Looking for a personal insurance agent business plan? You're in the right place.
Opening a personal-lines agency means answering the questions a seller, a carrier and a lender will all ask. How many policies does the agency need before it can pay its owner? What does a new policy earn compared with a renewal? How long do the first two years last, and what pays for them? A generic template won't show you what a sensible answer looks like.
In this article we'll walk through a complete sample business plan for a solo personal-lines agent in Pittsburgh, Pennsylvania, section by section, from the executive summary to the commission model, and finish with the financials.
Here's what you'll take away:
- The executive summary: see how to state on one page what the agency buys, what it costs and when it turns a profit, so a reader does not have to hunt for it
- The competition and SWOT: learn to describe captive agents and direct writers by category, so you make no claims about named companies that you cannot support
- The book model: trace each revenue figure to a policy count, an average premium and a retention rate, so a lender can test the arithmetic
- New versus renewal commission: understand why renewals carry the plan while new business drives growth, and what that does to cash in the early months
- The seller's earn-out: see how paying for a book out of the commission it earns changes the opening cash you need
- The five-year profit, cash flow and balance sheet: show a reader a loss in each of the first three years and the reserve that covers it, instead of a forecast that is profitable from month one
- The downside case: have an answer ready for the "what if revenue is 20% short?" question, along with the steps the owner takes in response
If you're setting up a personal-lines agency, read this before you write your own. The agency is fictional, so keep what fits your book and change the rest.
In this plan
If you need a personal insurance agent business plan template for your own plan, start it in the Toolkit.
Executive Summary
Mill Vale is an independent personal-lines insurance agency that opens in Pittsburgh, Pennsylvania on 1 January 2027. It sells auto, home, renters and life insurance to households and places each one with whichever of its carriers fits best. Founder Renata Wozniak owns 100% of the agency and is its only seller.
Renata starts with a book. She is buying 500 policies, about 290 households, from a retiring agent. The price is about $93,500: a $20,000 deposit at closing, an $8,000 holdback released at month 12 if at least 80% of the policies are still in force, and 20% of the renewal commission on those policies for 60 months, which comes to $65,463 at the plan's retention. That is about 0.99 times the $94,500 a year of renewal commission the book earns on the day of closing. The multiple is this example's own figure.
The agency needs $150,000, all of it Renata's savings. The money splits three ways: $99,500 stays in the bank as a reserve, $7,000 goes on equipment, and $43,500 covers the deposit, the holdback, legal work, filings and the launch. No bank loan is taken.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $112,214 | $126,917 | $155,015 |
| Net income after start-up costs | ($58,115) | ($27,474) | ($9,524) |
| Closing cash | $77,062 | $49,779 | $39,346 |
The agency loses money in each of its first three years, earns $11,244 in Year 4 and $36,182 in Year 5. Over the five years net income adds up to a loss of $47,687. A transferred book decays: Renata expects to lose 100 of the 500 policies in Year 1, and policies she writes herself pay only the lower renewal rate from their second year. Renewal income falls from $83,915 in Year 1 to $78,398 in Year 2 before it turns.
The downside case tests the risk the seller and the lender would both raise first: a quarter of the book (125 policies) fails to transfer and retention falls to 80% in every year. Renata cuts marketing and her own pay and pays no distribution. The seller's earn-out falls with the commission, so cash stays positive in every year, but the margins are thin: the lowest year-end cash is $30,125 and the lowest equity is $43,656, both at the end of Year 3, and Year 4 earns only $1,577.
What Mill Vale offers is modest: one of several carriers for each household, one named person on the phone, and a coverage review before every renewal.
The Agency and the Deal
Legal name: Mill Vale Insurance LLC, a Pennsylvania limited liability company. Owner: Renata Wozniak, 100%. Premises: a dedicated desk in a shared office in downtown Pittsburgh in Year 1, then a small private office from Year 2. Start date: 1 January 2027. Stage: pre-launch. The purchase agreement is signed and closes on the policies whose carriers have consented in writing.
What Mill Vale is for
Give Pittsburgh households coverage they understand, from an agent who answers the phone and reviews the policy before it renews.
Targets to 2031
- 485 policies in force by December 2027, 656 by December 2029 and 877 by December 2031.
