FAQ
Agency Valuation
Your agency’s value typically falls between 1.5 to 3x your annual commission revenue, but this range varies significantly based on several factors. The most critical elements affecting valuation include your client retention rate (agencies with 90%+ retention command premium multiples), revenue concentration (relying heavily on one or two carriers can reduce value by 15-20%), and organic growth trends over the past three years.
Here’s what really matters: buyers scrutinize your last 36 months of financial statements to identify trends. An agency generating $500,000 in annual revenue with 8% year-over-year growth and diverse carrier relationships might sell for 2.5x ($1.25M), while a similar-sized agency with flat growth and 40% of revenue from one carrier might only fetch 1.8x ($900,000).
The real answer depends on your specific operational details, which is why we created our comprehensive roadmap that breaks down the three primary valuation methodologies buyers use. Understanding these before conversations begin puts you in a stronger negotiating position.
Most agency owners overvalue their business by 30-40%, and this gap creates problems during negotiations. The disconnect usually stems from emotional attachment and not understanding what buyers actually purchase—they’re buying future cash flow, not your legacy or the years you’ve invested.
Owners often include intangible factors in their mental valuation, such as “I’ve built relationships in this community for 25 years” or “I work 60-hour weeks.” Buyers discount these heavily because they can’t bank on your personal reputation transferring or assume they’ll match your work ethic.
The specific gap typically occurs in these areas: owners overvalue small accounts (with premiums under $2,000) that buyers perceive as high-maintenance and low-margin; they fail to discount for carrier concentration risk; and they assume all revenue is equal, despite buyers heavily discounting contingent income that may not recur.
Before marketing your agency, get an objective third-party valuation from someone who specializes in insurance agencies—not your accountant who does tax returns. The $3,000-$5,000 investment in a professional appraisal prevents you from either leaving money on the table or pricing yourself out of the market entirely.
Not necessarily, and this surprises many owners. A $2 million revenue agency isn’t automatically worth twice what a $1 million agency commands. Buyers pay for the quality of revenue, not just quantity.
I’ve seen $800,000 agencies sell for higher multiples than $1.5 million agencies, mainly due to what lies beneath those top-line numbers. Here’s what creates that difference: the smaller agency had a 92% retention rate, 65% commercial lines (higher margin), relationships with eight carriers, an average account size of $4,500, and 12% organic growth. The larger agency had a 78% retention rate, a heavy concentration in personal lines (lower margin), 50% of business with two carriers, an average account size of $1,200, and flat growth.
Buyers also pay attention to operational efficiency. An agency generating $1.2 million with four employees might be worth more than one doing $1.5 million with eight employees, because profit margins are better and integration is cleaner.
Volume matters, but it’s the foundation, not the entire house. Focus on building quality metrics into your book before you start thinking about selling—it’s the difference between a 2.0x and a 2.8x multiple, which on a million-dollar agency means $800,000 more in your pocket.
Buyers will request specific documentation, and not having it organized kills deals. They want to verify everything you claim, and missing or messy financials make them question what else you’re hiding—even if you’re not hiding anything.
The essential documents you need ready: 36 months of monthly profit and loss statements (not just annual), 36 months of commission statements from every carrier broken down by month, current balance sheet, three years of tax returns, schedule of accounts receivable and payable, and a detailed list of your top 50 clients (premium, commission, renewal date, carrier) without names during initial discussions.
Beyond financials, prepare operational documentation: complete employee list with compensation and tenure, copies of all carrier contracts, office lease agreement, details on any pending litigation or DOI complaints, and documentation of your CRM system and business processes.
Here’s what trips up most sellers: inconsistent numbers between tax returns and internal P&Ls. If your tax return shows $350,000 net income but you’re telling buyers you make $500,000, you’ll need detailed addback schedules explaining every dollar of difference. Legitimate addbacks include owner excess compensation, non-recurring expenses, and family member salaries above market rate—but you need documentation proving these.
Start organizing this 12 months before you plan to sell. Don’t wait until a buyer asks, because scrambling to produce documents during due diligence makes you look unprepared and gives buyers leverage to renegotiate.
Buyers will request specific documentation, and not having it organized kills deals. They want to verify everything you claim, and missing or messy financials make them question what else you’re hiding—even if you’re not hiding anything.
The essential documents you need ready: 36 months of monthly profit and loss statements (not just annual), 36 months of commission statements from every carrier broken down by month, current balance sheet, three years of tax returns, schedule of accounts receivable and payable, and a detailed list of your top 50 clients (premium, commission, renewal date, carrier) without names during initial discussions.
Beyond financials, prepare operational documentation: complete employee list with compensation and tenure, copies of all carrier contracts, office lease agreement, details on any pending litigation or DOI complaints, and documentation of your CRM system and business processes.
Here’s what trips up most sellers: inconsistent numbers between tax returns and internal P&Ls. If your tax return shows $350,000 net income but you’re telling buyers you make $500,000, you’ll need detailed addback schedules explaining every dollar of difference. Legitimate addbacks include owner excess compensation, non-recurring expenses, and family member salaries above market rate—but you need documentation proving these.
Start organizing this 12 months before you plan to sell. Don’t wait until a buyer asks, because scrambling to produce documents during due diligence makes you look unprepared and gives buyers leverage to renegotiate.
