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Insurance Agency Valuations

Accurate valuations are important for both buyers and sellers in the insurance agency industry. There are many different methods to conducting valuations, and no one right method for doing so. 

Many banks and other organizations that conduct insurance agency valuations use the rule of multiples, which holds that an insurance agency is worth 2x-3x its revenue or 6x-9x its earnings before interest, taxes, depreciation and amortization. It would be convenient for all if this simple method provided accurate results, but unfortunately conducting true valuations is a bit more complicated. 

 Many factors drive value in an insurance agency, from its carrier relationships and quality of book of business to contractual agreements, customer retention rate and diversity of revenue stream.

When it comes to business valuation services, many things need to be taken into consideration. These include things such as:

  •  How one business compares to others in the marketplace
  • Current supply and demand and required rate of return
  • Variables such as geographic area, market trends, asset liquidity, financing options and current operations
  • Company performance/profitability
  • Divorce and Estate Changes

In order to determine the true value of an insurance agency, all these factors must be considered and carefully balanced. Based on these variables, the price can be greater or less than its fair market value. This price point is referred to as investment value.

The Risks of Inaccurate Insurance Agency Valuations

 A quick valuation that doesn’t take all factors into consideration could result in an estimate that is at least 20% over or under the true market value of an organization. Are you comfortable with a 20% margin of error? If you are selling your agency, you want the maximum value for your business. For many owners, their agency represents their life’s work – and after years of building up your business, you certainly don’t want to sell for anything less than what it’s worth. On the other side of the equation, if you are a buyer, you don’t want to overpay for the agency you are acquiring. That’s why accurate valuations are so crucial to the buying and selling process.

Choose Energia Consulting Partners for Accurate Valuations

At Energia Consulting Partners, we have decades of experience in the captive insurance agency mergers and acquisitions industry with more than $600+ million in completed sales, and have conducted hundreds if not thousands of valuations. As such, our knowledge of the true fair market value of an agency is second to none. Over the years we have created our own internal table of percentages and scoring rubric that has helped us to accurately determine agency values and close millions of dollars in transactions. 

We are committed to help our clients understand the value in achieving success. We understand the challenges of business valuations, and tailor our reports to meet the specific needs of lenders, banks, and business owners. If you are in need of a third-party agency valuation or cash flow analysis for a loan/purchase, Energia Consulting Partners is here to help. Fill out the form below and one of our consultants will be in touch to gather more information and start your valuation.

Are you in need of an agency valuation or cash flow analysis for a loan/purchase?

Energia Consulting is here to help. When it comes to business valuation services, many things need to be taken into consideration. These include things such as:

  • How one business compares to others in the marketplace
  • Current supply and demand and required rate of return.
  • Variables such as geographic area, market trends, asset liquidity, financing options and current operations.
  • Company performance/profitability
  • Valuation for securing a loan
  • Divorce and Estate Changes

These considerations greatly affect the price that is paid for a business. Based on these variables, the price can be greater or less than its fair market value. This price point is referred to as investment value.

At Energia Consulting, we are committed to help our clients understand the value to achieving success. We understand the challenges of business valuations, and tailor our reports to meet the specific needs of lenders, banks, and business owners

 

Business Valuation Request Form:

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