- Retention of at least 80% on the transferred book in Year 1 and 88% on every policy from Year 4.
- A first profitable year in 2030, with cash positive throughout the losses before it.
- A first owner distribution of $20,000 in 2031.
Where the commission comes from
| Line | How it earns | Year 1 share of revenue |
|---|---|---|
| Renewal commission, transferred book | About 10.5% of premium each time a policy renews | 75% |
| Renewal commission, policies written since opening | The same rate, from the second year of each policy | 0% |
| New-business commission, auto, home and renters | About 12% of first-term premium | 17% |
| Life insurance | About 55% of first-year premium, then 4% a year | 8% |
| Carrier profit-sharing bonuses | Paid by some carriers in arrears; none counted before Year 3 | 0% |
Policies split 55% auto, 35% home and 10% renters and umbrella, with an average annual premium of $1,800. These mix and premium figures are planning figures for this example.
The purchase of the book
| Term | Treatment |
|---|---|
| Price basis | About 0.99 times the $94,500 of annual renewal commission on the closing schedule. This example's own figure; negotiated prices vary |
| Deposit | $20,000 at closing |
| Holdback | $8,000, released at month 12 if at least 80% of the scheduled policies are still in force |
| Earn-out | 20% of the renewal commission Mill Vale receives on scheduled policies, for 60 months; $65,463 at the plan's retention |
| Which policies count | Policies on the closing schedule, including any moved to a different carrier while the household stays. A new policy sold to a scheduled household belongs to Mill Vale and carries no earn-out |
| Seller covenants | Five years of no solicitation of the scheduled households and no competing personal-lines agency in Allegheny County, subject to a lawyer's view of what is enforceable; 90 days of introductions |
| Errors-and-omissions tail | The seller keeps extended reporting cover on his own policy for work done before closing. Mill Vale's cover starts at closing |
| Security | None. The earn-out is an obligation of the LLC and Renata gives no personal guarantee |
Questions a lender or the seller will ask
What is the book worth, and on what basis? The price is set against the renewal commission the schedule earns on the day of closing, since that is the income Mill Vale buys. The earn-out makes about 70% of the price depend on what stays, so a shortfall in retention reduces what the seller is paid.
Have the carriers agreed? Carriers writing 60% of the scheduled premium have consented in writing and the rest have received the request. The deal closes only on policies at consenting carriers. Two carriers write about 60% of the schedule, and that concentration is a risk the plan accepts in Year 1.
How does a policy move? Each carrier processes its own change of producer, usually on a form signed by both agencies and often with a letter to the policyholder. The effective date varies by carrier. Commission goes to Mill Vale from that date, and the earn-out applies only to commission Mill Vale has received.
What if Renata is unable to work? Her insurance budget includes about $1,800 a year of key-person term life and disability cover. The licensed assistant can service accounts and quote while Renata is away.
What is Renata's personal exposure? Her $150,000 of savings. There is no bank guarantee because there is no loan, and the seller holds no security. She would guarantee the 12-month lease on the private office personally, at $8,400.
Why the stake is $150,000
On cash alone, the stake does not beat a salary within five years. Renata draws $40,000 in Year 1, about $22,000 below the BLS median for insurance sales agents, and the agency loses $47,687 across the five years. What the money buys is the book. By Year 5 it earns $134,144 a year in renewal commission. Valued at the same 0.99 times she paid, which is only this example's own multiple, that is about $133,000, in addition to $82,313 of equity on the balance sheet. The case rests on the multiple holding and on retention, and the downside cases test both.
Licences and appointments
The Pennsylvania Insurance Department licenses insurance producers. Renata holds Pennsylvania producer licences for property and casualty and for life insurance. The assistant is licensed for the same lines so that she can quote and advise, and both licences carry the Department's continuing education requirement of 24 hours in each two-year licensing cycle. The agency budgets $1,800 in Year 1 for education, renewals and carrier appointment fees for the two of them. The Department and its exam vendor set the exam, application and fingerprinting steps and their fees, so this plan quotes none of them. Each carrier contracts with the agency separately before the agency may sell its products.
