Please check out the latest edition of the CounterPoint Magazine.

1. n MONEYBALL VS. EYEBALL:
The Chase for Recruiting High
Performing New Producers
n 2015 Insurance Agency
TRANSACTION MULTIPLES
n Employee Marginal
PROFITABILITY
M A R C H|2 0 1 6
www.MarshBerry.com
helping clients learn, improve and realize their value
The
Hiring
MindsetAgencies can achieve organic
growth and perpetuation when
they adopt an “always hiring”
mentality and focus on recruiting
people with the “selling gene.”

2. Contact us today if you’re serious about tomorrow.
Data. Experience. Relationships.
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Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate
of Marsh, Berry Company, Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122 (440.354.3230).
MARSHBERRY
#1 MA
ADVISOR*
BY SNL
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*Merger Acquisition Announced Transactions in Insurance Brokerage (1999-2015); Ranked by Total Number of Deals

3. n PG. 4
The Hiring Mindset
n PG. 6
Metric of the Month •
Employee Marginal
Profitability
n PG. 8
Moneyball vs. Eyeball:
The Chase for
Recruiting High
Performing New
Producers
n PG. 11
2015 Insurance
Agency Transaction
Multiples
n PG. 12
On the Horizon
TABLE OF
CONTENTS
CONTRIBUTING
AUTHORS
MEGAN BOSMA,
Senior Vice President
CANDICE ENSINGER,
Director, Research
GEORGE HARB,
Data Analyst
KYLE HOEFT,
Consultant
ALBERT LLOYD,
Executive Vice President
JOSH MORGAN,
Unit Manager – Recruiting
DAN SKOWRONSKI,
Senior Vice President
Let’s
talk.
Engage with MarshBerry
28601 Chagrin Blvd., Ste. 400, Woodmere, OH 44122
www.marshberry.com
@marshberryinc
facebook.com/MarshBerry
linkedin.com/company/marshberry
March Spotlight
MarshBerry is
excited to once
again host the
MarshBerry 360
Seminar Series.
These educational events provide a comprehensive packet
of strategies that we feel insurance agencies and brokers
should consider as they strive to maximize value.
The MarshBerry 360 Seminar Series is designed to help attendees
understand areas of focus as they work to maximize growth,
profitability and value. In 2015, more than 500 attended our four
regional events, of which 76% were C-suite members of their
organizations and 85% were new to the event. We think that’s
pretty impressive.
For 2016, we’ve taken your feedback and have refreshed the
agenda. This year, half of our time will be spent on the subject of
creating transformational change within your organization. The
conference will also focus on how to create and maintain a best in
class culture, best practices of talent acquisition and development,
how to drive predictable and profitable organic growth, an update
on agency value and the MA market and the impact technology
can have on growing your business. The day will conclude with an
interactive QA roundtable with attendees receiving key takeaways.
To learn more, and to register, log on to:
www.MarshBerry.com/360
marshberry

4. 4 March 2016 | CounterPoint
The
Hiring
Mindsetby Albert A. Lloyd,
Executive Vice President
440.392.6562 | Albert.Lloyd@MarshBerry.com
Agencies can achieve
organic growth and
perpetuation when
they adopt an “always
hiring” mentality and
focus on recruiting
people with the
“selling gene.”
People are the backbone of any business—they produce sales, retain clients and deliver
services. They’re the source of growth, profit and perpetuation. Good people are a
company’s greatest asset; and onboarding the right people is critical to an agency’s health
today and ability to perpetuate in the future.