Absolutely, and probably more than you realize. Your carrier relationships can swing your valuation by 20-30% in either direction.
Buyers evaluate carrier mix on several dimensions. First, they examine concentration—if 40% or more of your revenue comes from a single carrier, that’s a red flag because losing that relationship post-sale would significantly impact the business. Second, they assess the quality and stability of the carrier. Relationships with top-tier carriers (such as Travelers, Chubb, and Progressive for personal lines) are worth more than appointments with regional or distressed carriers that may not exist in five years.
Third, and this often surprises sellers, buyers care about alignment with their existing carrier portfolio. If a buyer already writes 30% of their business with Carrier X and you also write 30% with Carrier X, that represents concentration risk after the acquisition. Interestingly, this scenario might also potentially result in a concentration benefit, if—and only if—the process is handled correctly. Conversely, if you have strong relationships with carriers they’ve been trying to access, your agency becomes more valuable because you solve a problem for them.
Commission rates matter too. If you’re writing business at low commission levels because you haven’t negotiated in years, buyers will factor that into their plans—either as an opportunity (they can improve rates post-acquisition) or a concern (you’ve been leaving money on the table).
Before selling, audit your carrier relationships: Are you appointed with carriers buyers actually want? Are your commission rates competitive? Do you have documentation of your contracts? This information directly impacts whether a buyer offers 2.0x or 2.6x your revenue.
The answer depends on why you’re growing and whether that growth is sustainable without you. Fast growth sounds attractive, but buyers discount it heavily if they suspect it won’t continue after you leave.
Let’s break down growth scenarios. If you’re growing 15% annually because you’ve built a referral machine, hired strong producers, and have systematized your operations, that growth probably continues—and yes, waiting another 2-3 years could significantly increase your sale price. If you’re growing because you personally grind out 60-hour weeks, networking at every chamber event, and personally service your top 50 accounts, that growth evaporates when you exit.
Buyers will scrutinize the source of your growth. Is it organic (existing clients adding coverages, referrals) or acquisition-based (you bought books of business)? Organic growth commands premium valuations because it’s typically sustainable. Is it profit-accretive or are you spending heavily on marketing and staff to generate it? Growth that comes with declining profit margins might not help your valuation.
There’s also market timing to consider. If you’re 62 and the market for agency acquisitions is hot with multiple buyers competing, selling now at 2.5x might beat waiting three years for 2.7x if the market cools or your health changes. We’ve helped owners navigate this decision by modeling out different scenarios—the best time to sell is when you’re ready and market conditions are favorable, not just when revenue hits an arbitrary number.
Client retention is the single most critical metric that buyers analyze, as it directly predicts future cash flow. An agency with a 90% retention rate is fundamentally worth more than one with an 80% retention rate, even if their current revenue is identical.
Here’s the math: if you have $1 million in revenue with a 90% retention rate, buyers know that in Year 2 post-acquisition, they’ll still have $900,000 of that revenue (minus normal lapses). With an 80% retention rate, they’re down to $800,000. Over a five-year hold period, that difference compounds dramatically. This is why retention can swing your multiple from 1.8x to 2.6x—the gap represents real dollars buyers will or won’t collect.
Buyers also look at retention by segment. If your overall retention is 85%, but your commercial lines retention is 92% and your personal lines retention is 78%, they’ll value the commercial book higher. If your top 50 accounts have a 95% retention rate, but smaller accounts have a 70% churn rate, they’ll adjust the valuation accordingly, as this signals relationship strength where it matters most.
Before you market your agency, analyze your retention by line of business, account size, years as a client, and loss ratio. If you discover weaknesses, you have the opportunity to address them. Implementing a formal renewal review process, improving customer service response times, or strategically non-renewing chronically unprofitable accounts can improve your retention numbers within 12-18 months—and potentially add $ 200,000 or more to your sale price.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a measure of your agency’s profitability, and sophisticated buyers increasingly use EBITDA multiples rather than revenue multiples because it more accurately reflects what they’re actually buying—profit, not just top-line revenue.
Here’s why this matters: two agencies with $1 million in revenue might have dramatically different EBITDA. Agency A operates efficiently with $300,000 in EBITDA (a 30% margin), while Agency B has bloated expenses and only $150,000 in EBITDA (a 15% margin). Using a 2.5x revenue multiple, both sell for $2.5 million. But using a 7x EBITDA multiple, Agency A sells for $2.1 million while Agency B gets only $1.05 million—huge difference.
Private equity buyers and larger aggregators almost always use EBITDA multiples (typically 5x to 9x, depending on size and quality) because they’re buying cash flow that can be returned to investors. Strategic buyers (other agency owners) often still use revenue multiples (1.8x to 3.0x) because they’re simpler and industry-standard.
Understanding this distinction is crucial because you may receive offers structured completely differently. A PE-backed buyer might offer “7x EBITDA” while a local agency owner offers “2.3x revenue.” You need to calculate which is actually better—and the answer might surprise you, depending on your expense structure.
If you’re preparing to sell, pay attention to your EBITDA, not just revenue. Cutting unnecessary expenses, renegotiating vendor contracts, and improving operational efficiency can directly impact EBITDA and increase your sale price, even if revenue remains flat.
