Looking for an insurance broker business plan? You're in the right place.
A brokerage earns commission only after an account moves, and a mid-size account can take six months to move. The questions that follow are about time and cash. How long can the firm fund itself before commissions cover payroll? How many accounts does each hire need to pay for itself? What happens if the book builds more slowly than hoped? A generic template won't answer any of them.
In this article we'll walk through a complete sample business plan for a commercial insurance broker in Los Angeles, California, section by section. We'll cover the executive summary, the market and competitors, how a book of business is sold and serviced and, last, all of the financials.
Here's what's inside, and what it lets you do:
- The executive summary: put a long-cycle business on one page, so a reader sees the ask and the payback before turning over
- The market and competitor table: place a new brokerage against national firms, regional independents and online platforms without naming rivals you can't source
- The sales plan: tie accounts won to proposals, close rates and renewal dates, so the revenue line has something behind it
- The book of business: see accounts, premium placed and revenue per account for five years, and judge whether the hires keep pace
- The first year, month by month: find the months that lose money before you reach them, and size your reserve to the trough
- The five-year profit, cash flow and balance sheet: follow each hire, rent step and commission input through to cash
- The downside case: answer the "what if revenue is 20% short?" question with the steps the owner takes in response
If you're setting up a brokerage, read this before you write your own. The firm is fictional, so take what fits your book and change the rest.
In this plan
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Summary and Funding Ask
Plum Insurance opens in Los Angeles on January 1, 2027 as a commercial brokerage for employers with roughly 40 to 250 people. It places property, liability, auto and workers' compensation cover and group benefits, and bills a separate fee for loss-control work, benefits benchmarking and renewal strategy. Daniel Reyes is the sole owner.
The ask is $310,000. Daniel puts in $210,000 of savings and a bank lends $100,000 over seven years. $227,000 stays in the bank account as a reserve, $30,000 pays for equipment and fit-out, and $53,000 covers legal work, licensing, agency-management software and the launch.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $396,480 | $779,000 | $1,107,000 |
| Net income after start-up costs | ($90,444) | $63,715 | $62,191 |
| Closing cash | $145,760 | $154,770 | $167,585 |
Eight owners have signed letters agreeing to move at renewal, so Plum starts with 8 accounts and finishes 2027 with 23. Winning a mid-size account takes about six months, and it can only move on a renewal date. The book therefore grows in steps: 33 accounts by the end of 2028, 43 by the end of 2029 and 60 by 2031. The first year loses money because a founder and a service hire are on payroll before commission catches up. Month by month, operating profit turns positive in July 2027, and Year 2 is the first profitable year.
For the lender, there is a stress test. Take 20% off revenue in every year, leave Daniel's pay alone, push back hires, trim marketing and incentive pay, stay in the first office and skip distributions: the firm still ends each year with cash, though Year 2 becomes a small loss.
One caution applies to the whole document. Commission rates, win rates, rents and costs here are illustrative inputs for a fictional firm. They are not market statistics or quotes.
Plum aims at a single client size: employers big enough to need a benefits program and a workers' compensation strategy, and small enough to want a named senior broker. That broker leads the account, and renewal work begins about 120 days before each effective date.
The Firm at a Glance
Legal name: Plum Insurance, Inc., a California corporation. Owner: Daniel Reyes, 100%. Office: 1,000 square feet on the Mid-Wilshire corridor, Los Angeles (leased). Opening date: January 1, 2027, the renewal date of the first six accounts. Status: pre-launch. The agency license application is filed, the lease is in draft, and eight business owners have signed letters to move at renewal.
What Plum is for
Handling the insurance and benefits of mid-size Los Angeles employers through one named broker, with a renewal plan that starts four months before the date.
Targets to 2030
- 23 accounts by December 2027, up from 8.
- 33 accounts and an after-tax profit in 2028.
- About $1.1 million of revenue in 2029.
- Loan repayments on schedule from 2028 and owner distributions from 2030.
