researching the market value of an agency
5 min to read

Knowing the Market Value of Your Insurance Agency

The market value of a company is as much wrapped up in the current revenue as it is in past success and future projections. There are so many factors to take into account that the numbers are easy to doubt. For example, two firms may bring in the same amount of revenue, but one may be slowly building momentum while the other one has steadily lost income or accumulated debt. Leaders may value a company at much higher than its worth, while outside companies ballpark their valuations far lower than an agency would like. Agencies need to go the extra mile when it comes to determining their value, or they may lose more than they bargained for.

Know the Goals

Whether you need to get an ESOP report for the stakeholders in the firm, you’re attempting to get a loan for expansion, or there’s a corporate dissolution, the value of the firm allows people to make the best decisions during a transition. Problems generally arise when evaluators either leave out certain information or discount its value, or .they include irrelevant information that confuses the reader. Strategic value, fair value, and liquidation values all have different requirements to factor in. Investors or companies may only care about one part of the business rather than the full enterprise.

Additional Considerations

Once you know why you need it, which parts of the company need to be evaluated, and who will be reading the report, analysts will have a better idea of exactly what everyone on both sides of the equation will want to see. The market value may be as much determined by the purpose of an agency as it is by its assets. For example, your identity theft insurance may be on the rise while home insurance sales are on the decline. Most agencies need to know their market value because the businesses will eventually be sold on the market. In this case, hopeful buyers will want to understand what their future will look.

Getting Help

Determining exactly how to handle a valuation is fraught with complications. While you may understand that a buyer is looking for different information than a bank, it can be difficult to pin down exactly what the receiver of the report will want to see (and how they want to see it.) One of the best ways to check on value is to look at what other comparable agencies have been sold for in the past. After all, a number on a piece of paper is worthless unless there are people willing to pay for it. Agency Brokerage Consultants has all the figures stored in a proprietary database, and we can help you decide the other data necessary to arrive at a realistic valuation.

Doing the Legwork

Getting the information together isn’t easy, and the stress of finding and organizing multiple documents can make it easy to just rely on the pure value of commissions. This is a shortcut that we strongly suggest you skip though. It may take time, but it’s absolutely worth it to do the legwork. Even thorough analysts may have a difficult time agreeing on an exact number due to the sheer scope of a business. Simply using the bottom line can discount the potential of the agency, and cause it to be sold for far under what it’s worth. It also ignores risk factors that may cause the purchaser to far overpay. While each business is different, leaders generally need to get business reports together plus all financial information, including bank statements, commission information, and tax returns.

State of the Report

Good market valuations won’t just give a final number, but will give a full state of the company. By putting financial and staff information in context, readers will start to get a sense of just what the company has to offer its potential customers and buyers. Agency Brokerage Consultants has perfected our method of valuing smaller to medium-sized insurance companies. It’s our job to ensure total compliance so each valuation gives the full picture to the interested parties. We analyze the situation as much as we analyze the numbers, so you can be sure you’re getting the right answers.

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