Looking for an insurance agency business plan? You're in the right place.
An agency earns nothing until a policy is bound and earns most of its money only when policies renew. That leaves a plan with hard questions. How much cash does the agency need while the book builds? How many policies does it have to write before renewals cover the payroll? What happens if carriers pay less than expected, or customers leave at renewal?
In this article we'll walk through a complete sample business plan for an independent property and casualty agency in Austin, Texas, section by section. We'll cover the executive summary, the SWOT analysis, the carrier and commission inputs and, in particular, all of the financials, from the first month of commission to the fifth year.
Here's what you'll be able to do after reading:
- The executive summary: see how to describe an agency that loses money for two years in a way a lender or investor can read in a minute
- The SWOT analysis: name the real weak points, such as starting with no book of business, and say how the plan covers them
- The book of business: learn how policy counts, premium, commission rates and retention turn into a revenue line you can defend
- The commission lag: see why renewals are 5% of revenue in the first year and 63% in the fifth, and plan your reserve around it
- The producer pay plan: work out what a salaried producer with commission costs, and when one pays for themselves
- The five-year profit, cash flow and balance sheet: follow each hire, carrier payment and pay decision through to cash
- The downside case: have an answer ready for "what if commission runs 20% short, or a carrier pays no profit share?"
If you're opening an insurance agency, read this before you write your own. The agency is fictional, so keep what fits your carriers and your market and change the rest.
In this plan
Looking for a insurance agency business plan template? The Toolkit builds yours with your own numbers.
Executive Summary
Hollis Row Insurance Agency is an independent property and casualty agency that opens in Austin, Texas on 1 January 2027. It sells homeowners and personal auto policies to households and small-business packages to owner-run offices, shops and studios, placing each customer with one of five appointed carriers. Founder Marcus Delgado holds a Texas general lines property and casualty license and owns 70% of the agency. A private investor owns 30%.
The agency needs $380,000: $180,000 of Marcus's savings, $110,000 from the investor and a $90,000 bank term loan. Of that, $322,000 is held as a cash reserve, $31,000 buys equipment and the office fit-out, and $27,000 pays for legal work, licensing and the launch campaign.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $112,494 | $293,700 | $561,400 |
| Net income after start-up costs | ($152,456) | ($72,836) | $25,853 |
| Closing cash | $190,985 | $94,713 | $87,560 |
The agency writes 298 policies in its first year and has 291 in force at December 2027, carrying about $924,000 of annual premium. Commission is earned in two layers. A new policy pays once, and a renewal pays each time the policy stays. Almost nothing renews in Year 1, so renewals make up 5.3% of revenue in Year 1 and 62.9% by Year 5. That lag is why the plan loses money for two years and needs a reserve equal to 85% of the raise.
The model also runs a 20% commission shortfall. With later hires, a smaller marketing budget, a 20% cut to Marcus's pay, no move to a bigger office and no distributions, cash stays above zero in all five years.
What sets Hollis Row apart is modest. One licensed person can quote a customer's home, car and business across several carriers. Producers earn a base salary plus commission on what they write, and a smaller commission carries on for every year the policy renews.
The Agency at a Glance
Legal name: Hollis Row Insurance Agency, LLC, a Texas limited liability company. Owners: Marcus Delgado 70%, a private investor 30%. Premises: 1,000 square feet of leased office space in north Austin, with a street-level door for walk-in customers. Start date: 1 January 2027. Stage: pre-launch. The agency license application is filed, all five carrier appointment agreements are signed and the lease is in draft.
What the agency is for
Place Austin households and small businesses with the right carrier for each policy, and keep them there through renewals and claims.
Targets to 2031
- 298 policies written in 2027, with 291 in force at the end of the year.
- $293,700 of commission revenue in 2028, the second year, and 733 policies in force.
- A first profitable year in 2029, with net income of $25,853.
- $10.15 million of premium in force and a team of ten full-time people by the end of 2031.
Three kinds of commission
| Revenue line | How it is earned | Year 1 share | Year 5 share |
|---|---|---|---|
| New-business commission | A percentage of premium on each new policy, paid once | 94.7% | 35.2% |
| Renewal commission | A percentage of premium each time a policy renews | 5.3% | 62.9% |
| Contingent commission | A carrier's profit share on volume and loss ratio | 0% | 1.9% |
Carrier appointments
Five appointments, each chosen for a line the agency sells. Two standard carriers write homeowners and auto, one non-standard carrier takes drivers the standard carriers decline, one writes small-business packages and one writes commercial auto and general liability for businesses that outgrow a package. The agency does not name carriers in this plan, because a real appointment depends on a contract and the commission schedule is the carrier's to set.
Licensing with TDI
The Texas Department of Insurance (TDI) licenses both individuals and agencies. Marcus already holds an individual general lines property and casualty license. The agency applies for an agency license, which TDI describes as requiring a designated responsible licensed producer, registration with the Texas Secretary of State and proof of financial responsibility, either a bond or an errors and omissions policy. TDI's published fee for the agency application is $50. The agency takes the errors and omissions route.