Lines of cover and how each one pays
| Line | Paid by | Share of Year 1 revenue |
|---|---|---|
| Property, liability and auto | Carrier commission | 45% |
| Workers' compensation, with claims support | Carrier commission | 13% |
| Employee benefits | Carrier commission | 25% |
| Advisory work: loss control, benchmarking, renewal strategy | Annual fee, plus carrier contingent commission from Year 3 | 17% |
Licensing
The California Department of Insurance licenses brokers and publishes its own rules and forms. It treats individual licenses and business entity licenses as separate applications. Daniel and anyone else who solicits or negotiates cover hold individual licenses, and Plum applies as an entity. Cover goes to admitted carriers, with licensed surplus lines brokers used for risks the admitted market will not take. Plum does not administer claims and does not carry risk itself. Requirements are rechecked before opening and at every renewal.
Market and Competition
Labor data for insurance sellers
The Bureau of Labor Statistics counted 572,600 insurance sales agent jobs in the United States in 2025, with median pay of $62,280 in May 2025 and projected growth of 3% from 2025 to 2035. The category spans personal and commercial agents alike. Plum's wages sit above that median because it hires experienced commercial staff in Los Angeles; the personnel plan has the figures.
Why a brokerage book compounds
Commission attaches to premium placed, so revenue tracks accounts rather than one-off sales. An account won in 2027 keeps paying for as long as it stays. Two inputs drive the growth: 8% of accounts leave each year, and revenue per account rises 3.5% a year through premium increases and extra lines. New accounts, retained accounts and deeper business with existing ones all feed the revenue line.
Who else is in the room at renewal
| Alternative | What it offers | Why a client picks it | Where Plum differs |
|---|---|---|---|
| National brokerages and bank-owned brokers | Complete commercial and benefits programs backed by analytics teams | Scale, carrier leverage, one provider for every line | One named broker leads; the service team stays put |
| Regional independent brokers | Commercial and benefits placement | Local history and carrier appointments already in place | A fixed renewal calendar and a stated advisory fee |
| Online brokerages and insurtech platforms | Quick quotes for small businesses | Speed and little friction on small premiums | Workers' compensation, benefits and claims advice for firms with real headcount |
| Carrier-direct and captive agents | A single carrier's products | Simple for a very small business | One submission goes to several carriers |
| Professional employer organizations and association plans | Pooled payroll, benefits and workers' compensation | HR outsourced in one package | The client keeps its own program and loss history |
These are categories, not named firms; service and fees vary by account, so none is ranked.
Strengths, weaknesses, opportunities, threats
| Strengths | Weaknesses |
|---|---|
| Twelve years of commercial placement behind the founder | One producer; new business stops when Daniel is away |
| Eight accounts committed before opening | No brand, so every prospect begins with a cold introduction |
| Income from both commission and fees | A loss in Year 1 paid from the reserve, and Daniel runs benefits renewals himself until month 20 |
| Opportunities | Threats |
|---|---|
| Mid-size firms unhappy with service at bigger brokers | Carriers cutting commission or rewriting contracts |
| Selling benefits and workers' compensation to property and liability clients | Soft markets, where lower premiums mean lower commission |
| Advisory fees that stay put when premiums move | A producer leaving with accounts, or a rival approaching Daniel's staff |
The Mid-Size Employer as Client
Who they are. A light manufacturer, wholesale distributor, logistics company, specialty contractor, medical group or professional-services firm with 40 to 250 people. The buyer is the owner, the chief financial officer or the head of human resources. They renew cover every year, carry a lease and a payroll, and have enough claims history for it to move the price.
How they buy now. Most stay with a broker of many years or the carrier agent who wrote the first policy. Property, liability, workers' compensation and benefits often sit with different people, so nobody reviews the program as one piece.
What pushes a switch. A steep renewal increase, a badly handled claim, an acquisition or new site that needs fresh cover, a climbing workers' compensation cost, or a broker who stopped returning calls.
What they rank highest. Claims get paid and calls get returned. The renewal holds no surprises. The price is fair for the cover. Someone senior knows the business.
Winning Accounts
From first meeting to bound policy
The sequence is a first meeting, a data request (loss runs, property and vehicle schedules, payroll and, for benefits, the employee census), a submission to carriers, a written proposal about 60 days before renewal and a signed broker-of-record letter. Daniel leads every first meeting and proposal in Year 1. With data gathering and carrier responses included, first meeting to effective date takes about six months.