The Pittsburgh Personal-Lines Market
How an agent is paid
Federal labour statistics put the United States at 572,600 insurance sales agents in 2025, with 3% employment growth projected to 2035. Commission is the usual form of pay, and independent agents can be paid on commission alone. Median pay was $62,280 in May 2025 for employees; self-employed agents are outside that figure.
Sizing the agency
The plan sizes the agency from capacity and quotes no Pittsburgh household count or premium total. One licensed agent and a part-time licensed assistant can write and service a limited number of policies. The question for the plan is whether the pipeline fills that capacity, and the busiest year has 215 new policies and 877 in force.
Commission schedules
Commission rates belong to each carrier's agency agreement and vary by carrier, line and year. Some carriers pay one flat rate for new and renewal business. The plan blends them at 12% on new property and casualty premium and 10.5% on renewals, which are this example's own figures. A point on the renewal rate moves Year 1 revenue by about $8,000.
Who else sells to the household
Four kinds of seller compete for a household's policies. A captive agent sells one carrier's products with a familiar brand. A direct writer sells by phone or online with no agent. A comparison site shows quotes side by side. Another independent agency offers several carriers, often with a longer client list. No company or premium is named here, since terms change and each seller publishes its own.
Mill Vale's contest happens at three moments.
| Moment | Who else is in the room | What Mill Vale offers |
|---|---|---|
| A transferred household receives the letter | The household's own carrier, and any agent who has quoted it | A named person, and a coverage review at its first renewal |
| A household sees a large renewal increase | Comparison sites and direct writers | A re-quote across Mill Vale's carriers, with the limits and exclusions each quote leaves out |
| A household buys a home | The lender's recommendation, and the realtor's contacts | Referral relationships and same-day quotes |
SWOT
Strengths
- Nine years servicing personal-lines accounts at a Pittsburgh agency
- A purchased book that pays commission from the first day
- Price tied to what stays: the holdback and earn-out shrink with retention
Weaknesses
- One seller, and a licensed assistant who covers service only
- A book built under the seller's name
- Three loss-making years that draw on the reserve
Opportunities
- Cross-selling home, renters and life to households that hold one policy
- Referrals from realtors and mortgage lenders
- Carrier bonuses once volume and results qualify
Threats
- Carriers declining to move policies, or moving them late
- Premium increases that send households shopping each year
- Two carriers holding 60% of the starting premium
Who Buys
Three households
The household that inherited an agent. Most of the 500 scheduled policies belong to households that chose the seller rather than Mill Vale. They receive a transfer letter and a call. Some accept, some ask what changed, and some stay with the carrier and drop the agent. The plan loses 100 of the 500 policies in Year 1 for this reason.
The household buying its first home. A couple in their thirties with two cars and a new mortgage needs home, auto and often life cover in one week. Referrals from realtors and mortgage lenders reach them, and this is where the life sales come from: 15 in Year 1.
The household at a large renewal increase. A family of four with two cars and a home sees its premium jump and starts shopping. A re-quote across several carriers is the job Mill Vale does best.
How households buy now
Most stay with the carrier they started with. Some get a quote from a comparison site at renewal. A smaller group has an agent they have never changed. The commonest gap is a policy bought on price, with limits and exclusions nobody explained.
What a household checks first
The price is fair for the cover that matters. Someone answers when they call. A claim is handled without a fight. They understand what the policy covers.
Writing and Keeping Policies
From quote to renewal call
A 20-minute call, quotes from the agency's carriers through a comparative rating tool, a coverage review that names what each quote leaves out, e-signature, and a call 30 days after the start date. About 60 days before each renewal, Renata or the licensed assistant re-quotes the household and sends a one-page summary of what changed. Renata takes every sales call in Year 1.
The book in numbers
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| New policies written | 89 | 150 | 180 | 200 | 215 |
| Transferred policies still in force at year end | 400 | 340 | 296 | 260 | 229 |
| Total policies in force at year end | 485 | 556 | 656 | 766 | 877 |
| Average annual premium | $1,800 | $1,854 | $1,910 | $1,967 | $2,026 |
| Life policies sold | 15 | 24 | 30 | 36 | 40 |
Retention on the transferred book is 80% in Year 1, 85% in Year 2, 87% in Year 3 and 88% after that. Policies Mill Vale writes keep 88% a year. A new policy that stays earns about $216 in its first year and about $189 in each renewal at 2027 premiums. At 88% retention it is expected to renew about seven more times, worth about $1,390 of renewal commission.
