1. Can You
Really
Acquire
Growth?An agency won’t go
anywhere without a
defined sales process.
n How do Your Commission
Percentages COMPARE?
n Merger Acquisition
GROWTH PERSPECTIVE
n Organic Acquired GROWTH
A U G U S T|2 0 1 5
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3. letter from John Wepler
Growth.You see
this term everywhere
these days.
From trade journals to industry events. We’re passionate
about organic growth and that’s why we’ve dedicated the
August edition of CounterPoint to the subject. Throughout
the edition, we compare and contrast organic and acquired
growth with a focus on building an organic growth engine.
Organic growth, however, requires more than
just adding sales staff. It involves creating a
sales management infrastructure that can
enable your sales team to be successful.
This issue also explores differences in regional commission rates and how growth can
impact mergers and acquisitions (MA). In today’s competitive MA market, we’ve
seen that buyers are focused on growth. Agencies who demonstrate sustainable
growth can often justify a higher purchase price based on anticipated returns.
This topic is so important to the industry, so MarshBerry decided to launch our first
Organic Growth Survey earlier this year. Over 170 independently owned insurance
agencies responded with the average revenue size of participating agencies being
$15.2 million. The goal of the survey was to identify organic growth trends, as well as
to provide insight into sales management practices. As we compile the survey results,
some interesting themes emerged.
We look forward to discussing this topic, as well as launching our 2015 Organic
Growth Trends report in the next month.
I hope you find this edition insightful and I encourage your feedback.
Chairman Chief Executive Officer, MarshBerry
n PG. 3
Letter from the Editor
n PG. 4
Can You Really
Acquire Growth?
n PG. 6
Metric of the Month •
Organic Acquired
Growth
n PG. 8
How do Your
Commission
Percentages
Compare?
n PG. 10
MA Growth
Perspective
n PG. 12
On the Horizon
TABLE OF
CONTENTS
CONTRIBUTING
AUTHORS
MEGAN BOSMA,
Senior Vice President
MOLLY CONNELL,
Senior Consultant
CANDICE ENSINGER,
Senior Analyst
GEORGE HARB,
Data Analyst
NICK KORMOS,
Vice President
JOHN WEPLER,
Chairman CEO
ANDY WHITE,
Member Services Specialist

4. Can You
Really
Acquire
Growth?by Nick Kormos,
Vice President
Organic Growth Consulting, CIC, CPIA
It’s time to take
a good, hard look at
your sales process —
create a detailed
roadmap that will
guide you toward
true growth.
So you just closed on an
acquisition of another
agency…
It’s a real win because it increases the size
of your organization and brings in several
new producers. Instant growth—a shot
of revenue in the arm of a firm looking to
accomplish an aggressive revenue goal.
Victory! Or is it?
It turns out that the three best producers
at the acquired firm are the retiring
partners who you have put on a
compensation model that incentivizes
retention and not new business. The
rest of the producers are really account
managers in disguise who were fed leads
from the partners. There’s no sales engine.
There’s no sales process. Yes, there are
sales, but not enough to keep up with the
industry average leakage rate of 10%.1
So now you need to produce 10% of a
much larger number in new business every
year just to remain flat. Oh, and you need
to do it with essentially the same number
of producers you had pre-acquisition. Add
in the debt service related to acquiring the
new firm, and your “win” can quickly turn
into a loss.
Wait a minute. Wasn’t the acquisition
supposed to be a coup for the agency,
a growth fast track, a team-builder—a
competitive edge? Sure, that was the idea.
The agency increased its size, but there
was no sales engine in place. No plan.
4 August 2015 | CounterPoint
1
Source: MarshBerry proprietary financial management system
Perspectives for High Performance (PHP)

5. 5CounterPoint | August 2015
We see this happen all the time: Good agencies want to
get bigger and better, so they focus on growth through
acquisition without establishing a first-rate sales process
and development plan for their producers. So they end up
bigger, but not necessarily better. And, in fact, the whole
agency can lose its direction while profits leak out of the
organization and strong salespeople lose interest because
of a lackadaisical environment.
