2025 Best Practices Study

agencies to redouble their efforts in new business and account retention to ensure positive organic growth is achieved. NUPP

Investments in new producers remain key to maintaining strong organic growth over time. Are you investing at an appropriate level? To address this question, Reagan Consulting developed a metric called NUPP – Net Unvalidated Producer Payroll. Expressed as a percentage of net revenue, NUPP is the difference between what an agency pays its unvalidated producers (producers-in-development)

NUPP

3.9%

3.6%

3.0%

2.3%

2.0%

1.9%

1.8%

1.7%

1.7%

1.7%

1.7%

1.6%

1.6%

N/A

<$1.25M $1.25-2.5M $2.5-5M $5-10M $10-25M $25-100M >$100M

2024 2025

and what the unvalidated producers would earn under the agency's regular commission schedule. An agency NUPP is perhaps the best indicator of whether it is investing at an appropriate level to ensure its long-term growth capacity.

Effective Investments in Growth: Calculating the NUPP

Step 1: Find the total compensation of all unvalidated producers Number of Unvalidated Producers

3

Actual Payroll of Unvalidated Producers $174,000 Step 2: What would the unvalidated producers earn under the agency’s normal producer commission schedule? Unvalidated producer's total book of business $125,000 Agency blended commission rate 32% Implied (“earned”) compensation $40,000 Step 3: Calculate the NUPP as a percentage of revenues Actual payroll of unvalidated producers $174,000 Implied (“earned”) compensation ($40,000) NUPP $134,000 Agency Net Revenues $7,500,000 NUPP - Net Unvalidated Producer Pay (as % of revenues) 1.8%

2025 Best Practices Profitability Overview Without question, profitability is the most important financial metric to master. Healthy profits are necessary to ensure suitable shareholder investment returns are achieved. Profits fund the growth investments

necessary to increase agency value and fund perpetuation redemptions. As such, healthy profits are a must. And yet, many agency owners are unsure how to measure their own profitability. Many rely on their financial statements, which are rarely an accurate indication of true profitability. Even worse, many agency owners have no idea how profitable they should be.

EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization.

Think of EBITDA as pre-tax cash flow.

2025 Study Highlights

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