Where Year 1's 89 new policies come from
| Lead source | New policies | Share |
|---|---|---|
| Cross-sale to the transferred households | 28 | 31% |
| Referral partners (realtors and mortgage lenders) | 26 | 29% |
| Online search and quote requests | 21 | 24% |
| Community events and word of mouth | 14 | 16% |
Why Years 1 and 2 are slow
Renewal commission falls from $83,915 in Year 1 to $78,398 in Year 2, because the transferred book is shrinking and a new policy earns the renewal rate only from its second year. Revenue still grows 13% in Year 2 as new business reaches $33,372. The agency loses $27,474 in Year 2 after $58,115 in Year 1, and $9,524 in Year 3. Renata's household lives on her $40,000 wage and a partner's salary in those three years.
Acquisition cost against first-year commission
Year 1 marketing is $19,500, or $219 for each of the 89 new policies. A new policy's first-year commission is about $216, and after the 4% chargeback allowance it nets about $207. Cost and first-year commission are therefore roughly equal, and the launch spend comes back in the first renewal. The cost per new policy falls to about $113 in Year 2 and about $93 in Year 5 as referrals and cross-sales replace paid search.
Finding New Policies
Spend by channel
Marketing in Year 1 comes to $19,500, made up of $6,500 for the launch (paid from the opening capital) and $13,000 of running spend. It equals 17% of Year 1 revenue, then 13% in Year 2, 12% in Year 3 and 9% in Year 5.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website, brand and launch mailing to the transferred households (launch) | $6,500 | A clear site with quote request forms, and a letter and call that introduce Renata to each household before its first renewal |
| Online search and quote-request ads | $6,000 | Searches such as "home insurance Pittsburgh"; about 21 policies, roughly $286 each |
| Referral partner programme | $3,000 | Coffee meetings and a closing-day guide for realtors and mortgage lenders; about 26 policies, roughly $115 each |
| Cross-sale mailings and calls to the transferred households | $1,500 | Offers of a home, renters or life review; about 28 policies, roughly $54 each |
| Community events and sponsorships | $1,500 | A neighbourhood association table and a local sports sponsorship; about 14 policies, roughly $107 each |
| Newsletter, review requests and renewal reminders | $1,000 | Keeps existing households informed and supports the retention figures |
Dates to 2030
- January 2027: purchase closes, transfer letters go to the scheduled households, and the first carriers confirm the move.
- June 2027: the licensed assistant starts.
- December 2027: 485 policies in force, with 89 new policies and 15 life policies sold in the year.
- 2028: move to a small private office; 556 policies in force; the $8,000 holdback is released in January if retention holds.
- 2029: first carrier bonus statement of $3,000 expected.
- 2030: first profitable year.
Running the Agency
Where Renata works
A dedicated desk in a shared downtown office at $450 a month in Year 1 ($5,400), with a meeting room booked by the hour. A small private office from Year 2 at $700 a month ($8,400), rising to $9,000 at the Year 3 lease renewal and by about 3% a year after that. Renata meets most households by phone and video, and in person on request.
Who does what
Renata quotes, advises and handles claims questions. The licensed assistant processes endorsements, certificates and ID cards, answers billing questions, quotes straightforward renewals and keeps the renewal calendar. Every household has a renewal review about 60 days before its renewal date. Each client's coverage choices, and any coverage the client declined, are recorded and signed.
Carriers
Mill Vale applies for appointments with the three carriers that write about 75% of the scheduled premium, adds two more in Year 1 and a sixth in Year 2. Two carriers write about 60% of the schedule at closing. The target is for no carrier to exceed 40% of premium by Year 3 as new business spreads across the others. Clients pay premium directly to the carrier, so the agency holds no client money and receives only commission, settled about 30 days in arrears.
Agency software
An agency management system that tracks every policy and renewal date, a comparative rating tool, e-signature, a call-recording phone system and a secure client portal. Software costs $6,600 in Year 1 and $9,000 by Year 5.
