Five Ways To Increase Agency Value
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 5 ways to IMPROVE Agency Value Presented by: Josh Morgan Consultant [email protected] 440.392.6579 Jared Roy Consultant [email protected] 440.392.6560
description
Today\'s insurance market requires agency owners to have a precise understanding of how to improve agency value. This webinar will concentrate on FIVE areas of focus that agency owners can use in 2012 to increase their agency\'s value.
Transcript of Five Ways To Increase Agency Value
2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
5 ways to IMPROVE Agency Value
Presented by:
Josh Morgan Consultant
[email protected] 440.392.6579
Jared Roy Consultant
[email protected] 440.392.6560
2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 1
Agenda
MarshBerry Overview
History of Agency Value
Understanding Agency Value
How to Improve Agency Value
Review
Q&A / Discussion
2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Marsh, Berry & Company
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Information Services
Management Consulting
Exchange Networks
M & A Advisory
Managing Peer-to-Peer Network Groups for 15 years
6 Networks with over 186 partners across the US, Canada and Puerto Rico
Network Clients represent over $2.3 billion in collective broker revenue, and $24.5 billion in total insurance premiums
MarshBerry is dedicated
to enabling insurance distributers to LEARN, IMPROVE and REALIZE
their fullest business potential.
Founded in 1981 4 Offices: OH, CA, TX, MI Privately-held Perpetuated Ownership 19 Shareholders
Clientele Includes: Insurance Agencies Brokers Wholesalers Credit Unions Banks Insurance Companies
2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
The Calculation: In the 1970’s $1,000,000 Rev. Acquired by Broker x 30% Pre-Tax Profit Margin $300,000 Profit x 50% Tax $150,000 After-Tax Earnings x 10.00 After-Tax Earnings Multiple $1,500,000 $1,500,000 Divided by $1,000,000 = 1.5 x’s
Note: Tangible Net Worth assumed to be $0.
History of Agency Value
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Components of Agency Value Book of Business Value (Income Statement)
Value of future earning capacity/intangible assets Pro forma adjustments (Owner Discretions) Risk assessment
Exponential effect on value $1 after tax $10
Tangible Net Worth (Balance Sheet) Total Stockholders Equity les Intangible Assets Value of hard assets Dollar for dollar ($1 = $1)
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Agency Valuation
Valuation Philosophy Revenue Multiple = Expression of Value Earnings Multiple = Calculation of Value
Valuation Methodology Book of Business Value + Tangible Net Worth Fair Market Value
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Eliminating Confusion EBITDA Multiple Examples
EBITDA = 20% Net Revenue EBITDA Multiple = 6.00 Book of Business Value = 1.20 x’s Net Revenue
EBITDA = 30% Net Revenue EBITDA Multiple = 7.00 Book of Business Value = 2.10 x’s Net Revenue EBITDA = 25% Net Revenue EBITDA Multiple = 6.12589891 Book of Business Value = 1.531474728 x’s Net Revenue
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
5 Ways to Improve Value
Let the Countdown Begin!
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Ways to Improve Value
•Do not value based on revenues •Realistic valuation and due diligence •Do not trade down - risk of diluting performance
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#5 Make Wise Acquisitions
2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
• Non-owned books of business are NOT included in value
• No Employment Agreements • Ex: Producer may own their book
Ways to Improve Value
•Covenant Not to Compete •Non-Solicitation •Non-Piracy
*Email for Sample
#4 Employment Agreements
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
• Pay for high quality employees • Higher cost • Greater Value • Greater Productivity • Higher Efficiency
• ‘Fanny Factor’
• Ex: $50K vs. $75K
Ways to Improve Value
#3 Employee Investment
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
• Implement a Master cell phone contract • Negotiate pool of minutes • Take advantage with multiple users • Penalties & Fees
• Check Review • One person (owner) review ALL outgoing checks • 1 week review of checks will be an eye opening event! • Duplicates • Christmas in July • 4th Dyson
Ways to Improve Value #2 Small Changes Yield BIG Results
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
• Network with successful peers
• Share and adopt key strategies
• Reinventing the wheel is expensive & time consuming
• The MarshBerry Solution is:
Ways to Improve Value #1 Learn from High Performers
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Agency Value and Overall Performance
0 1 2 3 4 5 6 7 8 9
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0.0 0.5 1.0 1.5 2.0 2.5 Revenue Multiple
Perf
orm
ance
Indi
cato
r Num
ber (
PIN
)
Founders Group (12/11)
Founders Group (12/97)
.5 x’s Value
Creation
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$1M = $500,000 in Value
2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Agency’s Year PIN Multiple Revenue Value*
1997 5.96 1.40 $3,873,000 $5,422,200
2011 7.35 1.90 $9,136,000 $17,358,400
Revenue Growth 136% 6.3%
Value Growth 220% 8.7%
*Includes all consideration
** Compound Average Growth Rate
CAGR**
Leverage
Total
Leverage Created 38%
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
The APPEX Network is a best practices
benchmarking and executive-level peer
exchange network for insurance agencies
strongly committed to improving agency
value.
100+ Value Driven Agencies Average Revenue of
$7-9 million
Ways to Improve Value
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
APPEX helps agencies IMPROVE by offering Partner Member Benefits categorized into three areas:
APPEX Network Partner Benefits
Benchmarking Networking & Online Exchange Industry Information & Training
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Upcoming APPEX Summit
IMPROVE Spring 2012 Wednesday, April 25th – Friday, April 27th
Sheraton Dallas Dallas, TX
IMPROVE Spring APPEX Summit 2 ½ Day Semiannual Conference – Spring 2012
• State of the Industry Presentation • General Session focused on Healthcare Reform • Strategic Issues Groups - 12 PAX Groups • Educational Breakout Sessions
• Employee Recognition • Future of Technology in the Industry • Compensation and Operations
For more information or to register: www.MarshBerry.com/IMPROVEPartnerNominees
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
Upcoming APPEX Summit
For more information or to register: www.MarshBerry.com/IMPROVEPartnerNominees
Partner Nominee Process • Attend the summit as our guest; registration fees are waived • Network with 100+ agency owners/decision makers • Attend the State of the Industry Address, General Sessions and
other Educational Breakout Sessions • Experience the 12 PAX groups first hand
• 10-12 non-competing agencies and MarshBerry facilitators • Exchange information, share strategies, and find solutions • Partners are held accountable for action items and challenged to
make positive improvements in their agency • Agency Presentations • Topical Discussions • Sharing of Best-Practices • NO RE-INVENTING THE WHEEL!
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
But Don’t Take Our Word For It
Kerry Morris Chief Operating Officer
Morris and Garritano San Luis Obispo, CA
“The type of agency that should join APPEX is one that wants to grow,
perpetuate and take their business to the next level.”
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2012 Marsh, Berry & Company, Inc. – No part of this presentation may be reproduced, published, stored or transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.
THANK YOU!
Josh Morgan Consultant
[email protected] 440.392.6579
Jared Roy Consultant
[email protected] 440.392.6560
IMPROVE Spring APPEX Summit Wednesday, April 25th – Friday, April 27th Sheraton Dallas, Dallas, TX
FOR MORE INFORMATION: www.PeerNetworks.MarshBerry.com
TO REGISTER:
www.MarshBerry.com/IMPROVEPartnerNominees
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