Consider two agencies: ​ Agency A hires and develops a producer. 100% of the expenses are charged against revenue. This reduces earnings and earnings per share. Agency B buys an agency in a straightforward, normal asset acquisition. Other than legal costs and a few other minor expenses, only 1/15th of the cost goes against earnings and earnings per share. ​ For comparison, a producer generates $500,000 in commissions after five years. Producer compensation, training, and deve

Business valuations are complex, at least when done correctly. One reason for this complexity is that a business’s value varies based on factors such as the parties involved, the purpose of the valuation, and what is being valued. ​For example, if an agency is being sold between family members, the parties MUST ABIDE by the IRS valuation guidelines. This is not optional. This rule has been in place since 1959! I do not know why some accountants, and more importantly, some bus

A recent ACORD report estimated that 75% of mergers and acquisitions by reinsurers and multiline insurers destroy value. The worst performers were motivated to do deals to acquire scale. ​Scale is not a determining factor in this industry. Management intelligence and execution matter far more than scale. Scale enables management teams to hide poor results more easily, and no one should ever doubt that motivation. ​ At the carrier level, I’ve analyzed results of around 80 carr

Those are the numbers from Brown & Brown’s January 27, 2026, analyst call (as reported in the Insurance Journal on January 28, 2026) regarding the revenues lost to a start-up (likely meaning Howden) in 2025. Per the statements made on the call, most employees were not producers, and most were in benefits. This fascinates me on multiple levels. First, Howden is making waves because of the many employees they’re allegedly taking from other brokers. In some cases, I find it funn

Consulting, to varying degrees, involves seeing into the future and advising clients how to best navigate that future. As a consultant and holding myself to a little bit of accountability: were my projections of the future of insurance distribution correct from about 10 years ago? In particular, a decade ago, I opined about which of 10 new insurance Insurtech distributors were likely to succeed. I advised my clients regarding why they should pay special attention to certain o

A recent IRS case highlighted the importance of hiring a qualified appraiser for asset and business transactions. "Qualified” is a definition provided by the IRS. A person cannot legitimately claim to be “Qualified” if they don’t meet the definition provided by the IRS. Here is an AI summary, which is actually a pretty good summary of the situation. The Hidden Risk of Using Unqualified Business Appraisers: Choosing a business valuation provider based solely on price can be a

In the summer of 2016, I gave a presentation to insurance distributor-related executives that was the epitome of the “Come to Jesus” moment. That presentation remains the hardest I’ve ever given because I knew the audience was going to viscerally react. I knew they were going to circle the wagons and completely reject reality. They were going to don denial as if they were putting on a helmet. I reviewed that presentation to learn if I went too far, didn’t go far enough, or wa

I recently returned from a phenomenal convention dedicated to business valuations. The presenters and attendees were high quality, extremely well-educated people focused on all the complexities of doing business valuations correctly. I hate to tell the readers who believe a business valuation is simply X times EBITDA that it is not that simple. Business valuations vary significantly by purpose, jurisdiction, and a myriad of other factors. For example, the value of a business

(And if the process sounds easy, you've chosen the wrong appraiser/business broker) One of the most dreaded emails/phone calls I get is from an agency owner, usually of a small agency, that has been led to think agency appraisals are simple. Agency appraisals are indeed simple when they are wrong. I know immediately the owner is going to be frustrated with me when I am simply trying to protect him and his agency from their own shortcomings. Some appraisers will gladly take ad

According to an article in Business Insurance on January 7, 2022, MarshBerry Capital showed a total of 3,301 acquisitions in the last five years. A report released on January 19, 2022 by Optis Partners, reported 3,733 acquisitions in the last five years. The IIABA estimated there were 36,000 independent agencies in 2020 (Agency Universe Study, 2020, IIABA, p. 17), a decrease from 36,500 independent insurance agencies in 2018 (Agency Universe Study, 2019, IIABA, p. 16) and 38,

A number of large mergers and acquisitions have occurred recently among carriers, presenting an opportunity to analyze the parties involved. My conclusion, which correlates with decades of research in almost all industries, is that most large M&A's involve companies that have run out of other options. The old adage, "When you run out of all other options, merge" is still relevant. The average growth rate of the companies that were buying or selling was 23% less than average o

Here are just a few real-world examples (even if incredulous ones) of how, by not hiring a true professional, agency owners have lost -- a lot: An agency owner was short $1 million in trust monies but did not think the shortage should be counted against his value. His comment was, "I have heard agencies are being sold for 2X and no one says anything about the balance sheet or trust monies." Of course, he was correct that no one ever talks about the balance sheet or trust moni

​Given the voluminous agency consolidation (sales to larger distributors) and aggregation (combining volumes in networks or clustering), can carriers who historically focused on single agencies continue to do so? Can those carriers, almost exclusively regional or niched in nature, remain true to their core values and still survive? Given the same factors, what are state agent associations going to do? How many agents need to attend XYZ convention from the 25 remaining distrib

You walk into your office to read your email and find an overjoyous message stating that your very favorite carrier is excited to announce they have "joined" with a carrier you mostly abhor. The "merger" (your carrier was actually bought) is going to give them the capital and ability to do even more magnificent things for you, their awesome agent whom they really respect. The seller has been your mainstay carrier for twenty years. Their profit sharing is solid. You have perso

If you are taking over leadership in an agency or brokerage, it is important to know and not be afraid of taking the following necessary steps: Be Strong. One of the biggest mistakes I see is a new leader easing slowly into a command-and-control desk. Flipping a switch and being a bull in a China shop upon assuming the throne is not the solution (unless the agency is truly broken) either. But many successors think they have years to gradually make improvements. You don’t have

Clusters/networks come in all shapes and sizes. There are those that are well considered and those that are pretty haphazard in design. Some are truly designed for a win/win between the individual member and the managers/owners of the cluster, while others are designed purposely for one side to gain the majority of benefits. Some are well built and solid throughout, and some have structures that are hollow behind their slick brochures and websites. There are ones that have di

P&C insurance companies are scared. Not all are scared, of course. Some are big enough, some are smart enough, and others are ignorant enough to not be scared about the future of insurance distribution. The ones that are scared are scared because of scale. So many agency acquisitions have been made by so few buyers that certain buyers are now larger than most carriers. For example, based on year-end 2017 10k's, Aon has almost $10 billion in revenue. Brown & Brown has $1.9 bil

I find many agency owners have firm opinions regarding the importance of S-Corporations and LLC’s. These opinions are not always fully informed. Making the situation worse, their advisors and particularly their accountants are not always fully informed. The accountants continue to make the assumption that all businesses are the same relative to whether S-Corporations, C-Corporations, or LLC’s are best. They are particularly not informed regarding cash flows that cause them

I have been valuing insurance agencies a long time. I have been valuing them using both the Intrinsic Value and Market Value methods most of the time. For anyone interested in reading a brilliant description of these two methods, I suggest reading the article, “Musings on Markets” (September 7, 2011), by Professor Aswath Damodaran of the NYU Stern School of Business. Intrinsic value is usually determined using one of several versions of the discounted cash flows method (the e

The press has filled pages over the last two years with details of the financial misdeeds of large corporations. Several insurance companies have had to modify their financial reports too. A lot of these misdeeds have involved balance sheets. Most people understand the income statement and how revenues must exceed expenses to have a viable and valuable company. However, most people, including some Wall Street analysts, tend to over-look balance sheets. A few big company exec'