Capacity
Renata at launch, and a licensed part-time service assistant from month 6 at 20 hours a week for the rest of the plan. Capacity is the tightest figure in the plan. One seller and a 20-hour assistant are expected to service 877 policies and write 215 new ones in Year 5, and no published benchmark supports that. If new writing slows, the assistant's hours move to service. If writing runs ahead, the next hire is a licensed associate, which this plan does not fund.
Cover and compliance
- Pennsylvania producer licences for property and casualty and for life, held by Renata, and for the same lines by the assistant, each with 24 hours of continuing education in every two-year cycle.
- Carrier appointments and a signed agency agreement with each.
- Errors-and-omissions cover for the agency, cyber cover, workers' compensation for the assistant, and key-person term life and disability cover on Renata, budgeted at $6,400 in Year 1.
- Written privacy and data-security procedures for client records.
Dependencies
The carriers, the software vendors, the shared-office operator and the accountant. Carriers are the only suppliers that are hard to replace, which is why the carrier targets above matter.
Who Runs It
Renata Wozniak, founder and licensed agent
Renata has nine years in Pittsburgh personal lines, all of them as a licensed account manager at one independent agency. She handled renewals, endorsements and claims calls for about 400 policies and quoted new business when the agency's producers were busy. She holds Pennsylvania licences for property and casualty and for life. Her $150,000 investment is her savings, built over those years.
The seller
The seller is a retiring independent agent with whom Renata has worked on a local industry committee. He stays available for 90 days to introduce her to his larger households. His payment depends on what stays, which gives him a reason to see that the households settle in.
What Renata has not done
Renata has never owned an agency, built a pipeline from nothing or done her own bookkeeping. She covers them with a standing weekly slot for referral partners, an outside accountant ($2,500 in Year 1) and a monthly report of policies in force, retention and commission by carrier.
Outside help
An independent agent who runs a four-person agency in Washington County reviews the first-year numbers each quarter. Renata also uses a state independent-agents association for carrier contacts and training.
Ownership and exposure
Renata owns 100% of Mill Vale Insurance LLC. She gives no guarantee on the purchase and takes no loan.
The Numbers Behind the Book
One model, five years, produces every table here. It is monthly for 2027 and annual after. Revenue starts from the book, with policies in force, retention and the commission per policy, so each revenue line can be traced back to a count of policies.
Funding the purchase and the first years
| Use of funds | Amount |
|---|---|
| Book purchase: deposit paid at closing | $20,000 |
| Book purchase: retention holdback, released at month 12 if at least 80% of policies remain | $8,000 |
| Agency filings, carrier appointments and errors-and-omissions deposit | $2,000 |
| Legal: entity set-up, purchase agreement, carrier contract review | $7,000 |
| Website, branding and launch mailing to the transferred households | $6,500 |
| Laptops, second monitors, phones and office furniture | $7,000 |
| Cash reserve for the first three years of building the book | $99,500 |
| Total uses | $150,000 |
| Source of funds | Amount |
|---|---|
| Renata Wozniak's savings | $150,000 |
| Total sources | $150,000 |
Renata invests $150,000 of her own savings and borrows nothing. A bank loan would mean paying interest on cash that sits unused while the agency loses money, and the cash flow could not service it before Year 4. The purchase of the book is part-funded at closing: a $20,000 deposit at closing, $8,000 more at month 12 once the holdback condition is met, and an earn-out paid from commission as it is collected. The deposit and holdback are expensed in Year 1 in this model, as the engine has no intangible-asset line. The $99,500 reserve covers the $95,113 of losses in Years 1 to 3 after start-up costs, with cash still positive in every year of the base case and the downside case.
What the figures rest on
- The agency opens with 500 personal-lines policies in force at closing, about 290 households, bought from a retiring agent. The average premium is $1,800 a policy in 2027, rising 3% a year, from a planning mix of 55% auto at about $2,050, 35% home at about $1,800 and 10% renters and umbrella at about $450. These are planning figures for this example, not market data.
- Commission is a blend across carriers: 12% of first-term premium on new property and casualty policies and 10.5% on renewals, so a new policy earns about $216 in Year 1 and a renewal about $189. Each carrier's agency agreement sets its own schedule, and some carriers pay one flat rate for new and renewal business. The model treats every policy as an annual term, so six-month auto terms are expressed on annualised premium.
