How to buy an insurance agency / brokerage?

Question

I've been offered a commercial P & C book of business. The other broker is retiring & we are both appointed with the same companies. How do I value his book of business? How do I pay for it? What should I look out for? Any links to articles would help. Thanks.

Answer 1

It's valued based on how much money it brings in, and what contingencies are in place, how many contract he has (if they're transferrable!), what the retention rate is, etc.

Normally it would be based on 2-5 years income, and many times if he'll provide the financing, you can pay him say half the income, over 6 years (if it's 3X).

Answer 2

>> What should I look out for?

Regardless of the current level of premium and commission, I suggest you think about whether some portion of the book has some special relationship and allegiance to the broker who is retiring, and will be moving the business when he leaves.

The commercial market is pretty soft now, and everyone is shopping their business.