How do you determine the value of an agency. We do mostly protection products but also a few million in advisory. The BD side seams straight forward. It’s the insurance side that’s hard

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The protection side of the business is definitely harder to value than the asset based side, but it definitely gets sold. The first thing to look at is renewals. Are they transferable at all or would you even want to transfer it to a buyer. For the transactional side of the business a lot of it depends on where that revenue is coming from. Is it from existing clients being cross sold other products or is it brand new clients coming in the door. If it is brand new clients, where are those clients coming from? Seminars, referrals, etc. and are those methods transferable to a buyer. All that being said, most will project out what their anticipated future revenue is and then discount it back. In general, most sell for 1 times their transactional revenue, but the terms are where it can make a big difference. A lot of protection based businesses will sell on an earnout where the buyer gives the seller a percentage of what they can generate for a few years (typically 3-5). If you want to have a further discussion give us a call at 503-427-9910 and ask for Erik.

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From the insurance side, it’s a little more difficult to value vs fee generating investment accounts (1x, 2x, etc revenue.) Insurance, depending on how deep you go and how much emphasis you (as the buyer or seller) place on possibly opportunity/cross-selling, is a moving target based on composition. Typically, we value insurance/products (health/P&C is different) based on commission splits moving forward for x-years on new business generated from the boom. To pay a multiple for life insurance (essentially death benefit proceeds) unless this is a massive book and a very old book at that, is ridiculous.

1X non recurring revenue (including insurance) 2.? Times recurring

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Additional Posts in Succession Planning: Buy/Sell Practice

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Www.joinsfm.com. We are a firm based in Central Florida. Also have branches in Ohio. If you are looking to join a good independent practice that has a guaranteed succession plan......check out our website. 34 years in business and rank in the top 5 largest financial planning firms in Central Florida. Check is out.

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