Getting a professional valuation before engaging buyers is one of the smartest investments you can make, typically returning 10-20x the cost through better negotiating outcomes. Here’s why.
First, it establishes your baseline. Walking into negotiations without knowing your agency’s objective worth is like selling your house without researching comparable sales—you’re negotiating without a clear understanding. When a buyer offers 2.0x revenue, you need to determine whether that’s a fair, low, or excellent valuation based on your specific circumstances.
Second, it identifies value gaps before buyers find them. A professional appraiser will identify the same weaknesses that buyers typically discover during due diligence—such as carrier concentration, retention issues, an aging client base, and key person risk—but you receive this information privately, allowing you time to address the problems. Discovering during negotiations that your valuation should be 25% lower than expected can kill deals or force desperate concessions.
Third, it provides third-party credibility during negotiations. When a buyer argues that your agency is only worth 1.8x, and you counter with 2.4x, having a professional valuation report supporting your number carries significant weight. Your opinion is biased; a certified appraiser’s analysis, backed by data and methodology, is much more defensible.
The investment ranges from $3,000 to $7,000, depending on the agency’s size and complexity. I’ve watched owners lose this amount in 30 seconds during negotiations because they didn’t understand their actual value. The valuation pays for itself if it helps you negotiate an extra $50,000—and on a seven-figure transaction, that’s almost guaranteed.
Ensure you hire someone who specializes in insurance agencies specifically, rather than a general business appraiser. The nuances of commission income, carrier relationships, and retention metrics require industry expertise.
Preparing Your Agency for Sale
Start preparing 18-24 months before you plan to engage buyers. This timeline isn’t arbitrary—it’s based on the actual time it takes to resolve issues that reduce your agency’s value and implement improvements that increase it.
Most owners believe that preparation involves organizing financial records and updating the client database. That’s 10% of the work. The real preparation involves operational improvements that take time to demonstrate results. Implementing retention strategies, for example, can improve your 82% retention rate to 90%, but it takes 12-18 months to show up in the numbers. Diversifying away from carrier concentration by developing new relationships and moving business takes 24 months. Hiring and training a producer to reduce key person dependency takes 18 months before they’re truly productive.
Here’s what happens when you compress this timeline: You list your agency, a buyer analyzes your financials, and they discover your retention dropped from 87% to 81% last year. You can’t explain it away or fix it during negotiations—it’s a data point that reduces your multiple. But if you’d discovered this issue many months in advance before the sale, you could have implemented a renewal review process, improved customer service, and shown the trend reversing back to 86% by the time buyers see your numbers.
The owners who get premium valuations didn’t accidentally build great agencies—they systematically addressed weaknesses well before conversations started. Even if you’re not planning to sell for five years, start tracking the metrics buyers care about now: retention by line of business, organic growth rates, carrier concentration, average account size, and profit margins. What gets measured gets managed.
Buyers often walk away from deals or dramatically reduce their offers when they discover issues that signal potential risk. Understanding these red flags before you go to market lets you address them proactively rather than making excuses during negotiations.
The biggest deal-killer is financial inconsistencies. When your tax returns don’t align with the profit and loss (P&L) statement you’ve presented, buyers assume you’re either committing tax fraud or lying to them—neither builds confidence. If you’ve legitimately been aggressive with deductions, prepare detailed add-back schedules that explain every difference with supporting documentation. “Trust me, my accountant handled it” doesn’t work.
Second is the undisclosed legal issues. If you have pending Department of Insurance complaints, even minor ones, disclose them upfront with an explanation and a resolution plan. Buyers will discover them during due diligence anyway, and finding out you hid something destroys trust and tanks the deal. I’ve witnessed transactions collapse 72 hours before closing because an owner failed to disclose a 3-year-old E&O claim they believed was irrelevant.
Third is key person dependency that you haven’t acknowledged. If you’re the rainmaker, closer, and relationship manager for your top 50 accounts, and you have no transition plan or incentives for clients to stay post-sale, buyers will heavily discount your price or structure earnouts that put most payment at risk. They’re buying a business, not buying the right to hope your clients stick around after you leave.
Other major red flags include a declining revenue trend (even 3-5% year-over-year raises serious questions), retention below 85%, over 40% of revenue from one carrier, an aging client base with no young client acquisition strategy, and a lack of basic operating procedures that document how work gets done.
The good news? All of these are fixable with enough lead time. The bad news? If you wait until you’re in negotiations, it’s too late.
This is one of the toughest decisions in the sale process, and there’s no universal correct answer—it depends on your specific situation, employee dynamics, and timeline.
The case for telling them early: If you have key employees who are critical to the business’s successful operation, they need to be part of your transition planning. A strong account manager with deep client relationships represents value to buyers, but only if you can assure buyers that the person will remain. Engaging them early, potentially with retention bonuses tied to the sale, protects your transaction and rewards loyalty. I’ve seen deals where the owner brought their key people into the process six months before going to market, offered them 5-10% of the sale proceeds, and this became a selling point to buyers—”the team is committed and incentivized to stay.”
The case for confidentiality: People talk. If you inform your staff 18 months before the sale, word will spread to clients, competitors, and carriers—creating uncertainty that damages your business while you’re trying to maximize value. Nervous employees start job hunting. Concerned clients start calling, asking if they should look for new agencies. Competitors spread rumors that you’re closing down. Your revenue can decline by 10-15% simply due to uncertainty before you even have a buyer.
