Want To Sell Your Insurance Agency? What’s Your Why?

4 Reasons to Do Periodic Agency Valuations

Agency Operations, Leadership, Personal Lines, Small Commercial Lines

You probably know the value of many things in life. Most homeowners know the potential value of their home and many investors check the performance of their retirement portfolio daily. But what about the value of your business? Independent business owners’ largest asset is typically shares in their own firm, but how many know the value of that asset?

If you own an independent insurance agency, most likely you plan to grow that asset and ultimately realize its value one day. But do you know the factors driving the value of your business? What should you focus on to improve value over time? Is there something you’re doing that will take away from that value or increase the perceived risk of a potential suitor?

These are some of the questions left unanswered if you’ve never had an agency valuation performed or your last valuation was years ago.

Here are the benefits of performing regular agency valuations by an objective third party:

1. Clearer decision making and strategy

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Performing regular appraisals of a business can help an owner to make informed strategic decisions. It also provides insights on how these decisions impact value and progress over time. Understanding the value of the insurance agency, including intangibles, branding, and customer relationships can help drive the following:

  • Advantageous investments
  • Resource allocation and growth strategies
  • Negotiations with investors or lenders
  • Insights into market dynamics and benchmarking
  • Pricing, marketing, and product development

2. Expose leaks, risks, and opportunities

After completing an agency valuation, MarshBerry regularly hears clients observe that they’ve found a new way to look at their business. Perhaps they didn’t realize they were spending so much on travel and entertainment or technology.

Going through the process of reviewing expenses in detail can shed light on how your agency is performing and confirm you’re investing in the right places to drive client service, revenue growth, or other returns.

Relying on a third-party expert to perform a valuation can add discipline to operations and steer independent agencies away from the trap of running as a lifestyle business. Instead, you’ll get guidance on creating institutional value and shareholder wealth.

Some business owners run personal expenses through their company to minimize their tax burden, but at what cost? Potential investors might only see a low profit margin, affecting valuation. Or, the inverse,   where you’re trying to minimize expenses and run a high profit margin, but instead end up taking away growth drivers of the business, thus impacting the long-term value of your agency.

3. Talent attraction and retention

The best run independent insurance agencies use equity (phantom or real) as an incentive tool to drive growth, attract talent, and meet company goals. It’s important to not only have a reasonable basis for providing a path to ownership, but also a stable valuation methodology as employees buy in or sell out of their position.

If you have a desire to remain independent, it’s worth investigating these tools as a strategy to hold on to your top performers and align incentives. Setting a baseline for the value of your agency is the first step in pursuing this strategy.

Once the plan is in place, have regular agency valuations performed annually and update the share price. High growth agencies are updating their share price quarterly or even monthly to incorporate recent acquisitions, so the share price remains current.

4. Readiness for any scenario

Each time you start a valuation, consider the individual purpose or goal you want to achieve. Maybe it’s to sell the agency, raise capital via debt or equity, create a buy/sell agreement, create stock options, calculate taxes, or assess risk, just to name a few.

For example, imagine you’re considering an exit strategy. Whether selling the business, passing it on to family members, or taking on a capital partner, knowing the value of the company is essential for determining the timing and terms of the exit.

For several of these purposes, a formal fair market valuation is required. For others, a negotiation between two parties serves as the basis of the valuation and is often referred to as strategic value or investment value.

It’s easy to get tied up with the daily operations of your business, but it’s important to take a step back and think about what your firm is worth today and what you hope it will be worth in the future.

If you’re interested in taking this conversation further, hiring a consultancy such as MarshBerry can help you understand your value and the drivers of that value to achieve your goals. After all, you can’t know where you’re going if you don’t know where you’re starting.


This article was originally posted on MarshBerry’s Viewpoint blog and is reposted here with permission. The views, opinions, and positions expressed herein are those of the author alone, and should not be considered to represent official positions of Liberty Mutual nor to imply any endorsement by Liberty Mutual.

Graham Gould

Vice President, MarshBerry

Graham Gould joined MarshBerry in spring of 2019 and currently serves as a Vice President. His responsibilities include the preparation of valuation reports, merger & acquisition projects, and general consulting projects.

Prior to joining MarshBerry, Graham worked at FMV Opinions, Inc., a valuation and financial advisory firm. While at FMV Opinions, Graham performed valuation analysis and financial advisory services for financial reporting, financial advisory, and estate & gift tax purposes. Graham has experience in a number of industries including insurance, technology, health care, investment funds, wineries, natural foods and grocers, and oil & gas.

Graham currently maintains the FINRA Securities Industry Essentials (SIE®) Exam, in addition to the Series 7, 79 and 63 FINRA Registration through MarshBerry Capital, LLC, the affiliated FINRA-registered Broker/Dealer of Marsh, Berry & Co., LLC.

Graham earned a Master of Business Administration (MBA) degree from the University of California, Irvine’s Paul Merage School of Business and a Bachelor of Science in Chemistry from Michigan Technological University. He holds the Certified Valuation Analyst (CVA) certification and is a member of the National Association of Certified Valuation Analysts.

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