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The Danger of the Insurance Industry Multiple: Understanding what your insurance agency is worth

What is my insurance agency worth
Insurance Industry Multiples

One of the most common questions we get from insurance agency owners is… 

What do the multiples look like if I sell my business today?

The desire to gauge what your insurance agency is worth and where your agency stands compared to industry peers is only natural. 

But the reality is that talking about multiples without understanding the context of a business can be extremely misleading. 

When insurance agency owners discuss the multiples they've heard in the market – whether it's Jim's 4x or Rachel's 8x – it's essential to look beyond the multiple numbers. Multiples alone won’t paint the full picture of the value you could get when selling your business. 

A critical piece of the puzzle that often gets overlooked is… business profitability. 

Without understanding business profitability, it’s hard if not impossible, to truly understand what your insurance agency is worth.

A strong measure of business profitability is: EBITDA. 

EBITDA stands for earnings before interest, taxes, depreciation, and amortization and is often the number used to value a business (the number that these multiples are applied to).

Consider this scenario…

Jane sold her agency at an 8x multiple 

Joe sold his agency at a 12x multiple 

If we only talked about multiples, it seems like Joe got a better deal. 

If we dig in we learn that… 

Jane’s business was running at a 50% EBITDA margin 

Joe’s business was running at a 25% EBITDA margin 

This difference in profit can yield millions more for Jane than Joe…

even though Jane sold at a lower multiple. 

Instead of fixating solely on the multiple, insurance agency owners should be asking questions like:

  • How does my profit margin compare to industry norms?

  • What steps can I take to increase my profit margin?

  • Given my 25% growth rate, what would be considered a healthy profit margin?


Legacy Advisors is the only M&A advisor comprised of previous agency owners dedicated solely to sell-side insurance deals. 


Schedule a call with us if you are curious about what a sale could look like for you. We can answer your questions, advise on market trends, and discuss ranges for what a buyer might pay for your business.

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