The middle-path-most-successful-sales take: Maintain confidentiality during preparation and marketing phases. Once you have a serious buyer and are entering due diligence (which means you’re 60-75% confident that a deal will close), bring in your key employees—usually 60-90 days before closing. This is late enough that the deal is real, but early enough that they have time to process and meet the buyer.
For your key personnel—the ones whose departure would materially harm the transaction—consider informing them earlier, but with clear expectations about confidentiality and incentives that align their interests with yours.
Your technology stack has a direct impact on your valuation, sometimes more than owners realize. Buyers aren’t just acquiring clients—they’re acquiring operations, and they’re evaluating how much work it’ll take to integrate your agency into their systems
If you’re still running on an outdated agency management system, maintaining client data in spreadsheets, or using paper files for documentation, you’re signaling operational inefficiency that buyers will discount. A modern AMS (Applied Epic, Hawksoft, EZLynx, Vertafore) that’s properly implemented with clean data is worth its weight in gold because it reduces the buyer’s integration headaches. Messy or outdated systems cost money because the buyer has to repair or replace them.
Here’s the specific impact: An agency using current technology with clean data typically gets valued at the higher end of the multiple range (2.5x vs. 2.0x) because transition risk is lower. An agency with data chaos—client information in various places, incomplete records, no documentation of processes—might see 0.3-0.5 knocked off their multiple because the buyer has to spend time and money cleaning it up.
That said, don’t buy a $50,000 software system six months before you plan to sell. Buyers will have their own preferred platforms and will likely migrate you anyway. Instead, focus on data hygiene: ensure your client records are complete and accurate, document your key workflows, organize your carrier portal logins and contracts, and establish basic standard operating procedures.
The primary question buyers ask about technology is: “Can this agency operate without the owner?” If you’re the only person who knows how everything works and it’s all stored in your head, your agency is worth less than one where documented systems allow staff to execute without constant owner involvement.
This challenge kills deals more than owners admit. You’re trying to run your agency at peak performance (because buyers will scrutinize your last 36 months), prepare mountains of documentation for sale, negotiate with buyers, and manage due diligence—all while keeping the fact that you’re selling confidential. It’s exhausting.
Here’s what actually works: Start preparation during your normal business cycle, not during your busiest season. If you’re a commercial lines agency with heavy January-April renewals, avoid starting your sales process in February. You’ll either neglect the sale process or neglect your renewals—and buyers will notice if your Q1 production drops off.
Delegate ruthlessly. This is precisely the time to prove your agency can operate without you anyway. If you’re still personally handling routine servicing, processing certificates, or managing every carrier relationship, buyers will discount your value because of key person dependency. Use the sale preparation as motivation to finally implement the delegation and systems you’ve been postponing. Your agency runs better, you free up time for sales activities, and you simultaneously make your business more attractive to buyers.
Hire help specifically for sale preparation. A bookkeeper to organize 36 months of financial statements costs $2,000-$3,000, but saves you 40 hours. A part-time project manager to coordinate documentation and buyer requests costs $5,000-$8,000, but prevents you from working 70-hour weeks for six months. These are relatively small investments compared to a six- or seven-figure sale.
Set boundaries with buyers. You don’t need to respond to information requests within 2 hours. Establish specific times for calls and due diligence activities that don’t disrupt your agency operations. Professional buyers respect boundaries; unreasonable buyers who demand constant availability are unlikely to be good partners anyway.
Most importantly, give yourself 18-24 months for the total process, not 6 months. Compressed timelines create pressure that can lead to mistakes, burnout, and poor decisions.
Address them head-on before marketing your agency, and definitely before due diligence begins. Trying to hide claims or complaints is futile—buyers will discover them through carrier conversations, DOI records, or their own due diligence process—and the cover-up is worse than the original issue.
For pending E&O claims, document everything: what happened, how you responded, current status, expected resolution, and financial exposure. If your E&O carrier is handling the matter, obtain a letter from them outlining the claim, their position, and the expected outcome. Buyers want to understand the potential liability they might be assuming, but more importantly, they want to see that you handle problems professionally.
A properly managed E&O claim with clear documentation might not impact your valuation at all. A hidden claim discovered during due diligence will tank your deal or knock 15-20% off your price because it signals dishonesty and raises questions about what else you’re hiding.
For customer complaints—whether formal DOI complaints or informal grievances—resolve them before sale if possible. If you have an angry client threatening to file a complaint, spend the time and money to make them satisfied or at least neutral. A $5,000 goodwill adjustment that resolves a complaint is infinitely cheaper than losing $200,000 off your sale price because a buyer discovers active complaints during due diligence.
If you have unresolved issues that can’t be fixed before the sale, disclose them proactively during negotiations with full context. Explain what happened, what you’ve done to prevent recurrence, and whether it represents an isolated incident or pattern. Buyers can accept isolated problems explained honestly; they can’t accept patterns of poor service or dishonesty.
The broader principle: Never let buyers discover problems on their own. You control the narrative when you disclose proactively; you lose all credibility when they find issues you tried to hide.
The instinct makes sense—more revenue equals a higher sale price—but aggressive growth right before the sale often backfires and can actually reduce your valuation if done wrong.
