The value of a balance sheet is a key component in the calculation of agency value. We encourage our IA Valuations clients to bolster their balance sheets, not only to increase their agency value, but also for a myriad of reasons that will have both short-term and long-term impacts on the agency.

Agency Reinvestment

Agencies with strong balance sheets have the ability to deploy this capital to make investments to drive revenue growth and profitability. By investing in people and training, the agency will position itself to drive revenue. It is expensive and time-consuming to hire and validate a new producer, but having cash reserves will help ease the burden on the agency. Additionally, with the dearth of high-quality talent available in the current market, having cash reserves will provide you with a let-up when opportunities to hire arise.

In addition, by investing in state-of-the-art technology, the agency will gain efficiencies and drive up profitability. This technology can be used as a recruiting tool to hire tech-savvy next generation talent.

Perpetuation Options

Having a strong balance sheet gives agency owners options when they look to perpetuate. Without a strong balance sheet, it is difficult for an agency to perpetuate. By tapping into retained earnings, an agency owner has several options when looking to transfer ownership. Cash can be bonused to key employees, who in turn use the bonuses to buy agency stock. Other options include providing a down payment for seller financed notes, collateralizing outstanding notes, and providing funds to repurchase outstanding shares.

Rainy Day Fund

Having an agency savings account will enable you to weather any economic downturns, or the impacts of legislation on your agency. If you are stripping all of the cash out of the agency, changes in the external market factors that are out of your control could put added stress on your agency. Having a nest egg to tap into will give the agency a lifeline during unstable times.

Having a strong balance sheet will allow you to increase your value in the short-term, by providing a way to invest in the people who will drive growth, and the systems that will drive efficiencies. It will also provide a safety net and increase stability in uncertain times. Lasty, it will increase the value of your agency when you eventually perpetuate. We encourage all agency owners to examine their balance sheets, and to use them as a way to reinvest in their greatest asset. Please reach out to if you would like to discuss your agency’s balance sheet and future options.

About IA Valuations and Agency Link – Founded in 2017, the IA Valuations team has performed over 220 valuations to independent insurance agencies across the U.S. Our advisors have 25+ years of experience guiding agency owners on maximizing their agency value, planning, and legal needs for ownership transition. In addition, IA Valuations has provided perpetuation planning, financial modeling and business planning for independent insurance agencies. Finally, IA Valuations has advised dozens of agency owners on selling their agencies through our Agency Link process. Agency Link is a platform that connects buyers and sellers together to further the growth and strength of the IA system. To learn more about IA Valuations, please visit or       

The information provided in these documents is general in nature and shall not be construed as personal legal, tax or financial advice for your situation. Please to discuss your personal situation.      

Copyright ©2023 by IA Valuations and Ohio Insurance Agents Association (OIA). All rights reserved. No portion of this document may be reproduced in any manner without the prior written consent of IA Valuations or OIA. In addition, this document may not be posted as a link on any public or private website without the prior written consent of IA Valuations or OIA.

By: Craig Niess, CVA, MBA

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