The Austin Insurance Market
The people who sell insurance
The Bureau of Labor Statistics counted 572,600 insurance sales agents in 2025, with a median annual wage of $62,280, and projects 3% growth from 2025 to 2035. Insurance agencies and brokerages are the largest employer, at 63%. On pay, the Bureau says independent agents may be paid by commission only, while employed agents may receive a salary only, a salary plus commission or a salary plus bonus, and that commission is the most common form of pay for experienced agents. The plan follows that: the founder takes a salary, service staff are salaried, and producers receive a base salary plus a share of the commission on what they write.
How the agency is paid
A carrier pays an agency a percentage of premium. In this plan the percentage is 11% to 15% on first-year premium and 9% to 13% on renewals, depending on the line. Premium is set by the carrier, not the agency, so revenue moves with carrier pricing as well as with the number of customers. A policy that stays for five years earns far more than a policy sold and lost, which is why the plan tracks premium in force and retention as closely as it tracks sales.
Competition
| Alternative | What it offers | Why a customer picks it | How Hollis Row differs by design |
|---|---|---|---|
| Captive agents of national carriers | One carrier's products, with local service | Brand recognition and one bill | Quotes across five carriers and recommends the fit |
| Direct writers and online comparison sites | Phone or online quotes with no agent, or side-by-side price lists | Speed, and no sales conversation | Advice after the price: limits, deductibles and what a claim looks like |
| Other independent agencies in Austin | Several carriers, often a long customer list | Established relationships and a known name | A founder who answers the phone in the first year, then a team that grows with the book |
| Surplus lines wholesalers and specialist agents | Cover for homes and businesses that standard carriers decline | The only route for a hard-to-place risk | A non-standard auto appointment, and referral of declined risks to a licensed partner for a share of the commission |
The table describes what each category offers and how this agency positions itself, not a ranking. No competitor is named, because each sets and changes its own terms.
SWOT
| Strengths | Weaknesses |
|---|---|
| Founder licensed and experienced in personal lines | No existing book: every customer is won from zero |
| Five carrier appointments covering home, auto and small business | Two loss-making years draw on the reserve |
| Producers earn on renewals as well as new sales, which rewards policies that stay | The founder and service team write about 400 policies a year until the producers mature |
| Opportunities | Threats |
|---|---|
| Referrals from lenders, real estate agents and accountants | Carrier premium increases that push customers to shop |
| Add-on policies sold to existing customers | A carrier tightening its appetite for homeowners business after a heavy claims year |
| A small-business book that grows slowly beside the personal lines | Loss of contingent commission in a bad claims year |
Who Buys From an Agent
Homeowners and drivers
The primary customer is a household in the Austin metro that owns a home, has one or two cars and wants one person to handle all of it. Many arrive at a purchase, a move or a renewal increase. They have often held a policy for years without ever comparing it, and they find out what it covers when a claim is filed.
Owner-run businesses
The second customer is a business with 2 to 25 employees: a dental office, a salon, a retail shop, a restaurant, a design studio. A small-business package combines property and liability cover in one policy. The owner usually has no one in charge of insurance and wants the certificates and endorsements handled.
Why customers move agents
A premium increase at renewal, a claim that was handled badly, a home purchase, a move or a business opening. Business customers also switch when a landlord or lender asks for a certificate the current agent cannot produce quickly.
Their priorities
A price they can accept. A person who answers. Claims help when something goes wrong. Cover that is explained before it is needed.
Writing the Book
From quote request to bound policy
A quote request by phone, form or walk-in, a comparison across the carriers that fit, a call to explain the options and a bound policy. Marcus takes every quote request in the first six months. The first customer service representative joins in month 7, and the first producer in month 14.
First-year volume and where it comes from
298 policies written: 117 homeowners, 140 auto and 41 small-business packages. The agency starts with no brand, so bind rates differ sharply by source. A referral from a lender or real estate agent arrives warm and binds far more often than a click on a search ad. The blend comes to about 1,080 quote requests and a bind rate near 28%. A customer who buys two lines counts twice, so 298 policies come from fewer customers.
| Lead source | Quote requests | Bind rate | Policies written | Share |
|---|---|---|---|---|
| Referral partners (lenders, real estate agents, home inspectors) | 244 | 45% | 110 | 37% |
| Add-on policies sold to existing customers | 120 | 50% | 60 | 20% |
| Community events and local sponsorship | 250 | 20% | 50 | 17% |
| Business introductions (accountants, bankers, landlords) | 172 | 25% | 43 | 14% |
| Google Ads and local search | 292 | 12% | 35 | 12% |
What one policy earns
| Line | Annual premium | New commission | Renewal commission | Annual retention |
|---|---|---|---|---|
| Homeowners | $3,600 | 15% ($540) | 13% ($468 a year) | 91% |
| Personal auto | $2,300 | 11% ($127 on the first six months) | 9% ($104 per six-month term) | 80% |
| Small-business package | $4,800 | 13% ($624) | 11% ($528 a year) | 84% |
Carriers set the real premium figures, and a rate rise lifts commission along with premium. The plan has premiums rising 3% a year from Year 2.