The whole insurance industry wants to talk about deals.
Whether it’s how much cash you would get at closing or what
you need to do to be competitive in closing a deal, the merger
acquisition market is on the top of everyone’s minds. Unless
you have an unlimited pool of money (like the public or private
equity firms), you will eventually have to focus on organic growth.
In our experience, the best firms in the industry recognize the
problem. They are building the engine before filling the gas
tank. Build the machine first and then acquire to supplement.
If you are acquiring revenue to replace non-production, your
issue is compounding—all while layering on debt.
Avoid this path to the never-ending acquisition search.
Here’s the plan
An agency can grow profitably and successfully through a
balance of organic growth and acquisition. In order for both
types of growth to work, you need to start by getting the
most out of your current producers. You need to show them
a defined process, cultivate their skills, provide appropriate
mentors, develop their careers—and repeat the process for
every salesperson on your staff.
If this sounds overwhelming, breathe deep. The good news is,
when a finely tuned sales process is in place, it does not have
to be micromanaged. Everyone knows how new producers
will be onboarded, trained and developed through the specific
process. The engine stays revved up because there are metrics,
milestones, a timeline and mentors pushing the gas pedal.
If your agency is growing in size but dragging in sales like so
many firms today, it’s time to take a good, hard look at your
sales process (or lack thereof) and create a detailed roadmap
that will help guide your people and your organization toward
true growth.
Monitor the Metrics
Hiring new producers and growing top line revenue go hand
in hand. MarshBerry tracked 552 producers hired in 2004.
The average age of these producers was 38 years old and
they worked at least 30 hours a week. The first year retention
rate was 86%, a slight improvement from the previous
findings of 83%. We believe that this could have been a result
from the improvement in the economy at that time. Among
the 552 producers tracked, only 111, or 20% of producers
were still employed as of 2014. Following the trend, an
agency will have to onboard five producers for every
producer who plans on retiring within the next ten years in
order to maintain the current number of producers by the
end of the decade (Figure 1).
Another indicator tracked was the number, or percentage, of
producers that became owners. This is important because
it shows the perpetuation readiness of an agency. In our
experience, producers that become owners tend to shift
their focus towards the growth and profitability of the agency
as a whole rather than just their own individual gains.
Many agencies run into a scalability issue. They crunch
some numbers and realize they’ll need to hire ten
successful producers over the next ten years. That means
actually recruiting 50 sales people, or five new producers
every year. Those five new people will need mentors
and training.
What training will you
provide? Who will serve
as mentors?
An institutionalized sales process answers those
questions and will help foster sustainable growth.
Agencies that fail to provide producers with a defined
roadmap will likely struggle to keep top producers and
experience attrition rates that keep them on a never-ending
race track.
Figure 1
Source: MarshBerry proprietary financial management system Perspectives for High Performance (“PHP”).
552 Producers Hired in 2004
Average Age: 38
Total Hired
(working 30+
hours a week)
1st Year
Retained
3rd Year
Retained
5th Year
Retained
10th Year
Retained
10th Year
Owners
Number of Producers 552 474 350 287 111 18
Percent Retained 100% 86% 63% 52% 20% 3.3%
PROCESS VERSUS EVENT: INDUSTRY SUCCESS

6. METRIC OF THE MONTH
6 August 2015 | CounterPoint
What does this all mean?
Through MarshBerry’s proprietary benchmarking
system, Perspectives for High Performance (PHP), we
are able to see what is contributing to an agency’s
total growth rate. The total growth rate is the sum of
an agency’s Organic and Acquired Growth Rates (less
divestitures).
For example, an agency with 8% organic growth and 2%
acquired growth would have a total growth rate of 10%.
Agencies who are experiencing low or moderate organic
growth may look for acquisition prospects to help supplement
organic growth and achieve budgeted total growth.
