As we review our results from the first half, revenue is the first number many of us review. Revenue growth is a key part of a compelling agency success and value story, and it is an easy result for us to understand. But since agency value is typically a function of cash flow and risk, it is insightful to examine revenues a little more deeply; specifically to determine the quality of revenues.

Think like a potential buyer. Does your revenue and book of business represent a different level of risk than in prior periods? Have changes to account retention, customer or industry concentration, or account development contributed to an increase or decrease in risk and therefore agency value?

According to "Critical Factors Affecting Agency Value," account retention is the #1 driver of agency value. In the “Best Practices Agencies" report, the median account retention rate ranges in the 91.5% to 93.5% range depending on agency size. How do your numbers compare with this range?

Next Steps. Think like a buyer. Take a deep-dive look at your revenues and determine whether a potential buyer may identify risk in your revenue results. What one or two opportunities for improvement can you identify and pursue to improve your agency success and value story?

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