The book of business
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Homeowners written | 117 | 200 | 320 | 400 | 460 |
| Personal auto written | 140 | 215 | 335 | 415 | 475 |
| Small-business packages written | 41 | 80 | 90 | 110 | 125 |
| New policies written | 298 | 495 | 745 | 925 | 1,060 |
| Policies in force at year end | 291 | 733 | 1,352 | 2,058 | 2,796 |
| Premium in force at year end | $924,000 | $2,441,000 | $4,618,000 | $7,242,000 | $10,150,000 |
| Revenue as a share of premium in force | 12.2% | 12.0% | 12.2% | 12.2% | 12.2% |
| Renewal and contingent share of revenue | 5.3% | 35.1% | 48.7% | 58.2% | 64.8% |
Renewals drive the growth after Year 1. The agency writes 1,060 policies in Year 5, 3.6 times its Year 1 total, and earns 11 times the revenue. The difference is the book already in force. The volume steps up gradually through each year, not on 1 January: monthly new policies run at 22 in December 2027, 30 in January 2028 and 49 in December 2028.
Who writes the policies
Marcus and the service team write every policy in Year 1. A producer is added in month 14 and, on a temporary license while working toward the exam, writes only about 8 policies a month in Year 2, 18% of the year's volume. Producers write 40% of new policies in Year 3, 55% in Year 4 and 65% in Year 5, at 16 to 19 a month each once established. The agency checks these rates against actual results each quarter.
Contingent commission
Carriers pay a profit share to agencies whose books are large enough and whose loss ratio is low. Each carrier sets its own premium threshold and measures a book that has run for a full year or more. A new agency cannot meet either test in its first two years, so the plan counts no contingent commission in 2027 or 2028. It sets contingent commission at 0.4% of the prior year's earned premium from Year 3: $6,700, then $14,100 and $23,700. It is at most 2% of revenue in any year.
Paying for Policies
Where the $42,000 goes
Marketing in Year 1 totals $42,000. Launch work takes $12,000 out of the start-up capital, and the remaining $30,000 is day-to-day spend, equal to 27% of Year 1 revenue; the share falls to 15% in Year 2, 10% in Year 3 and 5.5% by Year 5, as referrals and existing customers produce more of the new business. Divided by the 298 policies written, that is about $141 a policy. A homeowners policy pays $540 in its first year. With 91% retention and no premium rise, it would earn about $2,027 over five years, before producer pay and chargebacks.
Paid search is the costliest channel, and the plan treats it that way. At $14,000 for about 35 bound policies, it costs about $400 for each, against about $45 for each referral. The agency buys search to reach customers no partner knows, not as its main source.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website, brand and quote forms (launch) | $7,500 | A site with a quote form, a click-to-call number and pages for homeowners, drivers and small businesses |
| Local campaign and signage (launch) | $4,500 | Mailers to new homebuyers and a street-level sign for walk-in quotes |
| Google Ads | $14,000 | Searches such as "home insurance Austin" and "business insurance near me"; about 292 quote requests and 35 policies |
| Referral partner program | $5,000 | Coffee meetings, a one-page guide and a thank-you for each introduction; about 110 policies |
| Community events and sponsorship | $4,000 | Neighborhood association and youth sports sponsorships; about 50 policies |
| Business outreach | $2,500 | Accountant and banker lunches and a small-business insurance workshop; about 43 policies |
| Customer reviews and retention | $2,500 | Renewal reminders, annual coverage reviews and add-on offers; about 60 policies |
| Website content and local search | $2,000 | One guide a month on the questions owners ask around a home purchase or a renewal notice |
Milestones
- January 2027: licensed, open and writing the first policies.
- July 2027: the first service representative starts, and auto renewals begin.
- December 2027: 291 policies in force and about $924,000 of premium.
- February 2028: first personal-lines producer on a temporary license, working through the exam.
- December 2028: 733 policies in force, four full-time people.
- 2029: first full year of profit.
How the Office Runs
Office and lease
1,000 square feet in north Austin, priced at about $34 a square foot a year all-in, on a three-year lease with a personal guarantee. The space holds six desks, a meeting table and a front counter, with the part-time administrator sharing a desk. In month 37 the agency moves to about 1,800 square feet at about $36 a square foot, when it has five full-time people and is still hiring. The move and fit-out of the new space are budgeted at $25,000 in Year 4. Choosing a three-year first lease is what keeps the move free of a break penalty.
A day in the office
Quote, compare, bind and issue, then service. Service is most of the work: certificates of insurance, address and vehicle changes, billing questions and claims calls. Each policy gets a renewal review 60 days before its renewal date, which is where retention is won or lost. Quotes are run through a comparative rater, and the agency management system tracks every policy, task and renewal date.
Software
An agency management system, a comparative rater, e-signature, a customer relationship manager and a cloud phone system. Software costs $14,000 in Year 1 and $40,000 by Year 5, because each added seat is charged.