Buyers analyze growth quality, not just growth quantity. If your agency has been growing at 5% annually for years and suddenly shows 18% growth in the year before sale, buyers will ask tough questions: Is this growth sustainable? Did you sacrifice profit margins to generate it? Are you writing questionable business that will blow up after the sale? Did you purchase a book of business that’s not yet integrated?
Here’s where aggressive pre-sale growth hurts you: If you’ve ramped up marketing spending from $20,000 to $60,000 annually to drive growth, your profit margins are compressed. Buyers pay on multiples of revenue or EBITDA—if your EBITDA dropped because of growth spending, you might have higher revenue but lower valuation. If you’ve hired producers who aren’t yet profitable, the same problem.
If you’ve purchased books of business to inflate revenue, buyers will heavily discount that “growth” because it’s an acquisition, not organic, and the retention risk is higher on purchased books. If you haven’t fully integrated those acquisitions, buyers see operational chaos and risk.
The growth strategy that does increase value: sustainable organic growth driven by referrals, improved retention, account rounding, and marketing that’s already profitable. If you can demonstrate 8-12% organic growth year-over-year for 2-3 years with maintained or improved margins, that’s valuable because it’s a repeatable result.
If you’re 12-18 months from sale, don’t launch risky growth initiatives. Instead, focus on improving the quality metrics buyers care about: retention, profit margins, average account size, and operational efficiency. An agency growing 6% with 91% retention and 28% EBITDA margins will often command a higher multiple than one growing 15% with 83% retention and 18% EBITDA margins.
In the buyer’s eyes, steady, profitable, sustainable growth beats flashy, expensive, risky growth every time.
Most agencies operate based on institutional knowledge that is often trapped in the minds of their employees—especially the owners. This creates a significant key person risk that buyers usually heavily discount. Documented systems prove the business can operate without you, which directly increases valuation.
Begin with your core workflows, including new client onboarding, renewal process, certificate requests, claims handling, account servicing, commission processing, and carrier communications. For each workflow, document the trigger that starts it, the step-by-step process, who’s responsible for each step, the tools or systems used, quality checks along the way, and the completion criteria.
Don’t hire a consultant to build fancy process maps that nobody uses. Create working documents your staff actually references—simple checklists, templates, or even Google Docs with step-by-step instructions. The goal isn’t beautiful documentation; it’s transferable knowledge.
Here’s what makes documentation valuable to buyers: Can a new employee follow your procedures and produce consistent results? If your senior account manager leaves, can someone step into that role using your documentation without everything falling apart? The answers to these questions determine whether buyers view your agency as a system or as dependent on specific individuals.
Beyond process documentation, create an operational manual that covers: carrier contacts and contract details, technology passwords and access, key client quirks and preferences, vendor relationships and contracts, a renewal calendar, and standard forms and templates used.
The documentation process itself reveals gaps in your business. When you try to write down “how we handle renewals,” you might discover there is no standard process—everyone does it differently. That’s a problem you can fix before sale rather than having buyers discover it during due diligence.
Budget 40-60 hours to create basic but solid documentation across all major processes. This investment typically returns 10 times during the sale by reducing buyer concerns about key person risk and demonstrating operational maturity.
Finding and Vetting Buyers
Finding qualified buyers requires a multi-channel approach because different buyer-types hunt for agencies through different channels. You can’t simply post on one website and expect to receive serious offers.
Start with your immediate network—other agency owners you know who’ve expressed interest in growth. These conversations happen at industry conferences, local associations, and through carrier relationships. Some of the best deals I’ve seen have come from relationships built over years, not from cold outreach. An owner in your market who knows your reputation, understands your client base, and has observed your agency’s operations will often pay premium multiples because they’re buying certainty, not just financials.
The Insurance Journal’s Top 100 list is a goldmine for identifying active acquirers. These agencies didn’t become big by accident—they achieved their growth through strategic acquisitions, and most are constantly looking for their next deal. Research which ones operate in your region or are expanding into it. Don’t just send your CIM blindly; study their acquisition history, understand what they’re looking for, and craft personalized outreach that explains why your agency fits their strategy.
Business brokers specializing in insurance agencies have buyer databases you can’t access independently. They know who’s actively looking, who has financing lined up, and who’s serious versus those who are just tire-kicking. The trade-off is paying a 6-10% commission, but a good broker screens buyers, manages negotiations, and often secures better terms than you’d achieve alone because they understand leverage and deal structure.
Private equity-backed platforms are increasingly active buyers. Firms like Baldwin Risk Partners, Acrisure, Hub International, and dozens of others have raised capital specifically to consolidate insurance agencies. They move fast, pay fairly, and have streamlined processes—but they also have specific criteria about size, geography, and operations.
Online platforms like BizBuySell or industry-specific marketplaces offer you reach, but they also attract more tire-kickers. You’ll field inquiries from unqualified individuals, waste time on conversations that go nowhere, and risk confidentiality breaches. Use these selectively and always require NDAs before sharing details.
The real question isn’t “where do I find buyers?” but “how do I find the right buyer for selling my insurance agency?” Casting too wide a net burns time and risks confidentiality. Targeting 15-20 qualified prospects who match your size, geography, and values will produce better results than broadcasting to hundreds.
