Methodology
How we value an insurance agency
MyAgencyValue is built on a methodology used in real P&C agency transactions — the same logic buyers, sellers, and consultants apply when structuring a deal. We make it transparent so you can see why your range is what it is.
Tier 1: revenue multiple
The fastest cut at agency value applies a revenue multiple sized to the book's archetype. Personal-lines-heavy commodity books trade in the 1.5–2.0x range; balanced books in the 2.0–2.5x range; commercial-lines specialty books in the 2.5–3.0x range; and premium specialty books with 95%+ retention reach 3.0–3.5x. Retention adjustments push the applied multiple up or down by a quarter-turn.
Tier 2: EBITDA triangulation
Tier 2 layers a size-tiered EBITDA multiple on top of the revenue method, applies a pro forma normalization (owner comp at market, capped T&E, restored pension), and runs a quality-band adjustment of ±1.5x across eight factors: retention, growth trend, margin, book composition, producer concentration, account concentration, agency management system, and transition plan.
When the two methods disagree by more than 20%, Tier 2 flags the divergence so you understand which inputs are pulling the range.
Tier 3: full deal-room valuation
Tier 3 adds a discretionary earnings cross-check, a producer NPV overlay for principals planning to stay on, a 15-year after-tax cash-flow projection with monthly amortization, a sensitivity table, and a book-roll probability assessment. This is the diligence-grade view — the same model a buyer would build before submitting a letter of intent.
A note on directional honesty
MyAgencyValue is not an appraisal, not an offer, and not a substitute for diligence. Tier 1 ranges are intentionally wider than Tier 2 or 3 because we don't pretend to know what we don't know yet. Confidence improves with data depth — and we always show you the math.
Frequently asked
Common questions about agency valuation
How is an independent P&C insurance agency valued?
Independent P&C agencies are typically valued using a combination of four methods: a revenue multiple (1.5x–3.5x of annual commission revenue depending on book mix and retention), an EBITDA multiple (5x–9x of normalized earnings), a seller's discretionary earnings (SDE) approach for owner-operated books, and a producer NPV / discounted cash flow when a principal plans to stay on. Triangulating across all four methods produces a tighter, more defensible range than any single method alone.
What revenue multiple should I expect for my agency?
Personal-lines-heavy commodity books generally trade in the 1.5x–2.0x range. Balanced books (mix of personal and commercial) trade in the 2.0x–2.5x range. Commercial-lines specialty books trade in the 2.5x–3.0x range. Premium specialty books with 95%+ retention and clean financials can reach 3.0x–3.5x. Retention rate, growth trend, producer concentration, and account concentration each move the applied multiple by a quarter to a half turn.
How does EBITDA factor into agency valuation?
EBITDA matters more than revenue once an agency crosses roughly $1M in annual commissions. Normalized EBITDA — adjusted for owner compensation at market rate, capped travel and entertainment, restored pension contributions, and removed one-time expenses — is the figure buyers actually multiply. Size tier drives the EBITDA multiple: agencies under $500K EBITDA typically see 5x–6x; $500K–$1M sees 6x–7.5x; $1M–$3M sees 7x–8.5x; $3M+ commands 8x–10x or more for clean books.
What is the quality band adjustment?
The quality band is a ±1.5x adjustment applied across eight factors: client retention rate, three-year revenue growth trend, profit margin, book composition (personal vs. commercial mix), producer concentration, account concentration, agency management system maturity, and transition plan strength. Each factor can shift the applied multiple up or down. The quality band is what separates a 2.0x agency from a 3.0x agency at the same revenue level.
What is book roll and why does it matter?
Book roll is the probability that clients will follow the agency through an ownership transition. High book-roll probability comes from long client tenure, strong agency-of-record relationships, low producer concentration, and a structured transition plan. Low book-roll probability — often driven by a single producer holding most relationships — discounts the valuation because the buyer is exposed to client churn after close. Book roll is typically scored High, Medium, or Low and adjusts the final number by 5%–20%.
Is MyAgencyValue an appraisal?
No. MyAgencyValue is a directional valuation tool, not a formal appraisal, business valuation report, or offer to purchase. The output is intended to give agency principals a defensible range to anchor conversations with buyers, lenders, partners, or estate attorneys. A formal appraisal for tax, legal, or transaction purposes requires a credentialed business valuation professional and a full diligence package.
How accurate is a Tier 1 estimate vs. a Tier 3 valuation?
Tier 1 uses five inputs (revenue, book mix archetype, retention band, growth trend, and size tier) and produces a wider range — typically ±20%–25% — because limited data forces wider confidence intervals. Tier 2 narrows the range with EBITDA triangulation and a 7-factor quality band. Tier 3 produces the tightest range by adding a real P&L pro forma, producer-level NPV, a 15-year cash-flow projection with IRR, and a 5x5 retention-multiple sensitivity grid — the same model a buyer would build before submitting a letter of intent.
What's the difference between SDE and EBITDA in agency valuation?
EBITDA (earnings before interest, taxes, depreciation, and amortization) is the standard metric for institutional buyers and assumes a market-rate replacement for the owner. SDE (seller's discretionary earnings) adds back the owner's full compensation and personal benefits, which makes it the right metric for owner-operated agencies under roughly $1M in revenue where the buyer is also the operator. Both methods are run inside Tier 3 so principals can see how a strategic buyer and an individual buyer would each price the same book.