Eight accounts already signed
Eight owners signed letters before opening: six renew on January 1, 2027 and two on April 1. Each letter records the renewal date and current premium. At the modeled average of about $373,000 of premium per account, the eight carry roughly $3.0 million between them. None is a client of Daniel's employer. He met them over the past 18 months through CPA and attorney referral partners, trade associations and his own contacts, and a lawyer has read his employment agreement and confirmed it places no limit on approaching them. Each broker-of-record letter takes effect on that account's renewal date.
Funnel for 2027
Plum expects 16 gross wins beyond the launch eight, from about 110 qualified conversations and about 55 formal proposals. That implies roughly half of conversations reaching a proposal and 30% of proposals closing. Accounts landing from May onward were first met in 2026 through Daniel's personal network and referral partners, with no employer files or client data involved. Formal marketing begins after opening.
| Lead source | Accounts won in Year 1 | Share |
|---|---|---|
| Referral partners (CPAs, attorneys, bankers) | 7 | 44% |
| Daniel's direct outreach | 4 | 25% |
| Industry associations and events | 3 | 19% |
| Benchmark report and content | 2 | 12% |
Revenue per account and persistency
Carrier contracts set commission, so a client cannot negotiate it; Plum competes on placement, service and the advisory fee. An average account brings in $2,240 a month across all lines, rising 3.5% a year from Year 2. Persistency, the share of accounts kept year to year, is set at 92%, and Plum would report it to the bank each quarter alongside account counts and revenue per account.
Selling roles and incentive pay
Daniel alone sells in Year 1. An account executive joins in month 13 and a second senior account executive in month 40. Each earns a base salary plus roughly 30% of the first-year revenue on accounts they win. Account managers and the benefits specialist are salaried and take no share of new business.
Five-year book of business
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Accounts at year end | 23 | 33 | 43 | 52 | 60 |
| Gross new accounts won in the year | 16 | 12 | 13 | 13 | 12 |
| Average revenue per account | $26,900 | $27,800 | $29,100 | $30,200 | $31,300 |
| Premium placed (modeled) | $5.5m | $10.8m | $15.2m | $19.7m | $24.0m |
Year 1 wins exclude the launch eight. Premium placed is not revenue; it is what the commission rates imply and is shown to size the book. After Year 3, service capacity limits growth rather than demand. Hires follow the book, so Plum turns away accounts that would overload the team.
Marketing and Referral Plan
Where the $74,000 goes
Year 1 marketing totals $74,000: $24,000 of launch spend paid from start-up capital and $50,000 of running spend. That is 19% of Year 1 revenue. Running spend alone drops to 5% of revenue by Year 3 and 4% by Year 5 as referrals do more of the work. Across 16 gross wins, marketing costs about $4,600 per account. Daniel spends about half his time selling in Year 1, worth $88,900 of loaded pay; counting it lifts the cost to about $10,200 per account, or 38% of an average account's first-year revenue.
| Channel | Year 1 spend | Purpose |
|---|---|---|
| Brand and website (launch) | $14,000 | A site with pages for manufacturing, distribution, logistics and healthcare clients |
| Risk benchmark report (launch) | $6,000 | A short annual report on workers' compensation and benefit costs for Los Angeles employers, used in outreach and at events |
| Launch event (launch) | $4,000 | First introductions to referral partners |
| Events and renewal-season seminars | $12,000 | Fall briefings for owners and HR leads ahead of January renewals |
| Association memberships and sponsorships | $9,000 | A presence where mid-size employers gather; with events, about 3 accounts |
| Referral partner program | $8,000 | Coffee meetings and a referral guide for CPAs, attorneys and bankers; about 7 accounts |
| LinkedIn and email outreach | $6,000 | Daniel's direct approaches to named prospects; about 4 accounts |
| Report distribution and content | $8,000 | Two guides a year and a benchmark mailing; about 2 accounts |
| Prospect data and proposal production | $7,000 | Lists, proposal layout and print |
2027 landmarks
- January: 6 launch accounts live and the agency-management system running.
- April: 11 accounts after the two April renewals.
- July: 17 accounts after the mid-year renewals.
- December: 23 accounts and $51,520 of monthly revenue.