- Retention on the transferred book is 80% in Year 1, 85% in Year 2, 87% in Year 3 and 88% after that, because households that did not choose the agency leave more often in the first year. Policies written since opening keep 88% a year. The transferred book falls from 500 policies to 400 by the end of Year 1 and to 229 by the end of Year 5. A new policy that stays is expected to renew about seven more times, which is worth about $1,390 of renewal commission at 2027 premiums and rates.
- New policies written: 89, 150, 180, 200 and 215 in Years 1 to 5, ramping from 3 a month in January 2027 to 10 a month in July and August. A new policy pays the new-business rate for its first twelve months and the renewal rate from the thirteenth. Policies in force at year end are 485, 556, 656, 766 and 877.
- Life insurance: 15 policies sold in Year 1, then 24, 30, 36 and 40. The average annual premium is $1,100, first-year commission is 55% and renewal commission is 4% of premium in force, with 5% of life policies lapsing each year. Every life sale comes from a household that already holds a property and casualty policy.
- The seller is paid in three parts: a $20,000 deposit at closing, an $8,000 holdback released at month 12 if at least 80% of the policies on the closing schedule are still in force, and 20% of the renewal commission on those scheduled policies for 60 months. At the plan's retention the earn-out is $16,783, $14,277, $12,654, $11,408 and $10,341, or $65,463 in all. The total price is about $93,500, or 0.99 times the $94,500 a year of renewal commission the schedule earns at closing. That multiple is a figure set for this example, not a market quote. The earn-out is modelled as a direct cost at 20% of the transferred-book renewal line, so it falls when that line falls.
- Only policies on the closing schedule count towards the earn-out. A policy moved to a different carrier stays on the schedule while the household remains a client. A new policy sold to a scheduled household is Mill Vale's own, earns no earn-out and sits in the "written since opening" line.
- Chargebacks are modelled as a direct cost: 4% of new property and casualty commission and 7% of life commission, for policies that cancel or lapse early. That is $1,404 in Year 1. Carrier profit-sharing bonuses are set at nothing in Years 1 and 2, then $3,000, $5,000 and $7,000. They depend on carrier results and volume and could be zero.
- Carriers pay commission about 30 days after the statement date, so receivables average 30 days. Clients pay premium directly to the carrier, so the agency holds no client money in the model.
- On-costs of 27% sit on top of wages for payroll taxes, workers' compensation and a retirement match; the part-time assistant carries 15%. Renata is paid $40,000 from the first month, below the $62,280 median the Bureau of Labor Statistics reports for insurance sales agents in May 2025; the BLS figure excludes the self-employed. The assistant is licensed so that she can quote, advise and process changes. She works 20 hours a week from month 6 at $26,000 a year, about $25 an hour. A separate line from Year 2 carries 3% annual pay raises.
- A dedicated desk in a shared office costs $450 a month in Year 1 ($5,400). A small private office follows from Year 2 at $700 a month ($8,400), rising to $9,000 at the Year 3 lease renewal and by about 3% a year after that.
- Insurance of $6,400 in Year 1 covers errors and omissions, cyber, workers' compensation and about $1,800 of key-person term life and disability cover on Renata. Licensing and continuing education for two licensed people cost $1,800 in Year 1.
- Income tax uses the 21% federal corporate rate plus Pennsylvania's 6.99% corporate net income rate for 2027, held flat. The Department of Revenue schedule steps down to 4.99% from 2031, which the model does not use. No tax is due in any year, because the $95,113 of losses in Years 1 to 3 is more than the $47,426 of profit in Years 4 and 5. An owner who elected pass-through treatment would be taxed on a personal return.
- Year 5 alone pays an owner distribution, $20,000, out of surplus cash.