Staffing and service ratios
Two on payroll at the end of Year 1 (Marcus and a customer service representative), four at the end of Year 2, then nine at the end of Year 4 and ten at the end of Year 5, plus a part-time administrator from month 34. The administrator reconciles carrier commission statements against policies and checks for missing payments. Each hire follows revenue. The downside case shows what is delayed or dropped if revenue falls short.
Service staff are sized on two ratios. Personal lines: about 600 policies in force for each customer service representative. Small business: 150 to 250 packages for each commercial account manager, because a business customer needs certificates, endorsements and mid-term changes that a household does not. The first account manager starts in month 38 and the second in month 46.
Billing and the premium trust account
Most personal lines and many business packages are direct billed: the carrier invoices and collects from the customer and pays the agency its commission on a monthly statement. Where the agency does bill a customer, it deposits the premium in a separate trust account, kept apart from the operating account, and reconciles it monthly. Until the administrator starts in month 34, the outside accountant does the monthly reconciliation.
Licenses and cover
- A TDI agency license ($50 application fee), with Marcus as the designated responsible licensed producer, registration with the Texas Secretary of State and an errors and omissions policy as proof of financial responsibility.
- Fingerprint background checks for the people TDI requires them from. TDI directs applicants to start on its online fingerprint portal.
- A general lines property and casualty license for each person who sells. A new producer can work for 180 days on a temporary license ($150 on TDI's schedule, which also covers the permanent application) while sponsored by the agency, with at least 40 hours of training from the sponsor, and must pass the exam in that time.
- Written producer agreements with a non-solicitation term and a clear statement of who owns the customer relationship.
- Insurance for the agency itself: errors and omissions, cyber, general liability, hired and non-owned auto, and key-person life and disability cover on Marcus, budgeted at $9,000 in Year 1. Workers' compensation sits in the payroll on-costs.
Carriers and vendors
Five carriers, an agency management system vendor, a rater vendor and an errors and omissions broker. A carrier can change its appetite or commission schedule at any time, so no more than 35% of premium in force is planned with any one carrier.
Who Runs It
Marcus Delgado, founder and principal agent
Marcus has thirteen years in personal lines: eight as a producer in a captive agent's office and five at a mid-size independent agency in Round Rock, where he wrote about 300 policies a year. He holds a Texas general lines property and casualty license and a business degree. His $180,000 investment is eleven years of savings. He is leaving to run an agency of his own, where he sets the service standard.
What Marcus has not done yet
Marcus has not managed producers, has not built a book from zero and has little experience in commercial lines beyond small packages. The plan covers these with a commercial lines consultant on call, paid from the professional fees line, until the first commercial account manager joins in month 38, a written producer pay plan agreed before the first producer starts and a referral program run on a fixed weekly schedule.
If Marcus is out
For the first six months Marcus is the only licensed person on staff. The agency carries key-person life and disability cover on him, and the first service representative is licensed so that policies can be bound and serviced in his absence.
Outside help
The investor is a retired agency principal from San Antonio, who contributes carrier contacts and reviews the quarterly numbers. The agency uses a local accountant for tax and books, and a lawyer on call for producer agreements and the lease.
Who owns what, and what the bank holds
Marcus owns 70% of Hollis Row Insurance Agency, LLC and gives the bank a personal guarantee. The investor owns 30% and has no day-to-day role. The loan carries a covenant to deliver quarterly accounts.
Questions a lender will ask
- Can Marcus take customers from his former agency? No. His Round Rock employment agreement carries a 12-month non-solicitation clause for customers he serviced there, and a lawyer reviewed it before he resigned. The plan counts no customer from that book and declines quote requests from those customers for twelve months. Every policy in the model is won from zero.
- Will carriers appoint and support a new agency? All five appointment agreements are signed. Appointments do not guarantee volume: a carrier can set minimum production for a new agency or limit homeowners business by territory or home type. The plan caps any one carrier at 35% of premium in force, and a lost carrier appetite would slow the homeowners line, which the model does not capture.
- Who holds the premium? The carriers do, for direct-billed policies. The agency's own trust account is described under Operating Plan.
- What stands behind the loan if earnings do not cover it? The loan is $90,000 against a $322,000 reserve. Debt service is $9,675 in Year 1 and $20,419 in Year 2, paid from the reserve, since EBITDA is negative in both years. Earnings cover it from Year 3, at 1.9x. The bank takes Marcus's personal guarantee and a lien on the equipment.
- How does the investor leave? The investor's $110,000 for 30% values the agency at about $367,000 after the investment, which is based on the plan and on Marcus's contribution, not on a multiple of revenue. No dividend is promised before Year 5. From Year 5, Marcus has an option to buy the stake at an agreed multiple of the prior year's commission revenue, and the investor may join any sale of the agency.
Financial Plan: Turning the Book Into Cash
One model produces all the tables that follow. It runs month by month through Year 1 and year by year to Year 5. Revenue is built policy by policy, so every commission figure traces back to a policy count, a premium and a rate, and the inputs behind them are listed first.