Nothing wastes more time than spending 90 days negotiating with a buyer who can’t actually secure financing. Vetting financial capability upfront saves you months of wasted effort and prevents the emotional letdown of a deal that falls through.
Start by asking direct questions early—during the second or third conversation, not during final negotiations. “How are you planning to finance this acquisition?” is a completely reasonable question. Serious buyers expect it and have clear answers. Buyers who get defensive or evasive about financing raise immediate red flags.
There are three primary financing scenarios, each with different reliability: All-cash buyers (private equity platforms, large agencies, well-capitalized independents) are most reliable because financing isn’t contingent. They should provide proof of funds—typically a bank statement or letter from their CFO confirming available capital. Don’t hesitate to request this; it’s standard in transactions of this size.
SBA-financed buyers (common for individual entrepreneurs buying agencies) are moderate reliability. SBA 7(a) loans can finance up to 90% of the purchase price, but approval takes 60-90 days and requires seller involvement. The buyer should already have preliminary SBA lender approval before making formal offers. Ask: “Have you been prequalified by an SBA lender? What’s your credit score and down payment capability?” Buyers with credit scores under 700 or a down payment of less than 10% rarely close.
Seller-financed deals (where you carry a note for part of the purchase price) shift risk to you but expand your buyer pool. This works when the buyer has strong industry experience and some capital, but not enough for a full purchase. Structure it carefully, including personal guarantees, a first-position security interest, and clear default terms.
Red flags that signal financially incapable buyers: They want to tour your agency and meet your staff before proving financing (time-wasters using your process to gather competitive intelligence). They propose complicated equity structures where you take risk, but they get control. They’ve been “looking at agencies” for over two years but have never closed a deal. They propose earnouts that put 70% or more of your payment at risk over five years or more.
Before spending serious time with any buyer, get: proof of funds or a lender prequalification letter, a personal financial statement (for individual buyers), an explanation of how they’ve structured previous acquisitions (if any), and references from sellers they’ve previously purchased from.
A qualified buyer won’t hesitate to provide this information. An unqualified buyer will waste months of your life before the deal collapses at closing.
Need help identifying and vetting qualified buyers? Download our comprehensive roadmap at https://stromanconsultinggroup.com for detailed guidance on buyer types, red flags to avoid, and negotiation strategies.
Understanding buyer types helps you evaluate offers that may appear similar on the surface but have significantly different implications for you, your staff, and your clients.
Strategic buyers are other insurance agencies or industry operators acquiring your agency to expand their footprint, add capabilities, or gain scale. They’re buying for operational reasons—accessing your markets, carrier relationships, or expertise. These buyers typically offer revenue multiples of 1.8x – 2.6x, prefer all-cash or mostly cash structures, and focus on integrating your agency into their existing operations. Your brand may disappear, your staff might be consolidated, and your office may close.
The upside: They understand insurance, move decisively, and can close quickly because they know what they’re evaluating. They often pay fair prices without extensive earnouts because they have confidence in their ability to retain clients. If you want a clean exit with minimal ongoing involvement, strategic buyers often deliver that.
Financial buyers are private equity firms, family offices, or investment funds buying agencies purely for financial return. They’re less common for small agencies (most want $2M+ revenue) but are increasingly active in the market. They typically offer 2.3x – 3.0x+ revenue (higher multiples) but structure deals with significant earnouts tied to performance, retention, and growth targets.
The upside: Higher potential total compensation if earnout targets hit. They usually keep your brand, retain your staff, and want you involved for 2-5 years post-sale because they need you to maintain relationships and hit growth targets. If you’re not ready for complete retirement and want to participate in upside, financial buyers can work well.
The downside: Your payout is heavily contingent on future performance, and you no longer have complete control over operations. If retention drops or growth slows for reasons outside your control (economic downturn, carrier issues), you miss earnout payments. You’re working for someone else while waiting for money they owe you.
Which is better? Depends on your priorities. If you’re 65, want to retire, and value certainty, a strategic buyer paying 2.2x cash is preferable to a financial buyer offering 2.8x with 60% in earnouts over four years. If you’re 55, energetic, and confident in continued growth, the financial buyer might deliver more total compensation.
Evaluate offers based on total cash at closing (not theoretical earnout maximums), structure, and achievability of earnouts, your required post-sale involvement, and what happens to your staff and clients. The “best” offer isn’t always the one with the highest number on paper.
Employee sales can be phenomenal or disastrous, and the difference usually comes down to three factors: the employee’s capability to actually run the business, their financial capacity to buy it, and whether you can emotionally handle the transition dynamic.
The case for employee sales: Your key employee already knows the clients, understands the operations, and has relationships with carriers. Transition risk is minimal, which protects the business value you’ve built. Clients often respond positively because they already trust this person. Your legacy is more likely to be preserved because someone who’s been with you for years shares your values and approach.
The capability question: Being a great account manager doesn’t automatically translate to being a successful agency owner. Does this employee understand P&L management, can they handle sales and business development, do they have leadership skills to manage other staff, and most critically—are they willing to work the hours and take the risks that ownership demands? I’ve seen employee buyouts fail within two years because the employee loved the stability of a paycheck but couldn’t handle the stress of ownership.