Commission by line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Renewal commissions, transferred book | $83,915 | $71,384 | $63,271 | $57,042 | $51,703 |
| Renewal commissions, policies written since opening | $0 | $7,014 | $27,747 | $53,719 | $82,441 |
| New-business commissions, auto, home and renters | $19,224 | $33,372 | $41,248 | $47,206 | $52,269 |
| Life insurance commissions (first-year and renewal) | $9,075 | $15,147 | $19,749 | $24,553 | $28,339 |
| Carrier profit-sharing bonuses | $0 | $0 | $3,000 | $5,000 | $7,000 |
| Total revenue | $112,214 | $126,917 | $155,015 | $187,520 | $221,752 |
| Growth on prior year | – | 13% | 22% | 21% | 18% |
Renewal commission is the base: 75% of Year 1 revenue and 61% of Year 5. It falls in Year 2, from $83,915 to $78,398, because the transferred book loses 15% of its policies while the policies written since opening have not yet reached their second year. Total revenue still rises 13%, because new-business commission grows from 17% of revenue to 26%. Life commission is the smallest regular line, at 8% to 13%. Carrier bonuses add 2% to 3% from Year 3 and are the least certain line in the plan.
Month by month in 2027
| Month | Renewal commissions, transferred book | Renewal commissions, policies written since opening | New-business commissions, auto, home and renters | Life insurance commissions (first-year and renewal) | Carrier profit-sharing bonuses | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|
| Jan 2027 | $7,730 | $0 | $648 | $0 | $0 | $8,378 | ($1,917) |
| Feb 2027 | $7,588 | $0 | $864 | $0 | $0 | $8,452 | ($1,855) |
| Mar 2027 | $7,448 | $0 | $1,080 | $605 | $0 | $9,133 | ($1,284) |
| Apr 2027 | $7,311 | $0 | $1,296 | $605 | $0 | $9,212 | ($1,218) |
| May 2027 | $7,176 | $0 | $1,728 | $605 | $0 | $9,509 | ($969) |
| Jun 2027 | $7,044 | $0 | $1,944 | $1,210 | $0 | $10,198 | ($392) |
| Jul 2027 | $6,914 | $0 | $2,160 | $605 | $0 | $9,679 | ($827) |
| Aug 2027 | $6,786 | $0 | $2,160 | $1,210 | $0 | $10,156 | ($427) |
| Sep 2027 | $6,661 | $0 | $1,944 | $1,210 | $0 | $9,815 | ($713) |
| Oct 2027 | $6,539 | $0 | $1,944 | $605 | $0 | $9,088 | ($1,322) |
| Nov 2027 | $6,418 | $0 | $1,728 | $1,210 | $0 | $9,356 | ($1,097) |
| Dec 2027 | $6,300 | $0 | $1,728 | $1,210 | $0 | $9,238 | ($1,196) |
Every month of 2027 runs at an operating loss. EBITDA (earnings before interest, depreciation and tax) improves from ($1,917) in January to about ($400) in June and August as new policies written climb from 3 to 10 a month, then widens to ($1,196) in December as writing eases to 8. The monthly view divides each year's costs evenly, so the assistant's pay shows from January though she starts in month 6. The year opens with $107,500 in the bank after the deposit and start-up costs. Within 2027 the thinnest month-end balance is Dec, at about $77,000 once 30 days of unpaid commission is set aside. Over all five years the thinnest point is the end of Year 3, at $39,346.
