As an insurance broker owner considering a sale, the first question that naturally arises is, "What is my business actually worth?" Unfortunately, the answer is not that straightforward. Business value is driven by a combination of factors, and it is not as simple as assessing what a competitor may have sold for several years ago. Today's buyers are far more sophisticated and strategic in their approach. Many are backed by private equity, bringing heightened investor expectations and increased pressure to deliver strong, strategic returns.
Valuing a business on its previous year's revenues and profits is a thing of the past. Buyers are now looking beyond this and focusing on Client Quality, Growth and Synergy Potential and Operational Functionality. From a vendor's perspective, the sale process is often the most challenging part of the journey. For buyers the greater challenge typically lies in integrating the acquired broker into their existing infrastructure. If a business is considered high risk from an integration perspective, this can impact the valuation and ultimately reduce the price a buyer is willing to offer.
Let's take the example of two brokers both generating £1 million annual revenue and an adjusted EBITDA of £250,000. However, operationally these brokers are very different:
Broker A
Buyer-Ready- Diverse client base across different classes
- High client retention
- Second-tier management in place
- 10% organic growth each year
- Strong, documented processes and financials
- Open to synergy-creating opportunities
Broker B
Value at Risk- Top 5 clients account for 40% of revenue
- Owner manages all key client relationships
- No second-tier management in place
- Flat growth, no openness to change processes
- Owner wants to leave immediately after completion
- No documented processes, poor financial reporting
Yes, both brokers are generating £1 million in revenue and have an adjusted EBITDA of £250,000 but operationally they hold completely different risk to a buyer. It goes beyond what the broker is achieving financially right now, buyers need to ensure they secure a ROI (Return on Investment). In 1 Year, Broker A will have more potential to grow whereas the future of Broker B remains unpredictable.
This is where multiples are determined and can affect the value provided to brokers. Broker A may be offered a 7x EBITDA valuation and an offer of £1.75m. Whereas, Broker B a 5x EBITDA valuation and an offer of £1.25m.
The £500,000 difference is not driven by the current financial performance of either business, rather, it reflects the buyer's assessment of future earnings.
Valuations in 2026 are shaped by more than just historical performance. Buyers are investing in the future profitability of a brokerage and evaluating how sustainable those earnings will be after the transaction. Factors such as, client retention, diversity of clients and the owner dependency all influence a buyer's perception of risk and the multiple they are prepared to pay. Contradictory to Broker B, Broker A presents a lower risk opportunity. As a result, the buyer can focus on accelerating growth rather than investing significant time and resources into the functionality of business post-acquisition.
Buyers don't pay for the past, they pay for future potential. That's why pre planning and taking the necessary steps are important before you go to market to stand out amongst other vendors within the market.