The financial reality: Most employees can’t write a check for your agency. They’ll need SBA financing, which means you’ll likely carry a seller note of 10-20% of the purchase price. This puts you at risk—if the business declines after sale because they can’t perform, you might not get paid. Structure it carefully with personal guarantees, life insurance requirements, and clear performance covenants that protect your note.
The emotional minefield: You’re transitioning from boss to seller, and this employee is transitioning from subordinate to buyer. Power dynamics shift. They’ll make decisions you disagree with. They might change things you built. If you can’t emotionally let go and trust them to run it their way, you’ll make everyone miserable with your “helpful suggestions” that feel like control and interference.
Here’s how to evaluate whether an employee sale makes sense: Give them increasing ownership responsibility 12-24 months before a potential sale. Let them run the agency for 2-3 months while you’re minimally involved—do they thrive or struggle? Have frank financial conversations early—can they secure financing? Would you feel comfortable carrying paper for them? Finally, obtain an outside valuation and negotiate at arm’s length—don’t discount your price by 30% just because you like them. That’s not fair to you or your retirement.
Employee sales work beautifully when the employee is truly capable, adequately financed, and when you can genuinely let go. They fail spectacularly when you’re trying to force it because it feels emotionally satisfying but doesn’t match reality.
Confidentiality failures erode agency value more quickly than almost anything else. Word leaks that you’re selling, clients panic and start shopping, employees get nervous and update their resumes, competitors spread rumors, and your revenue can drop 10-20% before you even have a buyer. Protecting confidentiality requires a deliberate strategy.
Start with a marketing teaser—a one-page, anonymous overview of your agency that includes key metrics but no identifying information. Include revenue, growth rates, client concentration, and geographic region, but not your agency name, specific location, carrier breakdown that would identify you, or anything that makes you Google-searchable. This teaser is sent to potential buyers to gauge interest before revealing the identity.
Require NDAs (Non-Disclosure Agreements) before sharing your Confidential Information Memorandum. The NDA should prohibit the recipient from: disclosing they’ve received information about your agency, contacting your clients or employees, soliciting your staff, and using information for competitive purposes. Have your attorney draft this—generic internet NDAs miss critical protections.
Limit initial distribution. Don’t blast your CIM to 50 potential buyers. Target 10-15 highly qualified prospects who match your profile and are serious acquirers. Each additional person who sees your information increases the risk of a leak exponentially. If you’re working with a broker, insist on knowing exactly who receives the materials and require their approval before adding any additional recipients.
Use a secure virtual data room for due diligence documents, not Dropbox or email. Platforms like Firmex, Intralinks, or SecureDocs enable you to control access, view who has viewed specific documents, revoke access instantly, and watermark PDFs with recipient information that discourages sharing. They cost $500-$2,000 for a transaction but prevent catastrophic leaks.
Conduct showings and meetings off-site, never at your agency during business hours. Meet at their office, a hotel conference room, or restaurants outside your normal area. If a buyer needs to see your physical location, consider doing so after hours or on weekends when staff and clients won’t be present to see unfamiliar people touring your office.
Never use identifiable client names in initial materials. Refer to “Client A – $45K premium, manufacturing, 8-year relationship” rather than “ABC Manufacturing.” Reveal specific client identities only during final due diligence when you’re 90% confident the deal closes.
The hard truth: If your market is small (under 50,000 population), maintaining perfect confidentiality is nearly impossible. People talk, they recognize patterns, and insurance is a small world. Focus on limiting the spread and timing disclosure strategically—once you have a signed LOI and are 85% confident of closing, selectively telling key employees and clients becomes less risky than having them hear rumors.
Due diligence runs both directions. While buyers scrutinize your agency, you should scrutinize them as well. The wrong buyer pays cash but destroys your legacy, alienates your clients, and mistreats your staff—outcomes that might matter to you even after you’ve exited.
Ask about their acquisition history: “How many agencies have you acquired in the past five years? Can you provide contact information for two sellers I can speak with?” Talking to previous sellers reveals how buyers actually behave after the close. Do they honor commitments? Did earnouts get paid? Were transitions handled professionally? If a buyer refuses to provide seller references, that’s disqualifying.
Understand their integration approach: “What happens to my staff after closing? Will my office remain open? How long will my brand continue?” These aren’t theoretical questions—they have direct answers. A buyer planning to lay off half your staff and close your office might not care, but you should know this before accepting their offer. If maintaining your team matters to you, make retention requirements part of the deal structure.
Explore their operational philosophy: “How hands-on will you be in daily operations? What changes do you typically make in the first 90 days post-acquisition?” This reveals whether they’re buying to integrate aggressively or to let your agency continue operating semi-autonomously. Neither approach is wrong, but it should match your expectations.
Question their financial structure: “Beyond the purchase price, what additional investments will you make in the agency? What are your growth expectations?” This uncovers whether they’ll starve your agency of resources or invest in technology, marketing, and staff to drive growth. It also reveals their timeline—private equity buyers often have 5-7 year hold periods before selling again, which impacts long-term client relationships.
Assess cultural fit: “What’s your approach to client service? How do you handle claims issues? What’s your philosophy on carrier relationships?” The answers tell you whether their values align with how you’ve built your business. If you’ve built a high-touch service model and they operate with a low-cost, efficiency-driven approach, that misalignment will create problems.
