2003 Best Practices Study

The average multiple paid was 1.32x the acquired revenues. This was up slightly from 1.29x in the previous year.

2003 Best Practices Study – Acquisition Results Revenue Category % of Agencies Acquiring Avg. Commissions Acquired

% of Net Revenues

Avg. Multiple of Revenues Paid

Less Than $500K $500K-$1.25 M $1.25M - $2.5M

5.9%

$35,076

9.8%

1.0x

0

0

0

7.1% 13.3% 25.0% 37.0%

$273,129 $219,978 $859,279 $3,610,218

17.8% 4.8% 8.8% 10.1%

1.95x 1.18x 1.1x 1.4x

$2.5M - $5M $5M - $10M

Greater Than $10M

Although the immediate effect of the hard market was evident on this year’s results, the outcome is yet to be seen. It will be interesting to see how the Best Practices agencies perform as the market turns and margins shrink. Will they be able to maintain steady revenue growth and good profitability? We think so. These agencies have shown that they consistently are able to achieve good results by wisely controlling expenses, investing for future growth, and expecting the best from their employees and carrier partners. Need More Best Practices Information? The 2003 Best Practices Study is available in two formats – hard copy and electronically. The hard copy can be purchased from the IIABA Education Department (800-221-7917). The electronic version can be accessed via the websites of IIABA (www.iiaba.com) and Reagan Consulting (www.reaganconsulting.com). From these sites, users can enter the Best Practices Gateway home page to view an HTML version of the study, download a Best Practices comparison spreadsheet to compare their year-end results with the study’s results, and access the complete family of Best Practices resources. As in previous years, the update provides an analysis of agencies by revenue size, by region and by population density of the city in which they primarily operate. Also included is an analysis of agencies that indicated that Personal Lines is an important source of revenue. Other Best Practices Studies and Tools In addition to providing benchmarks and documenting the business practices of leading agencies, the IIABA and Reagan Consulting periodically address specific business practices or focus on issues of critical importance to independent agencies. Such studies include The Best Practices of Leading Sales Organizations and The Best Practices for Perpetuation and Management Succession . Some of the tools designed to help agencies measure and improve their