5. 5CounterPoint | March 2016
But finding talent is
tough. Without a plan
to recruit, reward and
retain employees,
organizations will
struggle to attract and
keep professionals.
We know that hiring is more of a priority than ever before
with 75% of agencies planning to increase production staff
by an average of 8% in 2016—that’s nearly double of prior
years, based on the MarshBerry 2015 Organic Growth
Trends Report.
Agencies that adopt an “always hiring” mentality and commit
to basic recruiting disciplines, stand the best chance for
industry leading organic growth. This is very timely as many
firms are looking for organic growth now more than ever.
So, what’s the best strategy for hiring people
who will fuel growth? Who are the producers
of tomorrow, and what factors must agencies
consider to tap top talent?
Here, MarshBerry answers these questions, identifies
important industry recruiting trends, and provides some
go-to tactics for firms to take to the hiring market.
Growing a Sales Culture
High-growth agencies that attract and retain top
producers are focused on creating new business and
recruiting people who have the discipline to develop
and grow a book of business.
These firms prioritize new business rather than running “lifestyle
agencies” who depend on renewals. To capture new business,
these progressive agencies need outstanding producers.
However, we know that finding and keeping true producers is
a challenge. Through our proprietary benchmarking system,
Perspectives for High Performance (PHP), MarshBerry tracked
552 producers who were hired in 2014. After ten years, 20%
(111) were still with the agency, and just over 3% of them (18)
were owners. Eighty percent of the producers had moved on
and were no longer with the firm that hired them.
That statistic speaks loudly about the rate at which agencies
must hire to retain a solid staff of producers. Basically, an
agency needs to recruit five new producers for every
seasoned producer who plans on retiring in the next decade.
Meanwhile, according to MarshBerry’s PHP data, with 45%
of an average agency’s producers in the 50-plus age group,
who is going to replace these leaders when they are ready to
retire? Not to mention, this senior group generates 35% of
new business while maintaining 50% of an agency’s book of
business, according to MarshBerry’s data.
The point is, agencies need to hire producers in their twenties,
thirties and forties who will eventually fill the roles of those
producers looking toward retirement. Otherwise, owners will
wake up ten years from now, look around and wonder, “Who’s
next in line?” Producer age stratification across the decades is
critical, and talent acquisition is how this is accomplished.
Agencies
always need
to be actively
looking for
young talent.
But what kind of talent
should firms seek? Who are
agencies hiring today?
MarshBerry learned, in our 2015
Market Financial survey, that
just over 20% will hire value-added
employee benefit personnel inSource: 2016 MarshBerry Market Financial Outlook Report
Figure 1
PERCENT OF AGENCIES INCREASING THEIR
HIRING PLANS BY FUNCTION 2015-2016

6. 6 March 2016 | CounterPoint
Source: 2015 MarshBerry Market Financial Survey
METRIC OF THE MONTH
Employee Marginal Profitability = Revenue
per Employee – Total Payroll per Employee
Employee marginal profitability improves when revenue
per employee rises at a much faster pace than payroll
per employee.
Employee marginal profitability has continued to show a steady
upward trend from 2009 through 2015*. During the seven year time
period revenue per employee has exceeded the average payroll per
employee (in dollar terms) creating a positive uptick in employee
marginal profitability throughout the respective years. However,
payroll per employee has outpaced the growth rate of revenue per
employee since 2013. During this time period, the average change
Employee Marginal
Profitability
Employee marginal profitability is
a meaningful gauge of employee
productivity. It is the difference
between revenue per employee and
total payroll per employee. It measures
the contribution per employee to the
overhead and profit of the agency.
2016, with the greatest hiring focus in loss control consulting
and Human Resources support. We see more outsourcing of
positions like legal services, regulatory compliance and payroll/
benefits administration. Agencies outsource services to firms
that specialize in those administrative activities so they can focus
on what they do best: produce and retain insurance business.
But that goes back to the producer issue. Who
will bring in new business?
Some agencies are hiring account executives to service the
books of retiring producers rather than assigning books to a
new producer. That speaks to the challenge of finding good
producers as well as cost savings. But, it’s not so easy to find
good account executives either. Also, hiring account executives
does less to promote a sales culture that will drive organic
growth relative to new producer hiring.
The agencies who are thriving in today’s market are always
looking for the next producer. They are committed to
both technical and sales training, and facilitating valuable
mentorship programs. They’re investing in training to elevate
producers’ skills - hiring is not cheap, and the revolving
door continues to rotate. Remember, college graduates
who take their first job don’t always plan on staying in one
place until retirement.
Targeting Producers
So how does an agency find good people, and how are
job seekers looking for quality employers?
The answer: Online. According to a 2015 Pew Research
study, 54% of job seekers have used the Internet to find
a job, and 45% have applied for a job online. People
are turning to the web to find quality employment. Pew
Research shows that among Americans searching for a
job in the last two years, 79% used online resources and
information. About one-third (34%) of job seekers said the
Internet was the most important resource.
Young talent is turning to social media for job leads, with
almost 30% using specific social networking tools like
LinkedIn and Facebook, according to a MarshBerry study.
They’re also learning about jobs from friends and family
(25%) and through mobile apps. In fact, we’ll see more use of
mobile apps in job searches in the future — and this makes
sense. Young people can search on their phones during a
lunch break or while on the run. This is explained by the fact
that individuals looking for a new job are not likely to sit at
an employer’s desk and use a company computer to search.
This ease of access provided by mobile apps will lead to
additional job movement by individuals which translates to
additional pressure on employers to retain talent.
Some agencies target hires from college, or run internship
programs so they can essentially “test” future employees to see
if they fit the culture and possess the “selling gene.” We also
Revenue
Loss Control
Consultant
Wellness
Coordinator
Client-Facing
/ Tech HR
Support
Less than $5M 39% 6% 39%
$5M to $10M 50% 17% 33%
$10M to $20M 25% 6% 19%
Greater
than $20M
54% 8% 8%
Source: 2016 MarshBerry Market Financial Outlook Report
Figure 2
% OF AGENCIES PLAN TO HIRE SPECIFIC
EB VALUE-ADDED POSITIONS