Funding the slow years
| Use of funds | Amount |
|---|---|
| Computers, dual monitors, phone system, printer | $14,000 |
| Office fit-out, furniture and signage | $17,000 |
| TDI licenses, exams, fingerprinting and carrier appointments | $3,500 |
| Legal: entity, lease, producer agreements; agency system set-up | $11,500 |
| Launch: website, brand, local campaign | $12,000 |
| Cash reserve for the years before renewals carry the payroll | $322,000 |
| Total uses | $380,000 |
| Source of funds | Amount |
|---|---|
| Marcus Delgado's savings | $180,000 |
| Private investor (30% of the company) | $110,000 |
| Bank term loan | $90,000 |
| Total sources | $380,000 |
Marcus Delgado invests $180,000 of his own savings, 47% of the total. A private investor puts in $110,000 for 30% of the company, and a bank lends $90,000 on a seven-year term at 10.75%, interest-only for the first 12 months. The bank asks for Marcus's personal guarantee and a lien on the equipment. The 10.75% is not a quoted lending rate. The $322,000 reserve is 85% of the raise, and it is sized to the losses. Commission arrives only once a policy is bound, and the renewals that eventually carry the payroll accumulate slowly, so the model loses $225,292 across the first two years, start-up costs included, before the book starts to pay for the team.
What the commission model rests on
- The book is built from three lines. Homeowners policies average a $3,600 annual premium, personal auto $2,300 (written as two six-month terms) and small-business packages $4,800. Premiums rise 3% a year from Year 2. These premiums are not published Texas averages.
- Commission rates follow the carrier agreements the agency would sign: 15% new and 13% renewal on homeowners, 11% new and 9% renewal on auto, and 13% new and 11% renewal on business packages. Each carrier sets its own schedule, and the agency would confirm rates before accepting an appointment.
- Policies stay with the agency at an annual rate of 91% for homeowners, 80% for auto and 84% for business packages, applied at each renewal date. Policies written: 298 in Year 1 (117 homeowners, 140 auto, 41 business), then 495, 745, 925 and 1,060. Policies in force at each year end are 291, 733, 1,352, 2,058 and 2,796, with $0.92 million, $2.44 million, $4.62 million, $7.24 million and $10.15 million of premium in force.
- Year 2 does not step up. New policies run at 22 in December 2027, 30 in January 2028 and 49 in December 2028, because the first producer starts in month 14 on a temporary license and writes only 8 policies a month on average in Year 2 while working through the exam and building a pipeline. Most Year 2 volume still comes from the founder and the service team: 406 policies, about 34 a month.
- Commission arrives in two layers. A new policy pays first-year commission once, about $357 per policy in Year 1 and $410 by Year 5. It pays renewal commission each time it renews. Auto renews after six months, so renewal income starts in month 7. Homeowners and business packages renew after 12 months, so their renewal income starts in Year 2. That lag is why Year 1 renewals are only $6,017, 5.3% of revenue.
- Contingent commission is a profit share that carriers pay on volume and loss ratio. Carriers set their own premium thresholds and measure a seasoned book, which a new agency cannot offer in its first two years, so it is zero in Years 1 and 2. From Year 3 it is set at 0.4% of the prior year's earned premium, taking earned premium as the average of the premium in force at the start and end of that year: $6,700 in Year 3 rising to $23,700 in Year 5. It is paid in the first quarter and is not guaranteed. A carrier that has a poor claims year can pay nothing.
- Producers are paid a base salary plus commission: 25% of the first-year commission on policies they write and 6% of the renewal commission on that book. They write 18% of new policies in Year 2, 40% in Year 3, 55% in Year 4 and 65% in Year 5, which is 16 to 19 new policies per producer per month once they are established. Producer commission is shown as its own cost line, $8,580 in Year 2 rising to $91,686 in Year 5, and about a quarter of it in Year 5 is paid on renewals.
- Carriers recover commission on policies that are cancelled early. An allowance of 4% of new-business commission is charged each year for chargebacks, from $4,259 in Year 1 to $17,400 in Year 5. Carriers pay on monthly statements, and the model carries receivables of 35 days. Direct costs are 1.5% of the two main commission lines, covering comparative-rater and e-signature fees and bank charges. Producer commission is carried in operating costs.
- Service staff are sized on two ratios, both the plan's own figures and not published benchmarks. Personal lines: about 600 policies in force for each customer service representative at a year end (583 in Year 3, 597 in Year 4, 612 in Year 5). Business packages: 150 to 250 for each commercial account manager. The first manager starts in month 38 and a second in month 46, giving 133 per manager at the end of Year 4 and 175 at the end of Year 5.
- Payroll adds 27% to wages for payroll taxes, health cover, workers' compensation and a retirement match (15% for the part-time administrator). Workers' compensation is counted there only. Wages in the personnel table are launch rates, and annual pay raises of 3% are charged as a separate line from Year 2. Marcus's $68,000 sits just above the $62,280 median the Bureau of Labor Statistics reports for insurance sales agents (May 2025). The $44,000 service representative wage sits just under its $44,770 median for customer service representatives (2025).