How the Office Runs
Office
The lease covers 1,000 square feet on the Mid-Wilshire corridor at $42 a square foot a year, full service ($42,000 in Year 1), for five years with a personal guarantee. It seats four with a meeting room, which carries the team through Year 2. In Year 3 Plum moves to about 1,700 square feet at $45, as headcount heads toward six and a half. Rent is 11% of Year 1 revenue and 5% by Year 5.
The 120-day renewal clock
Each account runs on a calendar tied to its effective date. At 120 days the team collects loss runs, payroll and census data; at 90 it goes to carriers; at 60 it presents the proposal and strategy; at 30 it binds, issues certificates and books the renewal. In between, the service team handles endorsements, certificates and claim reporting while Daniel and the account executives sell and set strategy. Account managers hold 20 to 25 accounts each, which suits a named-broker model.
Technology
An agency-management system tracks policies and renewal dates. Alongside it sit comparative rating and submission tools, e-signature, a client portal for certificates and documents, and a benefits administration integration. Software costs $18,000 in Year 1 and $48,000 by Year 5.
Roles
Two people are on payroll at the end of Year 1, four at the end of Year 2 and eight and a half full-time equivalents by Year 5; the personnel plan gives each role, wage and start month. Account executives get incentive pay of $14,000 in Year 2, rising to $72,000 by Year 5. Hires track the book, and the stress case shows which are delayed or dropped when revenue falls short.
Licenses, cover and client contracts
- California Department of Insurance individual licenses for everyone who solicits or negotiates cover, and an entity license for the firm.
- Carrier appointments and written agency agreements, with commission schedules held in the agency-management system.
- Errors and omissions, cyber, general liability, crime and employee cover, budgeted at $16,000 in Year 1.
- Client agreements stating scope of service, advisory fee and broker-of-record terms.
- Any client premium Plum handles sits in a separate account and never enters revenue or cash in the model.
Carriers and specialist partners
Carriers and their underwriters, wholesale brokers for specialty risks, benefits administration platforms and outsourced loss-control specialists. A carrier that leaves or changes terms can be replaced, since each account is marketed to several.
Founder and Team
Daniel Reyes, founder and principal broker
Daniel has twelve years in commercial insurance at one regional Los Angeles brokerage. He started as an account manager, became a producer in year four and spent his last five years leading mid-size manufacturing and distribution accounts. He holds California property and casualty and life and health licenses. The $210,000 he invests is his savings, and he is leaving to run a smaller firm where he serves his own clients.
What Daniel has not done yet
He has not built a firm from nothing, has not run a payroll and has no specialist background in benefits compliance. An outsourced accountant covers payroll and books, an employment lawyer is on call, and a benefits specialist joins in month 20. Until then Daniel runs benefits renewals with carrier support, which is a stated weakness of the first year.
If Daniel is out
No errors and omissions claim has been made against him in twelve years, and carrier applications will ask. He is the only producer at launch, so the firm carries life and disability cover on him. A named account manager serves each account from month 5, and the account executive hired in month 13 is a second licensed broker who can sign proposals and bind cover.
Outside help
A CPA who works with other brokerages reviews the first-year numbers each quarter, and an insurance attorney advises on agency agreements and client contracts. Daniel also draws on a California small business development center for pricing and marketing questions.
Guarantee and collateral
Daniel owns 100% of Plum Insurance, Inc. The bank is expected to take his personal guarantee, a lien on the equipment and a blanket lien on business assets, and the loan requires quarterly accounts.
Five-Year Financials
The figures in this section come from a single five-year model, monthly for 2027 and annual from 2028. The inputs are listed first so each result can be traced back to its cause.
