although we’ve made this document as comprehensive as possible, there is significantly more to discuss. If you would like to speak with us for more information on getting an insurance agency valuation, you can reach us using the information below.

Want More Information on Insurance Agency Valuation?

Contact: Mike Fletcher

Managing Partner, Sica | Fletcher

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


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