7. 7CounterPoint | March 2016
in payroll per employee was
4.8% compared to an average
change of 4.0% for revenue per
employee, resulting in a more flat
employee marginal profitability.
If this scenario continues and the
spread widens, it would cause
employee marginal profitability
to taper. n
EMPLOYEE MARGINAL PROFITABILITY
*Trailing twelve months through
September 30, 2015.
Source: MarshBerry’s Perspectives for
High Performance
see firms going after prospective producers who are currently
working in companies with great sales training programs.
But to find talented producers and to fill the
recruiting pipeline, we need to look beyond
the insurance industry for people who simply
have that selling gene.
You can teach a skilled salesperson the insurance industry—
if they have the gene, they can sell just about anything. An
agency then can provide technical training to teach the technical
aspects of insurance industry; then sales training, coaching and
mentorship to continue sharpening producers’ skills.
Mentorship programs are critical for showing producers
how to find success in the industry. Once hired, successful
agencies will work with producers for 12 months or longer
to improve their chances of success. Remember, turn-over
is expensive; retention through training can help protect
your recruiting investment. They’ll report their calls to a sales
manager, and get compensated through an activity-based
plan. The point that first year is to make sure a producer can
set appointments and close deals.
Only 30% of agencies have a mentor program in place, and
those that do tend to have a stronger sales culture (Figure
3). They assign different mentors to teach new producers
various roles. Also, agencies compensate those mentors
for their time. There are closing mentors and sales tracking
mentors. There are marketing mentors and education
mentors. Some mentors play dual roles — and that’s fine.
Mentorship helps usher an “unvalidated” producer that has
less than three years of experience, into a “validated” producer
that has been with the agency for more than three years and
can cover his or her compensation with production.
Meanwhile, agencies must keep in mind what type of
compensation plans attract young producers today.
According to a MarshBerry
study, only about 10%
of those 35 years old
and younger believe
their ideal pay structure
is commission-based.
Producers in the 36- to
46-year age bracket
(Gen-X) are more likely to
prefer commission based
pay (35%). These numbers
show that the older group
is likely more well suited to
a producer position that
demands some risk-taking
and personal motivation
to achieve goals.
Continued on Page 9
Mentorship
programs
are critical
for showing
producers
how to find
success in
the industry.
Source: 2015 MarshBerry Organic Growth Trends Report
Figure 3
Do you assign a mentor for new producers?