Coming out of a deep recession and into a hardening rate
cycle, organic growth rates experienced an upward trend
from 2011 through 2014. What the trend also shows
Organic Acquired
Growth
Organic Growth: MarshBerry segments
organic growth in two critical categories: new
business production and leakage/lift, which is a
measurement of retention and market factors.
Total Growth – Acquired Commission =
Organic Growth.
Acquired Growth: Acquired growth can be looked
at as a complement to an agency’s targeted total
growth rate. Targeted Growth Rate – Organic
Growth Rate = Acquired Growth Rate.
Begin by reviewing your agency’s metrics. What is the producer
success rate? How many new producers have you hired in the
last five years? What is your orientation process when they join
your organization? Who is involved in training?
Put this down on paper and review the trends. Maybe sales
isn’t “broken” at your agency, but you need a serious tune-up.
Perhaps you have a process, but you’re missing a checklist so
producers don’t get lost on their way to a close.
When you put pen to
paper, you may very
well recognize that
there is no defined
process at all. Create
a roadmap to secure
aggressive, sustainable
growth, and be a true
producing agency.
Source: 2015 MarshBerry Organic Growth Survey
Figure 2
DO YOU ASSIGN A MENTOR
FOR NEW PRODUCERS?
WHO SERVES AS A MENTOR?

7. 7CounterPoint | August 2015
Source: MarshBerry proprietary financial management system Perspectives for High Performance (“PHP”)
Map Out the Milestones
A typical agency solution is to just keep offering more
incentives instead of more direction. If you offered to hand
a $50,000 check to a producer to go “get the deal” and gave
this sales person no direction, no background on the suspect,
basically no intelligence at all, how motivated would this
employee be to beat down the door and close the business?
Of course, the money is attractive. But the daunting task of
getting this done could be just enough to deteriorate the effort.
Take that same offer but give the producer an outlined
process starting with how to open the door, and moving all the
way to closing the deal. Now, does this salesperson have to
think twice before calling on the prospect with confidence?
Throwing money at a broken or immature sales process
will not give producers the “backbone” they need to sell
successfully. Cash isn’t the only true carrot. Bonuses and
commissions are great, but they don’t solve your scalability
problem. Or grow your agency.
As author Daniel H. Pink reveals in his book, Drive: The
Surprising Truth About What Motivates Us, “The secret to high
performance and satisfaction at work, school and home is the
human need to direct our own lives—to do better by ourselves.”
Pink’s philosophy is based off of four decades of research on
human motivation.
In some ways, producers look at their sales goal like the
24 hours of Le Mans. It’s an endurance race with the only
motivation being money. However, offer them a fast car, top
notch training, and an experienced pit crew and watch their
motivation drastically increase. You’ve now turned Le Mans into
a Sunday drive for your team.
Many of us have probably
thought of revolutionary
products that could make us
millions. We wake up in the
middle of the night with this
great idea. But how do we make
it? How do we launch and market
it? Where do we get the capital
to start this business? The reality
sets in that even though we
could make millions, we have to
start from scratch. Now imagine
that someone handed you a roadmap to answer all of those
questions, and all it required was hard work and dedication
to the process. Sound more feasible now? The point is, your
sales process won’t get better simply by offering more money
for production, or penalties for lack of production.
If you look at some of the great sales organizations in our
country, how many of them currently do the “phone and a
phone book” routine with their new sales people? I’m sure
that at one time these corporations had just a handful
of people out there selling, and they each had their own
approach. This worked fine for a while, but as they scaled to
the organizations they are today, they realized that they need
processes, procedures and metrics to track effectiveness.
The insurance world is no different.
Your sales strategy may be working today, but if
you want to get to the next level we believe your
agency needs a specifically defined sales process
with milestones and accountability metrics to
provide scalability. Continued on Page 9
“Cash”
isn’t the
only true
carrot.
is that organic growth and
acquired growth supplement one
another. The uptick in merger
acquisition activity in 2012 was
due to the anticipation of rising
capital gains tax rates in 2013.