Funding the launch
| Use of funds | Amount |
|---|---|
| Laptops, monitors, phones and conference-room equipment | $14,000 |
| Office furniture and fit-out | $16,000 |
| Agency license, carrier appointments and E&O deposit premium | $9,000 |
| Legal and accounting: entity set-up, producer agreements, lease review | $12,000 |
| Agency-management system set-up and data migration | $8,000 |
| Launch: brand, website, risk-benchmark report, first events | $24,000 |
| Cash reserve for the long sales cycle and the first renewal season | $227,000 |
| Total uses | $310,000 |
| Source of funds | Amount |
|---|---|
| Daniel Reyes's savings | $210,000 |
| Bank term loan | $100,000 |
| Total sources | $310,000 |
Daniel invests $210,000 of his own savings, 68% of the total. A bank lends the other $100,000 over seven years at 10.5%, with interest only for the first twelve months; that rate is an illustration, not a quoted one. The bank is expected to want his personal guarantee, a lien on the equipment and a blanket lien on business assets. The $227,000 reserve is more than the base case needs, since the lowest month-end cash there is about $88,000. The surplus is for the stress case, where revenue is 20% short and Daniel keeps his full pay: with $40,000 less reserve, that case would end Year 2 with about $2,000 of cash. The loan stays at $100,000 for the same reason, and removing it would mean Daniel investing $100,000 more.
What the numbers rest on
- The average account pays $2,240 a month: $1,010 of property, liability and auto commission, $300 of workers' compensation commission, $560 of benefits commission and $370 of advisory fees. These are blended figures. Every account places property and liability cover; about 7 in 10 also place workers' compensation, about 6 in 10 place benefits and about 4 in 10 pay an advisory fee.
- Commission averages 10% of premium on property, liability and auto, 6% on workers' compensation and 3.5% on benefits, and each real carrier contract sets its own schedule. At those rates an average account places about $373,000 of premium a year. The whole book places about $5.5 million in Year 1, $15.2 million in Year 3 and $24.0 million in Year 5. Premium collected for clients is excluded from revenue and cash.
- Plum starts with 8 accounts, six renewing on January 1, 2027 and two on April 1. Fifteen more arrive during 2027, taking the year-end total to 23. Year-end accounts run 23, 33, 43, 52 and 60 after 8% annual attrition, which costs about 1 account in Year 1 and 2 in Year 2. Gross wins are therefore about 16 and 12.
- From first meeting to effective date, a mid-size account takes about six months. Many groups renew on January 1 or July 1, which explains the steps in April and July. Carriers pay commission 30 to 45 days late, so receivables are held at 45 days: commission earned in January reaches the bank in February and March.
- Revenue per account grows 3.5% a year from Year 2 through premium increases and added lines, from about $26,900 in Year 1 to $31,300 in Year 5. Carrier contingent commission, paid after year end on a mature book, adds $12,000 in Year 3, $20,000 in Year 4 and $28,000 in Year 5 inside the advisory line.
- Accounts per full-time equivalent at year end are 11.5, 8.3, 6.6, 6.9 and 7.1, and revenue per full-time equivalent stays between roughly $170,000 and $206,000. Account managers hold 20 to 25 accounts each by design: it fits the named-broker pitch, and a heavier load, common at higher-volume brokers, would raise margin.
- Account executives earn a base salary plus about 30% of first-year revenue on the accounts they win, booked as a separate line without on-costs. Daniel is the only seller in Year 1; the account executive starts in month 13 and the second senior account executive in month 40, and Daniel wins whatever they do not.
- Direct costs are a flat 3.65% of revenue: 2% of commission goes on carrier-portal, payment and quoting-tool fees, and 12% of advisory fees goes to outsourced loss-control and benchmarking work.
- Payroll costs 27% on top of wages for employer taxes, health cover, workers' compensation for office staff, paid leave and a retirement match (15% for the part-time coordinator). The wages in the team table are launch rates, and 3% annual pay raises appear as their own line from Year 2.
- The office is 1,000 square feet of Class B space on the Mid-Wilshire corridor at $42 a square foot a year, full service, then 1,700 square feet at $45 from Year 3. Rent takes 11% of Year 1 revenue because 1,000 square feet is about the smallest workable space for a founder, an account manager and a first account executive; it falls to 7% in Year 3 and 5% in Year 5. Software starts at $18,000 for an agency-management system, rating and e-signature tools and a client portal, and reaches $48,000 by Year 5.
- Plum's own insurance (errors and omissions, cyber, general liability, crime and employee cover) costs $16,000 in Year 1, 4.0% of revenue, and $32,000 in Year 5, 1.8% of revenue. Errors and omissions is the biggest item.