8. Moneyball, The Art of Winning an Unfair Game, written by Michael Lewis, tells the
story of Oakland Athletics General Manager, Billy Beane.
The book suggests the biggest problem he faced was a lack of budget compared to his competition. He was forced to evaluate
players in unconventional ways to find valuable additions for his team. According to the book, Beane relied on Sabermetric
analysis — the application of statistical analysis to baseball records in order to evaluate and compare the performance of
individual players. This number crunching led to playoff appearances while spending half of what some other teams spend.
Many up-and-coming agencies are encountering their “Moneyball” moment. With limited recruiting experience and
resources, how will they form a process to screen new producer candidates and achieve above normal success? Many
use the “eyeball” method where if the producer candidate looks and acts the part—they must be able to do the part. The
“eyeball” method, coupled with less than ideal post-hire mentoring, has resulted in success rates that hover near 22% for
new producer hires retained after ten years.1
Agencies must seek to establish their own version of Sabermetrics. In other words, applying a risk management approach to
hiring producers. For example, if such an approach were taken, it would forbid agencies from hiring new producers with no
sales experience. After all, would you bet on a horse that has never entered a race simply because they look like a winner?
As a risk management professional, the answer is likely “No.”
Based on our experience, the first step to creating such a program would be to gather a set of initial screening questions.
The goal is to determine if the candidate has done similar activities that the job of a producer requires. To move beyond the
first step in your interview process, they should be able answer affirmatively to all (or most) of the questions below.
1 Has the candidate sold business-to-business products or services
for at least three years?
2 Has the candidate followed a sales process similar to your firm’s?
3 Have they called on companies which have the same size profile
as the companies your firm targets?
4 Have they called on Chief Executive Officers, business owners,
and other executives?
5 Did their previous sales positions involve long sales cycles?
6 Are they accustomed to making 100+ cold calls or attempts2
per
week using numerous methods?
7 Have they endured a large volume of rejection?
If you can answer affirmatively to each of these questions,
then you are likely considering a viable candidate. n
1
2015 MarshBerry Organic Growth Survey
2
MarshBerry defines an attempt as part of our “Seven Levels Of Prospecting”
8 March 2016 | CounterPoint
For the Record
by Josh Morgan, Senior Search Consultant
440.392.6579 | Josh.Morgan@MarshBerry.com
Moneyball vs. Eyeball:
The
Chasefor Recruiting
High Performing New Producers
One thing is
certain — if agency
owners continue
to hire producers
simply based on their
perceived personality,
then their agencies
will continue to
experience the same
mediocre results.

9. 9CounterPoint | March 2016
Continued from Page 7
Always Hiring
Creating a sales culture requires that agencies
constantly hunt for fresh talent to fuel new business
and to replace producers who are retiring or simply not
making the cut.
The “always hiring” mentality ensures that agencies do not
miss out on top talent. Sporadic hiring is costly and often
times produces mediocre results.
If you’re not looking for
the next best producer,
someone else is.
Consider creative ways of keeping your agency’s name out in
front of prospective employees. Think about how you reward
the producers on your team today. It is a fact that producers
will talk about the incentive they just earned with their
friends, neighbors and others. Incentives do not always need
to be cash – get creative and play to a producer’s ego. For
example, would a watch, entertainment system or premium
car lease go further than a cash bonus? A producer would
be more likely to share how happy they are with others when
they can physically “show” their earned incentive to others.
Your current producers and their success can be the best
advertisement for your agency.
Above all, understanding today’s recruiting environment and
what young producers are looking for is critical for attracting
top talent. Take a good, hard look at your training program
and compensation plan. If your agency is a revolving door
and retention is a problem, ask why. Remember, if you don’t
fix the problem, someone else will.
Recognize the importance of age stratification with producers
and aim to hire professionals who can grow with your agency
so perpetuation can be a reality. Just as important as hiring
strong producers is knowing when to let go of the weak ones.
They’re taking up seats that could be filled with salespeople
who can drive new business. Again, this underscores
the importance of “always hiring” so you can cultivate a
prosperous sales culture.
At the end of the day, in any business, it’s
all about the people. Finding and hiring
the right employees is critical for agencies
that plan to organically grow, profit and
perpetuate. n
Peer Exchange Network News
Have you ever identified “culture” as a commitment or action
item in your strategic issues group?
Join us at MarshBerry’s Agency Peak Performance
Exchange (APPEX) in Las Vegas in April as we
focus the conversation on establishing, defining,
and evolving your culture.
Jon Wolske, Zappos Culture Insights leader, will address the audience in a keynote entitled, “Infectious
Happiness, Infectious Results.” Other sessions include MarshBerry’s Best of the Best in Industry and the
Zappos Cultural Experience.
The Zappos Cultural Experience includes a tour of Zappos’ corporate headquarters in Downtown Las Vegas,
providing a glimpse of the Zappos culture and allowing you to feel what it’s like to walk in the shoes of your
fellow Zapponians’.
Interested in learning more about our Peer Exchange Networks?
Contact Tommy McDonald today at Tommy.McDonald@MarshBerry.com