- Marketing is $30,000 in Year 1 plus $12,000 of launch costs, or about $141 for each of the 298 policies written. Paid search is the dearest source, at about $400 for each bound policy. Marketing falls to $89 per policy in Year 2 and $64 by Year 5 as referrals and the existing customer base do more of the work.
- Rent is set on 1,000 square feet at about $34 a square foot all-in for Years 1 to 3, on a three-year lease. The agency moves to 1,800 square feet at about $36 in Year 4, with $25,000 budgeted for the move and fit-out of the new space. Insurance covers the agency's own errors and omissions, cyber, general liability, hired and non-owned auto, and key-person life and disability cover, starting at $9,000 and reaching $19,000 in Year 5. Replacement computers and new-hire kit are budgeted from Year 2.
- Tax is charged at the federal corporate rate of 21%, with the early losses carried forward, and no state income tax is modelled. The Texas business tax that applies to an entity like this is the franchise tax, which has a no-tax-due threshold of $2,650,000 of revenue for the 2026 and 2027 report years, per the Texas Comptroller. This agency stays under $1.3 million, so none is modelled, and later thresholds may differ. The agency would normally be an LLC taxed through its owners' returns, so corporate rates are a cautious placeholder.
- An owner distribution of $60,000 in Year 5 is shared 70% to Marcus and 30% to the investor, and is paid only from cash the model shows the agency can spare.
Commission by source
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| New-business commission | $106,477 | $190,700 | $287,900 | $368,400 | $435,000 |
| Renewal commission | $6,017 | $103,000 | $266,800 | $498,500 | $777,700 |
| Contingent (profit-share) commission | $0 | $0 | $6,700 | $14,100 | $23,700 |
| Total revenue | $112,494 | $293,700 | $561,400 | $881,000 | $1,236,400 |
| Growth on prior year | – | 161% | 91% | 57% | 40% |
New-business commission pays for the first two years, and renewals take over from there. Revenue grows 161% in Year 2 mainly because Year 1 left so little to renew. New policies written rise 66% (298 to 495) and new-business commission 79% ($106,477 to $190,700), while renewal commission climbs from $6,017 to $103,000. Renewal and contingent income are 5.3% of revenue in Year 1, 35.1% in Year 2, 48.7% in Year 3, 58.2% in Year 4 and 64.8% in Year 5. The share passes half in Year 4. Growth slows to 40% in Year 5 because new policies grow more slowly than the book already in force.
The first twelve months
| Month | New-business commission | Renewal commission | Contingent (profit-share) commission | Total revenue | EBITDA |
|---|---|---|---|---|---|
| Jan 2027 | $4,960 | $0 | $0 | $4,960 | ($13,561) |
| Feb 2027 | $5,627 | $0 | $0 | $5,627 | ($12,904) |
| Mar 2027 | $7,457 | $0 | $0 | $7,457 | ($11,101) |
| Apr 2027 | $8,124 | $0 | $0 | $8,124 | ($10,444) |
| May 2027 | $9,457 | $0 | $0 | $9,457 | ($9,131) |
| Jun 2027 | $11,287 | $0 | $0 | $11,287 | ($7,329) |
| Jul 2027 | $11,954 | $741 | $0 | $12,695 | ($5,942) |
| Aug 2027 | $11,287 | $833 | $0 | $12,120 | ($6,508) |
| Sep 2027 | $10,081 | $926 | $0 | $11,007 | ($7,605) |
| Oct 2027 | $9,414 | $1,018 | $0 | $10,432 | ($8,171) |
| Nov 2027 | $8,748 | $1,203 | $0 | $9,951 | ($8,645) |
| Dec 2027 | $8,081 | $1,296 | $0 | $9,377 | ($9,210) |
January brings in $4,960. Revenue peaks at $12,695 in July, helped by home-buying season and the first auto renewals, and slips to $9,377 by December. Operating profit (EBITDA) is below zero every month: ($13,561) in January, ($5,942) in July at the best, and ($9,210) in December once new sales slow against a fixed payroll. The lowest month-end cash balance is Dec, at about $191,000 after allowing for the 35 days carriers take to pay. Monthly detail exists for Year 1 only. For later years the low point is read from year-end balances, and a month inside the year can fall below them.
