An insurance agency is worth the commission revenue its book of business will keep producing for a new owner, so valuation and deal terms both center on retention. Buyers range from a local agent buying a book to private equity backed brokers buying established agencies, and they price very differently. Before any of that, the seller needs to confirm that it owns the book, and that the carriers will appoint the buyer.
Key points
- Small agencies often sell on a multiple of commission revenue or SDE. Larger agencies sell on adjusted EBITDA, and private equity backed buyers have paid much higher multiples than local buyers.
- Independent agents generally own their expirations. Captive agents usually do not, and their contracts control what they can sell.
- Carrier appointments do not transfer. The buyer must be appointed with the carriers that write the book, or policies must be moved.
- Retention-based payouts, earn-outs and holdbacks are standard. How retention is measured often matters more than the headline multiple.
- Producers' licenses are personal. The buyer's agency needs its own entity licenses in each state where it writes business.
Who owns the book
The first question in any agency sale is whether you own what you are selling. Our business sale guide explains the general process, but insurance has a threshold issue.
Independent agents who represent several carriers generally own their expirations under their agency agreements. Expirations are the records of clients, policies and renewal dates, and owning them means the agency can move clients to other carriers and sell the book. Standard independent agency agreements usually say this outright.
Captive and exclusive agents are different. Agents who write for one company typically have contracts that give the company ownership of the policy records and renewal rights. What they can sell, if anything, is set by the contract. Some companies allow an agent to sell an economic interest in the agency to an approved buyer, and others pay a termination benefit based on the book instead. Courts in different states have treated these contracts differently, so read yours closely and get legal advice before you market anything.
How agencies are valued
Revenue multiples
For decades, agents traded on a rule of thumb of about two times annual commission revenue. Industry educators at the Independent Insurance Agents and Brokers of America have long warned that revenue multiples are a weak measure of value, because two agencies with the same revenue can have very different profit, growth and client mix. Revenue multiples are still common for small book sales, especially personal lines books sold to a local agent.
EBITDA multiples
Most larger transactions price on adjusted EBITDA: profit before interest, taxes, depreciation and amortization, after normalizing owner pay and one-time costs. Industry data shows a wide gap by buyer type and size. MarshBerry, which tracks insurance distribution deals, has reported average upfront multiples of roughly 11 times EBITDA for brokerage acquisitions in 2024, but those figures reflect larger agencies bought by private equity backed platforms. Small owner-operated agencies sell at much lower multiples, often in the mid single digits of EBITDA or a modest multiple of SDE.
These published ranges are averages from a market that changes with interest rates and investor demand. They are not a promise of what any agency will bring.
What moves the multiple
- Organic growth rate and retention history
- Profit margin, after paying the owner a market salary
- Mix of commercial lines, personal lines and employee benefits, with commercial and benefits generally valued higher
- Carrier relationships, including access to markets that are hard to get
- Client concentration and the share of revenue tied to one producer
- Contingent or profit-sharing commissions, which buyers usually discount because they vary year to year
- Agency management systems and data quality
Reagan Consulting's "Rule of 20" (organic growth rate plus half of EBITDA margin) is a common shorthand in the industry for measuring agency performance. Agencies that score well on growth and margin attract more buyers.
Carrier appointments and licensing
Carrier appointments are contracts between the carrier and a specific agency. They do not transfer with a sale.
In an asset purchase, the buyer needs its own appointment with each carrier that writes the book. If a carrier will not appoint the buyer, the buyer has to move those clients to other carriers at renewal, which risks losing them. In a stock purchase, the agency entity keeps its appointments, but carrier agreements usually require notice of a change in ownership and give the carrier the right to review it.
Start carrier conversations early, ideally with the buyer's input. Some carriers have minimum volume requirements, and a buyer who already represents a carrier can absorb its book more easily.
Licenses add another step. Producer licenses belong to individuals. Agencies usually need a business entity license in each state where they do business, plus a designated responsible licensed producer. A buyer has to hold the right licenses before it can receive commissions on the book.
Retention payouts and deal structure
Most agency deals pay part of the price at closing and the rest over time. Common structures include:
- A fixed amount at closing with a holdback adjusted for retention after one or two years
- An earn-out tied to revenue or EBITDA growth over two to five years
- Seller financing for local buyers, paid from commissions
- Rollover equity in the buyer's company in private equity deals
The retention terms deserve the closest reading. Settle how revenue is measured, which policies count, how rate increases and new sales to existing clients are treated, and what happens if the buyer moves policies to a different carrier or lets a carrier relationship lapse. Our guide to accounting practice sales covers retention clauses in a similar relationship business, and many of the same negotiating points apply.
Sellers who stay on as employees or producers will also sign employment, non-compete and non-solicitation agreements. Courts look at these more favorably when they are part of a business sale than when they appear in an ordinary employment contract, but enforcement still varies by state.
Diligence buyers will run
Expect a buyer to review:
- Commission statements by carrier for several years, reconciled to the books
- Policy counts, retention and new business by line
- Producer agreements, including who owns any books the producers brought in
- Errors and omissions claims history and current coverage
- Premium trust account handling, since commingling client premiums is a common regulatory problem
- Marketing practices and consumer complaints
Lead generation is a growing diligence item. Agencies that buy leads or call and text prospects can face claims under the federal Telephone Consumer Protection Act, discussed in our guide to consumer protection and robocall laws. Buyers want to see consent records and do-not-call compliance.
Agencies that write coverage for auto dealers, medical practices or hospitality businesses often know their clients well enough to see a wave of ownership changes coming. Our guides to auto business sales, medical practice sales and hospitality business sales describe the deals those clients go through, and a client sale can mean losing or gaining an account.
Selling to a local agent or a larger buyer
A local agent buying your book usually knows your town, your carriers and many of your clients. That buyer may offer a lower multiple and pay over several years from commissions, but clients tend to stay when the new owner is a familiar name. Regional agencies and private equity backed brokers often pay more and put more cash on the table at closing. In exchange, they may ask you to stay for a few years, change agency management systems and move some clients to the carriers they prefer. Compare offers on the cash you can expect after retention adjustments and taxes, not on the headline multiple.
Taxes and errors and omissions coverage
Most of an agency's price is goodwill and the value of expirations, which generally qualify for capital gains treatment when sold as part of an asset purchase. Buyers amortize purchased expirations and goodwill over 15 years for federal tax purposes. Payments for consulting or continued employment are ordinary income to the seller. A CPA should model how the price is allocated before you agree to it.
Errors and omissions coverage usually needs attention at closing. Most E&O policies are claims-made, so sellers commonly buy an extended reporting period, or tail, to cover claims about advice given before the sale.
Preparing to sell
Clean up commission accounting so revenue by carrier, line and producer is easy to verify. Confirm in writing that you own your expirations. Reduce reliance on yourself by moving clients to account managers your clients already trust. Address any carrier relationships that are under review, and fix premium trust account issues before a buyer finds them.
For a valuation and a confidential buyer search, an insurance agency broker can compare offers from local agents, regional agencies and private equity backed buyers, including how much of each offer depends on retention. Our business sale guide explains how to compare cash at closing with deferred payments.
Insurance licensing, carrier contract terms and non-compete law vary by state and change over time. A lawyer licensed in your state who handles agency transactions should review your agency agreements and purchase contract before you sign.