The three year period of 2012
through 2014 shows a steady
increase in organic growth,
pushing total growth rates over
8% in both 2013 and 2014.
During the same time period
(2012 to 2014), the amount of
acquired growth decreased each
year. Through the second quarter
of 2015, this trend appears to
hold true. n
ORGANIC ACQUIRED GROWTH TRENDS

8. 8 August 2015 | CounterPoint
How do your
Commission Percentages
Compare?
For the Record
New business is
critical to the future viability
of agencies nationwide.
To allow producers to directly affect their compensation, 85% of agencies pay validated producers on commission1
.
New business is incentivized at a higher rate on average than renewal business across regions. There were variations
among regions with regard to new and renewal commission rates.
In totality, the Midwest averaged the highest commission
rates for new and renewal business among the regions.
Further, the commission rates in the Midwest were higher
than the national average. It appears agencies in the
Midwest are offering greater incentives for producers to
write new business, but are not keeping pace with the rest
of the country with regard to penalties for lack of production
(i.e. reducing renewal rates). There is no minimum annual
new business required to retain the renewal commission
percentage in nearly 65% of the Midwest agencies. This
means producers in these agencies can produce $0 new
business and receive the same renewal commission as they
did in the past.
According to MarshBerry’s 2014 Agency Compensation Trends Report, producer commission percentages generally
remained flat compared to the prior year in all regions. This suggests agencies within the regions are not dramatically
changing compensation despite economic fluctuations and changing market conditions. Applying Sales Management
strategies to compensation helps producers better understand agency expectations and can help drive new
business production. n
by Megan Bosma, Senior Vice President
440.392.6553 |Megan.Bosma@MarshBerry.com
The East
region has
the highest
disparity
between
commission
rates for new
and renewal
business.
Source: MarshBerry 2104 Agency Compensation Trends Report. Only includes
agencies from U.S. Results exclude agencies from Canada, Puerto Rico, U.S.
Virgin Islands, and Peru.
New Renewal
Commission
Disparity
East 41% 25% 16%
Midwest 43% 30% 13%
Southeast 41% 29% 11%
Southwest/West 40% 28% 12%
National Avg. 41% 28% 13%
PRODUCER COMPENSATION DIFFERENCES
BY REGION
1
Based on results from MarshBerry’s 2014 Agency Compensation Trends Report.

9. 9CounterPoint | August 2015
Producers need to understand exactly what
they’re reaching for, where they stand in the
process, and where they need to go to achieve
a win. They also need to learn from someone
who has lived the process.
Think about your own salespeople. At what stage
do you notice them stalling? Is it while qualifying
prospects? Or, while evolving a “suspect” to the
“prospect” status? Are producers having a tough
time moving the needle to secure a close?
Every point in the sales process represents a
milestone. There are markers that connect each
milestone and those must be defined. When this
happens, producers understand exactly where
they stand in the sales process and how they can
effectively advance and successfully close a sale.
Nail Down a
Development Timeline
Knowing what to expect eases anxiety and
stokes confidence. When we go into situations completely
unprepared, we risk failure. Agencies can improve their
producer success rate by focusing on career development
and communicating exactly what salespeople must
accomplish to excel.
What will producers do on their very first day at your firm?
What about the second week, the third month, and by their
one-year anniversary? Establish a career timeline, and then
staff that process by identifying who will manage technical
training, oversee field training, and so on.
Moving producers through a development timeline requires
mentors at all levels. Essentially, there are four pillars of
mentorship. A sales tracking mentor monitors new producers
activity. An education mentor manages training and licensing.
A closing mentor will attend appointments with producers
and guide them toward closing deals. A marketing mentor
will help producers understand the proposal process, carrier
appetites and submissions.
At the end of the day, building a sales engine
requires: 1) understanding the metrics;
2) developing a detailed sales process with
milestones; and 3) establishing a timeline so
producers always know where they stand.
