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Selling Your Independent Insurance Agency - Part I

My job most often centers around helping agents grow their business, NOT sell their business. However, there are times when I am asked to evaluate the sale of an agency and what that might look like to an agency owner who is ready to exit the business or looking forward to the spoils of retirement.

There are two major topics to consider when evaluating a book sale. First, what is it worth? And second, how do I go about putting it on the market and then selling it? I will go into both topics briefly during this article. (If you are more interested in reading about the benefits of owning an agency, please see my article on ‘5 Reasons Owning an Insurance Agency is a Smart Choice’).

So, let’s jump in on Part I…


Unfortunately, this can sometimes be a moving target. Fortunately, this target has a traditional range of possible factors and is somewhat predictable! There are two ways to look at an insurance book, either by total annual renewing (or 12 months rolling) premium OR by annual revenue. Total annual renewing premium tends to be the faster and easier way to get an approximate value for your business.

Let us assume you have built a book of business (BOB) that generates $2,000,000 in average annual premium over the last three years. This would include renewal premium (customers that have been with your agency longer than a year) and any new business premium (first-year customers to your agency). We then need to make another assumption for quick analysis… what is the average commission generated by the book? I feel a good, conservative number to use is 12%. If that is the case, our example BOB would generate $240,000 in annual commission or revenue. On the street, buyers looking to purchase insurance agencies will then consider paying a factor of this total annual commission for your book. Factors generally range between 2.5- and 3.5-times annual revenue depending on the make-up of the business.

Therefore, you can expect to receive somewhere between $600,000 - $840,000 for your business!


This is a VERY rough number and there are many factors that go into getting down to a true total. Many times, an agency owner will spend months preparing information on the specifics of the book to sell. Also, some buyers will want to estimate a book sale on earnings before interest, taxes, and amortization (EBITA) which is a common accounting valuation used in business. It is best to hire a CPA that has experience in valuating insurance agencies to help in this and other aspects of evaluating your business.

You may also notice that there have not been any considerations for expenses in the estimate above. Expenses may be considered, BUT there are times a book, when purchased, will be absorbed into another existing book of premium with an established service staff already in place. Therefore, depending on the size of the book sold, there may be very little extra expense to the buyer if they decide to close separate agency locations and release any staff that may be associated with the purchased agency.

Stay tuned... in Part II, we will go into preparing and listing your agency for sale.


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