Planning Retirement Is Never Too Early For Independent Agents

Since the pandemic, the valuation of insurance agencies has never been higher. There are quite a few that even go for 3x the revenue. In 2020, an insurance agency even went for 6x the revenue and 10-15x EBITDA. The reason for this was simple—low-interest rates.  

The Impact of Low-Interest Rates  

Low-interest rates make it more affordable for people to buy, while investors have a tougher time making an adequate return on investment (ROI). So, businesses like insurance agencies with a consistent cash flow have never been more valuable. This trend is sure to last a couple of years. 

It also creates high demand, but the supplies are lower than before. There’s only about a 4-year supply of investment-grade insurance agencies in the marketplace today. This also means that your agency has NEVER BEEN WORTH more than it is now. 

The pandemic also brought newer risks for agencies, which affects the value of a book of business. The economic disruption resulted in a loss of clients and premiums. This downward trend may also persist until 2024. So, bear this in mind and do everything you can to maintain and grow your income, as it directly leads to a growth in value.  

Local vs. Remote Book of Business  

Your location will also play a hand in your final valuation—depending on who you’re selling to. 

Customers are used to their agent’s process. They will continue to expect it if they’re used to meeting agents at a local office. It’d be a much more difficult buy if you didn’t already have an office space or building. 

A buyer may pay less for that book of business because of the extra trouble they’d have to service that book. So, depending on whether you serve customers locally or long-distance, it may appeal to different buyers differently.  

So, pay attention to how your clients are trained and who you’re selling to—you might be able to get a larger deal if the buyer is local.