How to Value an Insurance Agency (2026)

Insurance agencies are valued on a multiple of annual commissions (revenue method) for small books, or a multiple of adjusted EBITDA for larger agencies. The method that applies depends on size: agencies under $500K in annual commissions use revenue multiples; agencies clearing $1M or more in adjusted EBITDA use EBITDA multiples.

The difference in outcome is significant. A $2M revenue agency valued at 2x revenue is worth $4M. The same agency with $600K in adjusted EBITDA valued at 8x EBITDA is worth $4.8M. Choosing the right framing directly affects what you accept or reject from buyers.

Valuation by Revenue Size

Use the table below as a starting point. Multiples within each tier vary by retention rate, line mix, carrier concentration, and owner dependency. The five factors section below covers how each one moves the multiple.

How to Calculate Adjusted EBITDA for Your Agency

Adjusted EBITDA is not what your P&L says. It is what your agency would earn if run by a professional manager at market-rate compensation. For most owner-operated agencies, several adjustments are required before applying a multiple.

• Add back excess owner compensation. If you pay yourself $350K and a market-rate manager costs $120K, add back $230K to EBITDA.
• Add back one-time expenses. Legal costs from a one-time dispute, a non-recurring facility renovation, or any other non-repeating expense should be added back.
• Add back personal expenses run through the business. Auto, travel, phone, or any personal cost that ran through the books should be normalized out.
• Remove revenue that will not survive the sale. If 20% of revenue comes from clients who will leave with the seller personally, conservative buyers reduce their EBITDA base by that amount before applying a multiple.
• Normalize contingency income carefully. Some PE buyers exclude contingency bonuses entirely because contingency payments fluctuate with carrier profitability and are not guaranteed. If contingency is more than 10% of your revenue, know how buyers in your tier treat it before modeling your value.

The Five Factors That Move Your Multiple

1. Retention Rate (Impact: 2 or More Turns)

Retention rate is the single largest multiple driver. A 92% retention rate earns premium pricing and higher cash at close. Sub-80% triggers earnouts and compresses the multiple by two or more turns. Document your annual retention for the past three years before any buyer conversation. If you do not know the number, buyers will calculate it themselves in diligence and it will not favor you.

2. Line Mix (Impact: 1 to 2 Turns)

Commercial lines and specialty books (employee benefits, professional liability, surplus lines) command higher multiples than personal auto and homeowners. Moving from 80/20 personal-to-commercial to 70/30 in the two years before a sale is one of the highest-ROI preparation moves for a mid-market agency.

3. Carrier Concentration (Impact: 0.5 to 1 Turn)

A single carrier over 40% of revenue introduces appointment risk buyers will price in. If one carrier declines to re-appoint the buyer after closing, a concentrated book has no alternative placement. Start diversifying at least 12 months before going to market.

4. Organic Growth Rate (Impact: 0.5 to 1 Turn)

Organic revenue growth above 5% annually trades above the midpoint of the tier multiple range. Three consecutive years of 6% or better organic growth (not counting hard-market premium increases) is a strong valuation signal. A flat or declining book discounts even with otherwise solid retention.

5. Owner Dependency (Impact: 1 to 3 Turns)

If you are the primary producer for more than 40% of the book and the primary relationship holder for those clients, buyers discount for book-walk risk. This is the most common reason agencies sell below the midpoint of their tier multiple. The fix is a 12 to 24 month transition of client relationships to staff producers and account managers before going to market.

Revenue Multiple vs. EBITDA Multiple: A Practical Example

An agency with $2M in annual commissions and $500K in adjusted EBITDA (25% margin). Under a revenue multiple approach at 1.8x, the agency is worth $3.6M. Under an EBITDA multiple approach at 8x, the agency is worth $4M. At $1M in adjusted EBITDA (50% margin), EBITDA multiples diverge even further from revenue multiples in the seller’s favor.

This is why buyers of mid-market agencies prefer EBITDA framing and why sellers should understand both calculations before entering any negotiation. For a breakdown of what each buyer tier pays and how deal structures compare, see the guide to insurance agency sale multiples by tier.

What Non-Compete and Earnout Provisions Do to Your Stated Value

Buyers often quote a total deal value combining cash at close, an earnout tied to retention targets, and equity rollover into the buyer’s entity. The headline number looks like 9x EBITDA. The net value to the seller may be 6x to 7x once earnout conditions and rollover risk are accounted for.

Non-compete provisions in insurance agency sales are typically 5 years with a geographic radius matching the agency’s service area. Non-compete payments are taxed as ordinary income, not capital gains. If the buyer allocates significant value to the non-compete, the seller’s after-tax proceeds drop materially compared to the same value allocated to goodwill.

For a full breakdown of tax treatment in asset versus stock sales, see the guide to insurance agency asset sale vs. stock sale tax implications.

Related Resources

• Insurance Agency Sale Multiples by Tier
• PE Aggregators vs. Strategic Buyers: Which Is Right for You?
• How Long Does It Take to Sell an Insurance Agency?
• Asset Sale vs. Stock Sale Tax Implications
• How to Sell an Insurance Agency in Pennsylvania

Frequently Asked Questions

How do I calculate the value of my insurance agency?

Start with your annual commission and fee revenue and your adjusted EBITDA. For agencies under $500K in revenue, value is typically 1.0x to 1.8x revenue. For agencies with $1M or more in adjusted EBITDA, apply a 7x to 10x multiple to adjusted EBITDA. Adjusted EBITDA adds back excess owner compensation, one-time expenses, and personal costs run through the business.

What is adjusted EBITDA for an insurance agency?

Adjusted EBITDA starts with your stated EBITDA and adds back excess owner salary above market rate, one-time or non-recurring expenses, personal expenses run through the business, and any items that would not recur under new ownership. The result is the normalized cash flow a buyer is actually underwriting.

Does contingency income count toward my agency value?

It depends on the buyer. Some PE aggregators exclude contingency income from their EBITDA base because contingency bonuses fluctuate with carrier loss ratios and are not guaranteed. Others include a normalized contingency figure. If contingency exceeds 10% of revenue, understand how your likely buyer pool treats it before modeling your valuation.

How does retention rate affect agency value?

Retention rate is the largest single swing factor. A 90% or better retention earns premium multiples and high cash at close. Sub-80% retention compresses the multiple by two or more turns and adds significant earnout conditions. A drop from 90% to 78% retention can reduce a 9x EBITDA offer to a 7x offer or lower, representing a material dollar impact at any size.

Are employee benefits books valued higher than P&C?

Generally yes. Benefits books have stickier client relationships, recurring annual premiums, and cross-sell optionality into voluntary and ancillary products. Specialty books including employee benefits, professional liability, and surplus lines tend to trade at the upper end of their size tier’s multiple range.