- Income tax comes to about 28% combined: the 21% federal corporate rate plus California's 8.84% corporation franchise tax, with the state tax deducted from the federal base (21% + 8.84% x 0.79). The engine carries forward the Year 1 operating loss of $37,444, which shelters part of Year 2 profit, but not the $53,000 of start-up costs shown in the profit and loss, so tax is slightly overstated. It leaves out California's $800 minimum franchise tax, which generally starts in a corporation's second year, and any S corporation election, taxed by California at 1.5% at entity level. The California rates came from search extracts of Franchise Tax Board pages, not the pages themselves, so they need confirming with the Board.
- Distributions of $40,000 in Year 4 and $100,000 in Year 5 begin only after retained earnings turn positive in Year 3. The loan runs to term rather than being paid off early.
Revenue by line of cover
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Property, liability and auto commissions | $178,770 | $351,000 | $493,000 | $638,000 | $779,000 |
| Workers' compensation commissions | $53,100 | $104,000 | $147,000 | $190,000 | $231,000 |
| Employee benefits commissions | $99,120 | $195,000 | $274,000 | $354,000 | $432,000 |
| Advisory fees and contingent commissions | $65,490 | $129,000 | $193,000 | $254,000 | $313,000 |
| Total revenue | $396,480 | $779,000 | $1,107,000 | $1,436,000 | $1,755,000 |
| Growth on prior year | – | 96% | 42% | 30% | 22% |
Property, liability and auto is the biggest line at 45% of Year 1 revenue and 44% of Year 5. Benefits holds a steady 25%, and workers' compensation is the smallest commission line at 13% in both years. Advisory fees and contingent commission rise from 17% to 18%, as fees tend to follow an account that already trusts the firm. Growth peaks at 96% in Year 2, when a full year of accounts is on the books and the account executive arrives, and eases to 22% by Year 5.
Month by month in 2027
| Month | Property, liability and auto commissions | Workers' compensation commissions | Employee benefits commissions | Advisory fees and contingent commissions | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $6,060 | $1,800 | $3,360 | $2,220 | $13,440 | ($20,706) |
| Feb 2027 | $7,070 | $2,100 | $3,920 | $2,590 | $15,680 | ($18,548) |
| Mar 2027 | $8,080 | $2,400 | $4,480 | $2,960 | $17,920 | ($16,389) |
| Apr 2027 | $11,110 | $3,300 | $6,160 | $4,070 | $24,640 | ($9,915) |
| May 2027 | $12,120 | $3,600 | $6,720 | $4,440 | $26,880 | ($7,757) |
| Jun 2027 | $13,130 | $3,900 | $7,280 | $4,810 | $29,120 | ($5,598) |
| Jul 2027 | $17,170 | $5,100 | $9,520 | $6,290 | $38,080 | $3,034 |
| Aug 2027 | $18,180 | $5,400 | $10,080 | $6,660 | $40,320 | $5,193 |
| Sep 2027 | $19,190 | $5,700 | $10,640 | $7,030 | $42,560 | $7,351 |
| Oct 2027 | $21,210 | $6,300 | $11,760 | $7,770 | $47,040 | $11,667 |
| Nov 2027 | $22,220 | $6,600 | $12,320 | $8,140 | $49,280 | $13,825 |
| Dec 2027 | $23,230 | $6,900 | $12,880 | $8,510 | $51,520 | $15,984 |
January revenue is $13,440 from the six accounts renewing on January 1. It climbs in April when two more arrive and again in July with the mid-year renewals. Profit before interest, depreciation and tax (EBITDA) is negative from January to June and positive from July to December. Commission arrives monthly as carriers pay it, so the line shows no seasonal peaks, though workload peaks at benefits open enrollment and January 1 renewals; the model treats that as the cost of hiring ahead. Month-end cash bottoms out in Jul at about $88,000 once 45 days of receivables are netted off.