Ask about earnouts specifically: “What percentage of your prior acquisitions have hit full earnout targets? What’s the average payout percentage?” If they structure deals with aggressive earnouts but sellers historically only collect 40-60% of projected payments, you’re looking at smoke and mirrors, not fair dealing.
Finally, trust your gut. You’ve developed business instincts over the course of decades. If something feels off about a buyer—they’re evasive, overly aggressive, or make promises that sound too good to be true—walk away. There are other buyers. Your agency is valuable. Don’t sell to someone who doesn’t respect what you’ve built.
Need help identifying and vetting qualified buyers? Download our comprehensive roadmap for detailed guidance on buyer types, red flags to avoid, and negotiation strategies.
Running a competitive process with multiple qualified buyers simultaneously is almost always preferable to sequential one-on-one negotiations, both in terms of price and terms. The dynamics change completely when buyers are aware of competition.
Here’s what happens with single-buyer negotiations: They control timing. They know you’re not entertaining other offers, so they can slow-walk due diligence, ask for extra concessions, and nickel-and-dime terms knowing you’ve invested time and emotion into this single track. If negotiations stall or the deal falls apart, you’re back to square one—six months lost, your financials now six months older, and you’re approaching buyers who might wonder why the first deal didn’t close.
Multiple-buyer dynamics shift leverage: Buyers move faster because they fear losing to competition. They offer better terms upfront rather than trying to renegotiate later. They become more flexible on structure, earnouts, and transition requirements. Most importantly, if one buyer develops cold feet or tries to re-trade terms (lowering their offer based on due diligence findings), you have alternatives rather than being held hostage.
The practical approach: Engage 3-5 qualified buyers simultaneously through the initial stages—teaser, NDA, CIM, preliminary offers. This is manageable without overwhelming yourself. Once you receive Letters of Intent (LOIs), you can choose your top two candidates and take both through detailed due diligence. This maintains competitive tension while allowing you to focus your energy.
Be transparent about running a competitive process. Don’t lie to buyers about exclusivity. Simply state: “We’re in conversations with several qualified parties and will be selecting our preferred buyer based on total offer quality, not just price.” Professional buyers expect this and respect it. Unsophisticated buyers might complain, but those aren’t the buyers you want anyway.
The exception: If an unsolicited buyer approaches you with a compelling offer that meets your needs—strong price, good structure, respected buyer—and you weren’t planning to sell for another year, you might engage exclusively. But even then, use the implicit competition of, “I could just wait and market properly” as leverage. Never negotiate from a position of, “you’re my only option.”
Managing multiple buyers requires organization: track where each buyer is in the process, what information they’ve received, what questions they’ve asked, and their specific concerns. A shared spreadsheet or simple CRM keeps this organized. If you’re working with a broker, they manage this workflow, which is part of what you’re paying them for.
The data is clear: sellers who run competitive processes receive offers 12-23% higher on average than those who negotiate with single buyers. That difference on a $2 million transaction is $240,000 to $460,000. The extra complexity is worth it.
This question requires weighing multiple factors because the answer genuinely depends on your priorities and the specific situation. There’s no universal right answer, but there are critical considerations you need to evaluate.
The concern is legitimate: A buyer who already owns an agency in your market and plans to consolidate creates obvious risks. Your office probably closes. Your staff likely gets redundant with their existing team. Your brand disappears. Your clients get transferred to their existing operation. Everything you built gets absorbed, and the distinct identity of your agency evaporates within 90 days.
If preserving your legacy, protecting your staff’s jobs, and maintaining your brand matter significantly to you, a consolidating buyer probably isn’t the right fit—regardless of their offer. Money isn’t everything, and the emotional reality of watching your life’s work get dismantled within months of sale can be devastating for owners who care deeply about legacy.
However, the financial case for consolidating buyers is strong: They often pay premium multiples because they achieve immediate cost synergies. They eliminate duplicate office leases, redundant staff, overlapping technology systems, and redundant carrier overhead. These savings are real—potentially 20-30% of combined operating expenses—and they’ll share some of that value with you through higher purchase prices. An offer of 2.6x from a consolidating buyer might be better than 2.2x from a buyer keeping your agency standalone.
Additionally, consolidating buyers usually offer cleaner exits. They don’t need you hanging around for three years managing the agency during earnout periods because they’re integrating everything into existing operations. If you’re 66 years old and want to retire fully within 90 days, a consolidating buyer with majority cash at closing might be exactly what you need.
The middle ground: negotiate retention protections into the purchase agreement. Require that all staff be offered comparable positions with comparable compensation for at least 12 months following the close. Negotiate a retention bonus pool, funded by the buyer, that rewards employees who stay through the transition. Include provisions that key employees who are terminated without cause within 18 months trigger additional payments to you. These protections align buyer incentives with staff welfare.
Evaluate consolidating buyers on: the purchase price premium they offer (should be 10-15% higher to compensate for integration impacts), how they treat staff from previous acquisitions (get references), their reputation in the market (will your clients be well-served?), and their track record of honoring commitments.
Don’t automatically rule them out, but don’t accept them blindly either. If an owner offers 2.7x revenue all-cash with a 90-day exit but plans to close your office, and another offers 2.3x with earnouts but keeps your agency intact, run the numbers and think through what matters more to you: the extra $200,000 or the preservation of what you’ve built. There’s no wrong answer—just your answer.