Small Doesn't Mean Cheap: What Actually Moves Your Agency's Valuation

Lucas Parris, senior vice president at Mercer Capital and head of its insurance industry team, opened the third session of FindBob's Summer Series with a simple example. Picture an $11 million sale. The seller tells his friends he sold for 11 times earnings, on $1 million of performance EBITDA. The buyer tells his board they paid 9.2 times, on $1.2 million of EBITDA. Same price. Same deal. Two different multiples, because the two sides scrubbed the earnings number differently.

That gap is the whole game, according to Parris, and it is worth more attention than most business owners give it.

Value is performance EBITDA times a multiple

Parris framed the math simply: value equals performance EBITDA times a multiple. "There is no single valuation for any agency, or for any business for that matter," he told the room. "Valuation is a range concept." An external sale to private equity, an internal transfer for estate or gift purposes, and a sale to a partner or family member can each produce a different number for the same practice, because the assumptions behind each are different.

Here is the part business owners tend to miss: the multiple is mostly out of your hands. It is set by market conditions, buyer appetite, and where the industry cycle happens to be. performance EBITDA is the opposite. It is built from your own revenue, margin, and documentation, and it is where you actually have leverage.

The math that beats negotiating the multiple

Parris walked through a second example that makes the point concrete. Start with a $9 million valuation: $1 million in EBITDA times a 9 multiple. Negotiate the multiple up half a turn, to 9.5, and the deal is worth $9.5 million. That is $500,000 in added value from a real negotiating win.

Now compare that to proving the EBITDA is actually $1.1 million once the numbers are properly documented, a 10% increase. At the same 9 multiple, that is $9.9 million, or $900,000 in added value. Cleaning up the EBITDA number created roughly 80% more value than winning half a turn on the multiple.

The adjustments that get you there are specific: a policy that closed right after year end and should be layered into run-rate revenue, contingent and bonus commissions averaged over several years instead of counted at their best-year level, one-time legal or transaction costs backed out, owner compensation normalized to market in either direction.

Are you running your business as if it were for sale?

Parris returned to one question throughout the session: "Are you running your business as if it was for sale?" Not because every business owner should be selling, but because the business owners who are ready when a sale happens, whether planned or forced by a death, a market shift, or an unsolicited offer, are the ones who already did the cleanup.

That means clean financial statements rather than a P&L full of owner perks. It means formalizing handshake agreements with producers or brokers before a buyer's diligence team finds an undocumented arrangement and flags it. It means separating a building or office you own personally from the practice's legal structure if the rent is not already at market rate. None of this is exciting work. All of it shows up directly in what a buyer is willing to pay and how fast a deal can close.

If an offer lands on your desk

Parris also had specific advice for business owners who get an unsolicited offer, which he said happens constantly given how many buyers are active right now. Look past the headline number to the full structure: how much is cash at close versus a seller note, rollover equity, or an earnout, and what are the actual terms behind each. Avoid granting exclusivity too early, since you have the most negotiating leverage at the very start of a conversation. And take the time to understand why a buyer wants you specifically, since that often reveals how much room there is to negotiate.