Team and payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and principal broker | $140,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Account manager (service) | $72,000 | Month 5 | 1 | 1 | 1 | 1 | 1 |
| Account executive | $95,000 | Month 13 | – | 1 | 1 | 1 | 1 |
| Employee benefits specialist | $90,000 | Month 20 | – | 1 | 1 | 1 | 1 |
| Service associate (certificates, endorsements, claims support) | $58,000 | Month 26 | – | – | 1 | 1 | 1 |
| Second account manager | $76,000 | Month 30 | – | – | 1 | 1 | 1 |
| Compliance and renewals coordinator (part time, 20 hours a week) | $36,000 | Month 36 | – | – | 0.5 | 0.5 | 0.5 |
| Second senior account executive | $108,000 | Month 40 | – | – | – | 1 | 1 |
| Third account manager | $78,000 | Month 52 | – | – | – | – | 1 |
| Total payroll incl. on-costs | $238,760 | $437,515 | $631,465 | $818,640 | $927,225 |
Daniel is alone for the first four months. An account manager joins in month 5 as the first renewals come through, and then the hires follow the book: an account executive in month 13, a benefits specialist in month 20, a service associate in month 26, a second account manager in month 30 and a part-time compliance and renewals coordinator in month 36. A second senior account executive arrives in month 40 and a third account manager in month 52. Daniel draws $140,000 from the first month, so every profit figure is after his pay. The coordinator's $36,000 is a part-time salary.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $396,480 | $779,000 | $1,107,000 | $1,436,000 | $1,755,000 |
| Direct costs (carrier portal and loss-control fees) | ($14,479) | ($28,447) | ($40,425) | ($52,440) | ($64,089) |
| Gross profit | $382,001 | $750,553 | $1,066,575 | $1,383,560 | $1,690,911 |
| Payroll incl. on-costs | ($238,760) | ($437,515) | ($631,465) | ($818,640) | ($927,225) |
| Rent | ($42,000) | ($43,300) | ($76,500) | ($78,800) | ($81,200) |
| Utilities | ($3,600) | ($3,700) | ($5,200) | ($5,400) | ($5,600) |
| Marketing | ($50,000) | ($55,000) | ($58,000) | ($62,000) | ($65,000) |
| Insurance | ($16,000) | ($20,000) | ($25,000) | ($29,000) | ($32,000) |
| Professional fees | ($9,000) | ($10,000) | ($11,000) | ($12,000) | ($12,500) |
| Software subscriptions | ($18,000) | ($24,000) | ($34,000) | ($42,000) | ($48,000) |
| Licenses, carrier appointments, CE and association dues | ($6,000) | ($8,000) | ($10,000) | ($12,000) | ($13,000) |
| Client meetings, travel and renewal-season events | ($14,000) | ($18,000) | ($22,000) | ($24,000) | ($26,000) |
| Phones, supplies and postage | ($5,000) | ($6,000) | ($7,500) | ($8,500) | ($9,000) |
| Equipment replacement and new-hire kit | $0 | ($6,000) | ($5,000) | ($9,000) | ($6,000) |
| Account executive incentive pay (share of new-business commission) | $0 | ($14,000) | ($38,000) | ($56,000) | ($72,000) |
| Bad debt allowance (fee clients) | ($1,500) | ($3,000) | ($4,500) | ($5,500) | ($6,500) |
| Annual pay raises (3% a year) | $0 | ($13,125) | ($38,456) | ($75,910) | ($116,375) |
| EBITDA | ($21,859) | $88,913 | $99,954 | $144,810 | $270,511 |
| Depreciation | ($5,086) | ($5,086) | ($5,086) | ($5,086) | ($5,086) |
| Interest | ($10,500) | ($9,904) | ($8,512) | ($6,966) | ($5,250) |
| Income tax | $0 | ($10,208) | ($24,166) | ($37,151) | ($72,806) |
| Net income before start-up costs | ($37,444) | $63,715 | $62,191 | $95,608 | $187,369 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($53,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($90,444) | $63,715 | $62,191 | $95,608 | $187,369 |
Before start-up costs Year 1 loses $37,444, and after them $90,444. Year 2 turns a profit of $63,715 and pays $10,208 of income tax, because the Year 1 operating loss only covers part of it. The EBITDA margin is 11.4% in Year 2 and slips to 9.0% in Year 3, when the bigger office and three hires land together. It recovers to 10.1% in Year 4 and reaches 15.4% in Year 5, as the book keeps growing and only one hire follows month 40. Payroll with pay raises takes 58% to 62% of revenue throughout, which fits a business that sells advice and service.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($134,240) | $21,641 | $26,838 | $60,132 | $153,126 |