This is how organic growth happens—and
organic growth is vital to an agency’s
continued success. n
Questions on how to create an organic growth roadmap for
your organization? Contact Nick Kormos at 440.392.6563 or
via email at Nick.Kormos@MarshBerry.com.
W E W A N T T O H E A R F R O M Y O U !
We want to make sure we’re providing the content you want to read and want feedback on the articles
we’re publishing. Send an email to us at Editorial@MarshBerry.com and let us know your thoughts!
Maintaining Producer
Accountability
a
Attaining subjective performance
criteria
(Attitude, Collaboration, Culture)
b
Producer definition and minimum
standards
c
Minimum production standards with
carrot and stick accountability
d
Trade down of accounts below with
no commission
e
Pipeline usage compensation
accountability
Source: MarshBerry Opinion and Experience
Source: 2015 MarshBerry Organic Growth Survey
Figure 3
DOES YOUR AGENCY PROVIDE SALES AND TECHNICAL
TRAINING TO NEW PRODUCERS?

10. 10 August 2015 | CounterPoint
MarshBerry advocates a balanced approach to driving growth and
profitability. However, when it comes to a buyer’s perspective in
today’s market, we are seeing that growth is a primary value driver.
When considering a potential acquisition, a proven track record of agency growth is of significant value to a buyer. It
demonstrates leadership capabilities and the strong sales culture required to grow consistently in a hard and soft market.
In today’s market, growth helps drive value and often plays a large role in determining the purchase price a buyer is willing
to pay.
One of the metrics buyers frequently use when assessing an opportunity is the Internal Rate of Return (IRR). The IRR
tells the buyer the rate of return considering the cost of the acquisition and the future cash flows from the acquisition.
When a buyer calculates the IRR of a potential investment, they project estimated cash flow over a future time period.
The buyer has a hurdle rate, or required rate of return (reflecting that there are other opportunities for investment of
buyer’s capital). If the IRR is not greater than the hurdle rate, the deal won’t provide the buyer the return it wants, as the
deal is currently structured.
Here is an example: Buyer wants to acquire seller, a $15,000,000 agency with a 30% EBITDA margin, in an asset purchase,
with no debt leverage. Buyer is considering offering 8x EBITDA or $36,000,000 purchase price. The IRR, assuming 15%
year-over-year growth, is 25.5% (see Figure 1) and assuming a 5% year-over-year growth, it is 16.1% (see Figure 2).
An agency with consistently strong historical growth supports a forecast of strong future growth. With all else being
equal, this provides a higher cash flow return to the buyer, and may allow the buyer comfort with a stronger valuation
and purchase price. Depending on the buyer’s hurdle rate, a buyer may get comfortable with the 8x EBITDA valuation
on 15% growth; however, if the buyer believes the seller can only grow at 5% year-over-year, they may look to adjust
Dealmaker’s Dialogue
Growth
Perspective
Merger
Acquisition
by Molly Connell, Senior Consultant
440.392.6584 | Molly.Connell@MarshBerry.com
Anagencywith
consistentlystrong
historicalgrowth
supportsaforecastof
strongfuturegrowth.
