Taking Your Agency & Our Distribution System to the Next Level 2013 Best Practices Study Insights.
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Transcript of Taking Your Agency & Our Distribution System to the Next Level 2013 Best Practices Study Insights.
Taking Your Agency & Our Distribution System to the Next Level
2013 Best Practices Study Insights
ACT Special Event
Historical Organic Growth (in net Revenue)
2007 2008 2009 2010 2011 2012 2013-10%
0%
10%
20%
30%
40%
15.7%
0.6%
-1.6%
0.2% 1.1%3.0%
9.5%
14.1%
4.1%0.7%
-1.3%
3.6%7.6%
11.7%
31.3%
12.1%10.0%
6.7%
12.5% 12.2%
20.0%
Average +25% Profit +25% Growth
Source 2013 Best Practices Study for agencies with revenues between $2.5M - $5M
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ACT Special Event
Key Performance Benchmarks
Net Revenue Growth Rates
<1.25M 1.25-2.5 2.5-5M 5-10M 10-25M >25M
NR Growth (Organic)
6.9% 9.1% 9.5% 8.9% 10.4% 9.2%
NR Growth (Total)
7.0% 9.5% 9.9% 10.3% 11.3% 11.2%
% of Agencies Making
Acquisitions
6.1% 17.6 6.7% 20.9% 27.3% 53.8
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ACT Special Event
Key Performance Benchmarks
% of Agencies with Specialty / Niche
<1.25M 1.25-2.5 2.5-5M 5-10M 10-25M >25M
2010 25.0% 44.2% 51.4% 55.6% 64.1% 68.4%
2013 39.4% 55.9% 64.4% 72.1% 72.7% 80.0%
% of NR from Industry Specialty
10.7% 18.2% 23.9% 20.8% 26.0% 31.4%
% of NR from Product Specialty
5.9% 13.1% 9.1% 14.8% 14.3% 18.4%
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ACT Special Event
Drive Towards Specialization
General Business Specialty Business
1.15 1.15
0.36
0.29 Value Increase Due to Greater Growth
Value Increase Due to Greater Profitability
Base Value of General Business
5
Multiple of Revenue: 1.15 x
Multiple of Revenue: 1.80 x
General Business
Specialty Business
Sustained Revenue Growth 5.0% 10.0%
Sustained EBITDA Margin 20.0% 25.0%
Valuation (EBITDA Multiple) 5.80 x 7.20 x
Valuation (Revenue Multiple) 1.15 x 1.80 x
ACT Special Event
Key Performance Benchmarks
% of Agencies Hiring New Producers
<1.25M 1.25-2.5 2.5-5M 5-10M 10-25M >25M
2010 17.5% 32.6% 43.2% 66.7% 87.2% 100%
2013 27.3% 32.4% 57.8% 58.1% 84.8% 92.3%
# of Producers Hired
1.2 1.1 1.5 1.7 2.6% 5.4
% Hired in Last 5 Years Considered
Successful
76% 65% 58% 55% 60% 59%
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ACT Special Event
NUPP: Net Unvalidated Producer PayrollStep 1: Find the total comp of all unvalidated producers
Number of unvalidated producers 3
Actual payroll of unvalidated producers $150,000
Step 2: What would the unvalidated producers earn under the agency’s normal producer commission schedule?
Unvalidated producers’ total book of business $175,000
Agency blended commission rate 35%
Implied (“earned”) compensation $61,250
Step 3: Calculate the NUPP as a percentage of revenues
Actual payroll of unvalidated producers $150,000
Implied (“earned”) compensation $61,250
NUPP $88,750
Agency Net Revenues $5,000,000
NUPP as a percentage of revenues 1.8%
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ACT Special Event
Industry NUPP8
NUPP Over Time
2008 2009 2010 2011 2012 Guideline-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
2.3%2.0%
2.3%1.8% 1.7%
Healthy
Source: Reagan Value Index
BorderlineLow
PotentiallyUnhealthy
ACT Special Event
2007 2008 2009 2010 2011 2012 2013
-5%
0%
5%
10%
15%
20%
25%
30%
8.9%5.8%
2.2%
6.2% 6.0%9.0%
10.4%
23.2%21.1%
18.3% 18.9% 18.6%20.3%
22.4%
Operating Margin EBITDA Margin
Historical EBITDA Margin & Operating Margin
Source 2013 Best Practices Study for agencies with revenues between $2.5M - $5M
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ACT Special Event
Shareholder Return on Investment10
Rule of 20 Score
½ EBITDA Margin=
Organic Revenue Growth
+
What is the Rule of 20?
• Provides a tool to benchmark agency performance
• Helps frame the trade-off between growth and profitability
Average+25% Profit
+25% Growth
Rule of 20 23.7 30.5 31.5
Benchmarks shown are from the 2013 Best Practices Study for Agencies with Revenue between $2,500,000 and $5,000,000
Public BrokersOrganic Growth
EBITDA Margin
Rule of 20 Result
Willis Group 3.1% 25.6% 15.9
Aon 4.0% 20.6% 14.3
Brown & Brown 2.6% 32.9% 19.1
Arthur J. Gallagher 4.7% 19.1% 14.3
Marsh & McLennan 5.0% 18.7% 14.4
Your Results * * *
Rule of 20 vs. Public BrokersDecember 31, 2012
ACT Special Event
Key Performance Benchmarks
% of Agencies Belonging to Franchise, Cluster, Aggregator Group, Alliance or Network
<1.25M 1.25-2.5 2.5-5M 5-10M 10-25M >25M
2010 17.5% 32.6% 13.5% 17.8% 33.3% 42.1%
2013 39.4% 47.1% 40.0% 27.9% 27.3% 59.8%
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ACT Special Event
Profit Sharing
Market Access
Back Office Support
Other
36.8%
4.4%
19.0%
39.7%
Other(in order of frequency) Collaboration with
other agents
Sharing ideas & info
Networking
Association w/quality agents
Maximize Revenue
Perpetuation Planning
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Why they joined a Franchise, Alliance, Network
ACT Special Event
Key Challenges (in order of frequency mentioned)
Recruiting, Developing & Retaining New Talent– Production – Service – Leadership
Maintaining Sustained Growth Controlling Expenses/Maintaining Good Profitability Leveraging Technology Perpetuating the Agency
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ACT Special Event
Reagan Consulting1 Piedmont Center, Suite 500
Atlanta, GA 30305(404) 869-2539
www.reaganconsulting.com
Shirley Lukens
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