Hiring schedule
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and principal agent | $68,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Licensed customer service representative | $44,000 | Month 7 | 1 | 1 | 1 | 1 | 1 |
| Producer, personal lines (salary plus commission) | $42,000 | Month 14 | – | 1 | 1 | 1 | 1 |
| Second customer service representative | $44,000 | Month 24 | – | 1 | 1 | 1 | 1 |
| Senior producer (salary plus commission) | $50,000 | Month 30 | – | – | 1 | 1 | 1 |
| Agency administrator (part time, 20 hours a week: commission and trust-account reconciliation) | $30,000 | Month 34 | – | – | 0.5 | 0.5 | 0.5 |
| Commercial account manager | $52,000 | Month 38 | – | – | – | 1 | 1 |
| Third customer service representative | $44,000 | Month 42 | – | – | – | 1 | 1 |
| Second commercial account manager | $52,000 | Month 46 | – | – | – | 1 | 1 |
| Second senior producer (salary plus commission) | $50,000 | Month 46 | – | – | – | 1 | 1 |
| Fourth customer service representative | $44,000 | Month 56 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $114,300 | $195,792 | $297,127 | $474,978 | $624,203 |
Marcus is the only person on payroll from January to June. He writes and services every policy until the first licensed customer service representative joins in month 7. The first personal-lines producer follows in month 14, a second service representative in month 24, a senior producer in month 30, a part-time administrator in month 34, a first commercial account manager in month 38, a third service representative in month 42, a second senior producer and a second account manager in month 46, and a fourth service representative in month 56. The agency has 2, 4, 5, 9 and 10 full-time people at the ends of the five years, plus the administrator at half a position from Year 3. Four hires land in Year 4, which is why that year is the thinnest. Producer salaries are in the table, and their commission is a separate cost line. Marcus draws $68,000 from the first month, and every profit figure is struck after that wage.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $112,494 | $293,700 | $561,400 | $881,000 | $1,236,400 |
| Direct costs (comparative-rater and e-signature fees, bank charges) | ($1,687) | ($4,405) | ($8,421) | ($13,215) | ($18,546) |
| Gross profit | $110,807 | $289,295 | $552,979 | $867,785 | $1,217,854 |
| Payroll incl. on-costs | ($114,300) | ($195,792) | ($297,127) | ($474,978) | ($624,203) |
| Rent | ($34,000) | ($35,000) | ($36,100) | ($64,800) | ($66,700) |
| Utilities | ($2,800) | ($2,900) | ($3,000) | ($4,400) | ($4,500) |
| Marketing | ($30,000) | ($44,000) | ($54,000) | ($62,000) | ($68,000) |
| Insurance | ($9,000) | ($10,500) | ($13,000) | ($16,000) | ($19,000) |
| Professional fees | ($6,000) | ($6,500) | ($7,000) | ($7,500) | ($8,000) |
| Software subscriptions | ($14,000) | ($19,000) | ($26,000) | ($34,000) | ($40,000) |
| Producer commission (paid on top of salary) | $0 | ($8,580) | ($30,707) | ($59,628) | ($91,686) |
| Commission chargebacks on cancelled policies | ($4,259) | ($7,627) | ($11,514) | ($14,736) | ($17,400) |
| License renewals, continuing education and carrier fees | ($3,000) | ($4,000) | ($5,500) | ($7,000) | ($8,500) |
| Phones, supplies and postage | ($4,000) | ($5,000) | ($6,000) | ($7,500) | ($8,500) |
| Office move and fit-out of the larger space (Year 4) | $0 | $0 | $0 | ($25,000) | $0 |
| Equipment replacement and new-hire kit | $0 | ($3,000) | ($6,000) | ($8,000) | ($9,000) |
| Annual pay raises (3% a year) | $0 | ($5,874) | ($18,095) | ($44,043) | ($78,343) |
| EBITDA | ($110,552) | ($58,478) | $38,936 | $38,200 | $174,022 |
| Depreciation | ($5,229) | ($5,229) | ($5,229) | ($5,229) | ($5,229) |
| Interest | ($9,675) | ($9,130) | ($7,854) | ($6,435) | ($4,855) |
| Income tax | $0 | $0 | $0 | $0 | ($3,787) |
| Net income before start-up costs | ($125,456) | ($72,836) | $25,853 | $26,536 | $160,150 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($27,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($152,456) | ($72,836) | $25,853 | $26,536 | $160,150 |
Year 1 loses $110,552 at EBITDA, $125,456 after depreciation and interest, and $152,456 after start-up costs. Year 2 loses $72,836 and is the last loss year. Year 3 is the first profitable year, with EBITDA of $38,936 (6.9%) and net income of $25,853. Year 4 is flat: EBITDA is $38,200 (4.3%) and net income $26,536, because the $25,000 office move, the larger lease and four hires arrive in the same year. EBITDA margin reaches 14.1% in Year 5, with net income of $160,150 and income tax of $3,787 as the early losses are used up. Compensation, meaning payroll, pay raises and producer commission, is 72% of revenue in Year 2, 62% in Year 3, 66% in Year 4 and 64% in Year 5.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($158,015) | ($84,984) | $5,412 | $1,118 | $131,299 |
| Equipment and fit-out | ($31,000) | $0 | $0 | $0 | $0 |
| Funding received | $380,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($11,289) | ($12,564) | ($13,984) | ($15,563) |
| Owner distributions | $0 | $0 | $0 | $0 | ($60,000) |