the purchase price and/or structure of the deal
to increase the IRR. n
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 | August 2015
Figure 1
— 1 2 3 4 5 6 7 8
EBITDA Projection $5,175 $5,951 $6,844 $7,871 $9,051 $10,409 $11,970 $13,766
Less: Amortization of Acquired Entity 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Taxable Income $2,775 $3,551 $4,444 $5,471 $6,651 $8,009 $9,570 $11,366
Tax Liability (40%) 1,110 1,421 1,778 2,188 2,660 3,204 3,828 4,546
After Tax Earnings $1,665 $2,131 $2,666 $3,282 $3,991 $4,805 $5,742 $6,819
Plus: Amortization of Acquired Entity 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Cash Flow $4,065 $4,531 $5,066 $5,682 $6,391 $7,205 $8,142 $9,219
— 1 2 3 4 5 6 7 8
Cash Flow ($36,000) $4,065 $4,531 $5,066 $5,682 $6,391 $7,205 $8,142 $9,219
Terminal Value at 8x EBITDA — — — — — — — 110,125
Total Cash Flow ($36,000) $4,065 $4,531 $5,066 $5,682 $6,391 $7,205 $8,142 $119,344
Cash Internal Rate of Return 25.5%
CASH INTERNAL RATE OF RETURN
15% GROWTH (YEAR-OVER-YEAR)
Figure 2
— 1 2 3 4 5 6 7 8
EBITDA Projection $4,725 $4,961 $5,209 $5,470 $5,743 $6,030 $6,332 $7,282
Less: Amortization of Acquired Entity 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Taxable Income $2,325 $2,561 $2,809 $3,070 $3,343 $3,630 $3,932 $4,882
Tax Liability (40%) 930 1,025 1,124 1,228 1,337 1,452 1,573 1,953
After Tax Earnings $1,395 $1,537 $1,686 $1,842 $2,006 $2,178 $2,359 $2,929
Plus: Amortization of Acquired Entity 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Cash Flow $3,795 $3,937 $4,086 $4,242 $4,406 $4,578 $4,759 $5,329
— 1 2 3 4 5 6 7 8
Cash Flow ($36,000) $3,795 $3,937 $4,086 $4,242 $4,406 $4,578 $4,759 $5,329
Terminal Value at 8x EBITDA — — — — — — — — 58,254
Total Cash Flow ($36,000) $3,795 $3,937 $4,086 $4,242 $4,406 $4,578 $4,759 $63,583
Cash Internal Rate of Return 16.1%
CASH INTERNAL RATE OF RETURN
5% GROWTH (YEAR-OVER-YEAR)
Source: MarshBerry Opinion Experience; The above example is for illustrative purposes only and not meant to represent any specific client experience. Individual results may vary.
Numbers in thousands
MarshBerry 30th Annual Market
Financial Survey — Now Open!
The survey compiles anonymous general agency information along with financial, market,
carrier and technology data and then summarizes the findings in a State of the Industry Outlook report. The
survey takes approximately 30 minutes to complete. Participants receive a complimentary copy of the final report.
Log on to www.MarshBerry.com today to complete your survey!
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

12. MARSHBERRY
28601 Chagrin Blvd., Suite 400,
Woodmere, Ohio 44122
ON THE HORIZON
AUGUST 2015
08.23 MarshBerry 30th Annual Market Financial
Survey - Now Open
The survey compiles anonymous general agency information
along with financial, market, carrier and technology data
and then summarizes the findings in a State of the Industry
Outlook report. The survey takes approximately 30 minutes
to complete. Participants receive a complimentary copy of
the final report. Log on to www.MarshBerry.com today to
complete your survey!
SEPTEMBER 2015
09.23 Sales Growth Leadership Seminar - Ohio
About the Seminar: Organic growth involves creating a
sales management infrastructure that can enable your sales
team to be successful and letting the model filter out under
performers. This interactive seminar showcases the best
practices high growth agencies have implemented.
Who Should Attend: Insurance agency executives and sales
managers trying to build a high-growth organization.
NOVEMBER 2015
11.4 - 9th Annual SNL Insurance Brokerage
11.5 Summit – New York
Use code MBY200 at registration to receive a $200 discount.
Log on to www.MarshBerry.com to register for events
and to view all other MarshBerry news and events.
Peer Exchange
Network News
Why is Everyone Failing in
Personal Lines?
What’s the future for personal lines?
Should we fight commoditization, or
embrace it? If you think that we can
rely on the independent agency model
for today’s buyer you are probably
going to lose.
Nick Kormos, Vice President -
MarshBerry, will ask the tough
questions and figure out why everyone
is failing at Personal Lines during our
Fall BANK/TASC conference.
Fall BANK/TASC Conference
September 13 - 15
Ritz-Carlton, St. Louis, MO.
Interested in learning more about
our Peer Exchange Networks?
Contact Tommy McDonald today at
Tommy.McDonald@MarshBerry.com