| Equipment and fit-out | ($30,000) | $0 | $0 | $0 | $0 |
| Funding received | $310,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($12,631) | ($14,023) | ($15,569) | ($17,284) |
| Owner distributions | $0 | $0 | $0 | ($40,000) | ($100,000) |
| Net change in cash | $145,760 | $9,010 | $12,815 | $4,563 | $35,841 |
| Closing cash | $145,760 | $154,770 | $167,585 | $172,148 | $207,990 |
Cash never goes below zero at a year end, and the low point is the end of Year 1. Operations burn $134,240 in Year 1, paid from the opening reserve. Distributions start in Year 4, when retained earnings and cash can support them.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $145,760 | $154,770 | $167,585 | $172,148 | $207,990 |
| Accounts receivable | $48,881 | $96,041 | $136,479 | $177,041 | $216,370 |
| Equipment and fit-out (net) | $24,914 | $19,829 | $14,743 | $9,657 | $4,571 |
| Total assets | $219,556 | $270,640 | $318,807 | $358,847 | $428,931 |
| Bank loan | $100,000 | $87,369 | $73,346 | $57,777 | $40,493 |
| Paid-in capital | $210,000 | $210,000 | $210,000 | $210,000 | $210,000 |
| Retained earnings | ($90,444) | ($26,729) | $35,462 | $91,069 | $178,438 |
| Total liabilities and equity | $219,556 | $270,640 | $318,807 | $358,847 | $428,931 |
Margins, break-even and debt cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -5.5% | 11.4% | 9.0% | 10.1% | 15.4% |
| Net margin (before start-up costs) | -9.4% | 8.2% | 5.6% | 6.7% | 10.7% |
| Payroll incl. pay raises as share of revenue | 60% | 58% | 61% | 62% | 59% |
| Revenue per full-time equivalent at year end | $198,240 | $194,750 | $170,308 | $191,467 | $206,471 |
| Average monthly revenue | $33,040 | $64,917 | $92,250 | $119,667 | $146,250 |
| Monthly revenue needed to cover operating costs | $34,931 | $57,226 | $83,605 | $107,142 | $122,853 |
| Debt service cover (EBITDA / interest + principal) | -2.1x | 3.9x | 4.4x | 6.4x | 12.0x |
Break-even here means average monthly revenue above the "needed" row in the table. Year 1 averages $33,040 against $34,931 needed, a small miss, though December's $51,520 is well past that line. Year 2 averages $64,917 against $57,226. Debt cover is negative in Year 1 because the firm loses money while paying interest, and holds above 3x from Year 2.
Stress test: revenue 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $317,184 | $623,200 | $885,600 | $1,148,800 | $1,404,000 |
| Net income before start-up costs | ($103,845) | ($1,888) | $59,168 | $97,319 | $159,353 |
| Net income after start-up costs | ($156,845) | ($1,888) | $59,168 | $97,319 | $159,353 |
| Closing cash | $89,136 | $41,975 | $59,855 | $114,242 | $229,933 |
Revenue is 20% lower in every line and every year, and Daniel keeps his full $140,000 pay. Management responds in these ways: the account executive and the benefits specialist start three months late, every hire from month 25 starts twelve months late, the second senior account executive and the third account manager are dropped, marketing and incentive pay fall by 20%, the firm stays in its first office through Year 5 and no distributions are paid. The first account manager still starts in month 5, because the launch accounts need servicing. With those steps cash stays at or above $41,975 at every year end, but Year 2 is a small loss instead of a profit and cash is thinnest at the end of that year. Profit returns in Year 3. Equity closes Year 1 at $53,155. The firm absorbs a 20% shortfall only because of the reserve and the delayed hires together.
Sources
- Bureau of Labor Statistics, Insurance sales agents, Occupational Outlook Handbook: 2025 employment, May 2025 median pay and 2025 to 2035 projection.
- California Department of Insurance, Applying for a license: lists individual and business entity license applications. The Department's requirements, hours and fees were not loaded and are not restated here.
- California Franchise Tax Board, Corporations and the 2025 Form 100 booklet. The 8.84% general corporation rate, 1.5% S corporation rate and $800 minimum franchise tax were read from search extracts of these pages; the pages themselves did not load. Confirm with the Board before relying on them.
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