| Net change in cash | $190,985 | ($96,273) | ($7,152) | ($12,866) | $55,736 |
| Closing cash | $190,985 | $94,713 | $87,560 | $74,695 | $130,431 |
The cash balance never reaches zero. It is $94,713 at the end of Year 2, about three months of that year's operating costs, and $87,560 at the end of Year 3. The lowest year end is Year 4, at $74,695, which is about one month of that year's operating costs, which makes Year 4 the year with the least room. Equity stays positive throughout and is $64,708 at the end of Year 2. Loan repayments begin in month 13, after the interest-only year. The only distribution is in Year 5, once cash and retained earnings can cover it.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $190,985 | $94,713 | $87,560 | $74,695 | $130,431 |
| Accounts receivable | $10,787 | $28,163 | $53,833 | $84,479 | $118,559 |
| Equipment and fit-out (net) | $25,771 | $20,543 | $15,314 | $10,086 | $4,857 |
| Total assets | $227,544 | $143,419 | $156,707 | $169,260 | $253,847 |
| Bank loan | $90,000 | $78,711 | $66,146 | $52,163 | $36,599 |
| Paid-in capital | $290,000 | $290,000 | $290,000 | $290,000 | $290,000 |
| Retained earnings | ($152,456) | ($225,292) | ($199,439) | ($172,903) | ($72,752) |
| Total liabilities and equity | $227,544 | $143,419 | $156,707 | $169,260 | $253,847 |
Margins, coverage and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -98.3% | -19.9% | 6.9% | 4.3% | 14.1% |
| Net margin (before start-up costs) | -111.5% | -24.8% | 4.6% | 3.0% | 13.0% |
| Payroll incl. pay raises as share of revenue | 102% | 69% | 56% | 59% | 57% |
| Revenue per full-time equivalent at year end | $56,247 | $73,425 | $102,073 | $92,737 | $117,752 |
| Average monthly revenue | $9,375 | $24,475 | $46,783 | $73,417 | $103,033 |
| Monthly revenue needed to cover operating costs | $18,727 | $29,422 | $43,489 | $70,185 | $88,311 |
| Debt service cover (EBITDA / interest + principal) | -11.4x | -2.9x | 1.9x | 1.9x | 8.5x |
Break-even compares each year's average monthly revenue with the monthly revenue needed to cover operating costs, both in the ratios table. Year 1 averages $9,375 a month against $18,727 needed and Year 2 averages $24,475 against $29,422. Year 3 is the first year above the line, at $46,783 against $43,489. Year 4 is above it by a smaller margin, $73,417 against $70,185, and Year 5 by more. The payroll row leaves out producer commission, which the compensation figures in the profit and loss note include. Debt service cover is negative in Years 1 and 2, because the agency is loss-making while paying interest, so the debt is serviced from the reserve, not from earnings. It is 1.9x in Years 3 and 4 and 8.5x in Year 5.
When commission falls 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $89,995 | $234,960 | $449,120 | $704,800 | $989,120 |
| Net income before start-up costs | ($124,345) | ($71,838) | $11,917 | $23,295 | $98,066 |
| Net income after start-up costs | ($151,345) | ($71,838) | $11,917 | $23,295 | $98,066 |
| Closing cash | $194,254 | $102,454 | $86,499 | $76,522 | $136,989 |
Here every revenue line falls 20% in every year. In practice, producer commission and chargebacks would fall with commission, but the model leaves them at the base-case level, so the case is cautious. The response: the first service representative stays on schedule, every hire from month 13 starts six months later, the second senior producer is dropped, marketing is cut by 20%, Marcus takes a 20% pay cut, the agency stays in its first office and no distributions are paid. On those terms the agency ends every year with cash in the bank, at no less than $76,522, and is profitable from Year 3, with net income of $11,917 against $25,853 in the base case. Equity ends Year 1 at $138,655. Year 5 cash beats the base case only because no distribution goes out. Without the response, the same 20% shortfall would leave $20,325 of cash at the end of Year 2 and none in Year 3, at ($92,289). A separate risk sits outside this case. Contingent commission depends on carriers' loss ratios, and a bad claims year could remove it. Losing it altogether would take $6,700 from Year 3 revenue and $14,100 from Year 4 in the base case, small beside the commission lines.
Sources
- Bureau of Labor Statistics, Insurance sales agents, Occupational Outlook Handbook: May 2025 median pay, 2025 employment, 2025 to 2035 outlook, employer share and pay structure.
- Bureau of Labor Statistics, Customer service representatives, Occupational Outlook Handbook: 2025 median pay.
- Texas Department of Insurance, General lines agent licensing: exam, fingerprints, $50 agent and agency application fees, agency requirements (designated responsible licensed producer, Secretary of State registration, bond or errors and omissions policy), and the 180-day temporary license ($150, 40 hours of training).
- Texas Comptroller of Public Accounts, Franchise tax: $2,650,000 no-tax-due threshold for report years 2026 and 2027.
- Premiums, commission rates, retention, producer pay, rent and the ratios for service staff are the plan's own figures and are not drawn from a published source.
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