10. Dealmaker’s Dialogue
2015 Insurance Agency
Transaction
Multiples
by Dan Skowronski,
Senior Vice President
440.392.6552
Dan.Skowronski@MarshBerry.com
10 March 2016 | CounterPoint
2015 results showed the third consecutive year of robust increases in purchase price
multiples, with the average transaction price characterized by a strong Base Purchase
Price, and with a higher earn out opportunity than seen in recent years.
As a multiple of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) the average Base Purchase
Price increased to 7.78 times EBITDA, a substantial rise from 7.14 times in 2014. Including the Realistic Earn Out,
the average deal was 8.73 times EBITDA in 2015, up from 7.86 times in 2014. The earn out potential in 2015 if the
Maximum Earn Out is achieved was significant, resulting in an average maximum purchase price of 10.23 times EBITDA,
an additional 1.0 times that seen in 2014 (9.22 times) and nearly 2.0 times higher than 2013 (8.33 times).
Platform agencies are typically larger, sophisticated, high-performers, and considered a foundation for the buyer’s
insurance operations in a given geographic region. Platform agencies continued to command premium pricing in
2015 with a Base Purchase Price at 8.49 times EBITDA plus an additional 1.07 times in Realistic Earn Out to equal
a Realistic Purchase Price of 9.56 times EBITDA. However, this lower Base Purchase Price and higher Realistic Earn
Out compared to 2014 may be evidence of risk-averse pricing behavior creeping into the market with the shift of risk
Buyer demand, especially for size, growth and quality
continues to drive deal multiples.
from the buyer to the seller. An
additional 1.69 times in earn out
equals the Maximum Purchase
Price of 11.26 times EBITDA,
a decrease in the Maximum
Purchase Price of 2% compared
to 11.44 times in 2014. We see
this as further evidence of more
controlled pricing creeping
into the market, with the lower
Maximum Purchase Price
sometimes driven by lower caps
in place by the buyers, or higher
growth hurdles required to
achieve the Maximum Earn Out.
The Best 25% of the average
transactions, based on the realistic
purchase price as a multiple of
Source: MarshBerry proprietary database of transactions in which we were directly involved, those from which we
have detailed information, transactions in the public record, our knowledge of the marketplace, and discussions
with active buyers and sellers. Value illustrated is net of a working capital requirement, if any. Past performance is
not indicative of future results. Multiples are averages and do not imply that all deals fall within these parameters.
Figure 1
2015 TRANSACTION MULTIPLES
Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry Company, Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122
(440.354.3230).

11. 11CounterPoint | March 2016
BASE PURCHASE PRICE: The dollar amount Paid at Close,
plus the Live Out the seller will receive.
Paid at Close: The amount of proceeds paid at the
closing of a transaction, including any escrow for
indemnification items.
Live Out: The amounts a buyer may initially hold back,
but which are paid as long as the seller’s performance
does not materially decline, or which may be paid at
closing, but are subject to a potential adjustment.
REALISTIC EARN OUT: The dollar amount the seller is likely
to receive in the future based on a number of factors including
actual historical seller performance and buyer/seller review
and discussion of earn out metrics.
MAXIMUM EARN OUT: The maximum possible earn out
payment based on future performance.
EARN OUT: The earn out represents the potential amount
the seller can potentially achieve following a deal closing
based upon the achievement of certain goals, typically related
to growth of revenue and/or EBITDA.
EBITDA, achieved very strong multiples for a third straight
year. The Best 25% averaged a Base Purchase Price of 9.14
times EBITDA, with a total of 10.70 times possible under
the Realistic Earn Out, and a total of 12.29 times if a seller is
able to hit the Maximum Earn Out. However, while buyers
continue to pay higher valuations for larger agencies, many
have communicated that they are looking to blend the
average multiple paid across all of their acquisitions, and thus
can support selected higher multiples if balanced by other
transactions where they pay far less. We believe this dynamic
speaks to the decline in the average valuation of the Lowest
25% of the average deals.
The number and variety of active buyers
in 2015 and today illustrates a continued
interest in the insurance distribution
space. Current market activity leads us to
believe that large, sophisticated, organic
growth-capable sellers with a solid bench
of perpetuation candidates should have
leverage to negotiate strong deal multiples
in the near term. However, our experience
indicates that sellers without these
attributes may not achieve the
most favorable deal multiples and/or
transaction structures. n
1
The average reflects deals completed by all buyer segments, including public brokers, private
equity-backed brokers, banks, and independent agencies.
Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate
of Marsh, Berry Company, Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122
(440.354.3230).
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ON THE HORIZON
APRIL 2016
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