Who is on payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and licensed agent | $40,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Licensed service assistant (part time, 20 hours a week) | $26,000 | Month 6 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Total payroll incl. on-costs | $68,242 | $80,700 | $80,700 | $80,700 | $80,700 |
Renata works alone from January to May, writing policies and servicing the book herself. A licensed part-time service assistant joins in month 6 at 20 hours a week and stays at that level for the rest of the plan. No other hire is in the plan. Renata is the only seller and the only owner. The assistant can quote and advise under her own licence, so service carries on when Renata is away. The table counts her as 0.5. Because Renata's $40,000 comes out from the first month, every profit figure is struck after her pay.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $112,214 | $126,917 | $155,015 | $187,520 | $221,752 |
| Direct costs: seller earn-out (20% of transferred-book renewals) and chargebacks | ($18,187) | ($20,570) | ($25,124) | ($30,393) | ($35,941) |
| Gross profit | $94,027 | $106,347 | $129,891 | $157,127 | $185,811 |
| Payroll incl. on-costs | ($68,242) | ($80,700) | ($80,700) | ($80,700) | ($80,700) |
| Rent | ($5,400) | ($8,400) | ($9,000) | ($9,300) | ($9,600) |
| Utilities | ($1,800) | ($1,900) | ($1,900) | ($2,000) | ($2,000) |
| Marketing | ($13,000) | ($17,000) | ($18,000) | ($19,000) | ($20,000) |
| Insurance | ($6,400) | ($6,700) | ($6,900) | ($7,100) | ($7,300) |
| Professional fees | ($2,500) | ($2,500) | ($2,800) | ($3,000) | ($3,000) |
| Software subscriptions | ($6,600) | ($7,400) | ($8,000) | ($8,500) | ($9,000) |
| CE, licence renewals and carrier appointment fees (two licensed people) | ($1,800) | ($2,200) | ($2,500) | ($2,500) | ($3,000) |
| Phones, postage and supplies | ($1,500) | ($1,700) | ($1,800) | ($1,900) | ($2,000) |
| Equipment replacement | $0 | ($1,500) | ($1,500) | ($3,000) | ($1,500) |
| Annual pay raises (3% a year) | $0 | ($2,421) | ($4,915) | ($7,483) | ($10,129) |
| EBITDA | ($13,215) | ($26,074) | ($8,124) | $12,644 | $37,582 |
| Depreciation | ($1,400) | ($1,400) | ($1,400) | ($1,400) | ($1,400) |
| Interest | $0 | $0 | $0 | $0 | $0 |
| Income tax | $0 | $0 | $0 | $0 | $0 |
| Net income before start-up costs | ($14,615) | ($27,474) | ($9,524) | $11,244 | $36,182 |
| Start-up costs expensed at opening (book deposit and holdback, legal, filings, launch marketing) | ($43,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($58,115) | ($27,474) | ($9,524) | $11,244 | $36,182 |
The first year ends $14,615 down before start-up costs and $58,115 down after them, since the book deposit, the holdback and the launch are all expensed in it. Year 2 loses $27,474, a wider operating loss than Year 1, because a full year of the assistant, the private office, a larger marketing budget and the first pay raises arrive before new policies begin to renew. Year 3 loses $9,524. Year 4 is the first profitable year at $11,244 and Year 5 earns $36,182. Over the five years net income adds up to a loss of $47,687. Income tax is zero in Years 4 and 5 because earlier losses carry forward.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($65,938) | ($27,283) | ($10,434) | $9,973 | $34,769 |
| Equipment (laptops, phones, furniture) | ($7,000) | $0 | $0 | $0 | $0 |
| Funding received | $150,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid (no loan) | $0 | $0 | $0 | $0 | $0 |
| Owner distributions | $0 | $0 | $0 | $0 | ($20,000) |
| Net change in cash | $77,062 | ($27,283) | ($10,434) | $9,973 | $14,769 |
| Closing cash | $77,062 | $49,779 | $39,346 | $49,319 | $64,087 |
The bank balance never drops below $39,346, reached at the end of Year 3. Cash falls from $107,500 on day one to $77,062 at the end of Year 1, after the $8,000 holdback is released, and then by $27,283 in Year 2 and $10,434 in Year 3. The only distribution is $20,000 in Year 5.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $77,062 | $49,779 | $39,346 | $49,319 | $64,087 |
| Accounts receivable | $9,223 | $10,432 | $12,741 | $15,413 | $18,226 |
| Equipment (laptops, phones, furniture) (net) | $5,600 | $4,200 | $2,800 | $1,400 | $0 |
| Total assets | $91,885 | $64,411 | $54,887 | $66,131 | $82,313 |
| Bank loan (none taken) | $0 | $0 | $0 | $0 | $0 |
| Paid-in capital | $150,000 | $150,000 | $150,000 | $150,000 | $150,000 |
| Retained earnings | ($58,115) | ($85,589) | ($95,113) | ($83,869) | ($67,687) |
| Total liabilities and equity | $91,885 | $64,411 | $54,887 | $66,131 | $82,313 |
Break-even and margins
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -11.8% | -20.5% | -5.2% | 6.7% | 17.0% |
| Net margin (before start-up costs) | -13.0% | -21.6% | -6.1% | 6.0% | 16.3% |
| Payroll incl. pay raises as share of revenue | 61% | 65% | 55% | 47% | 41% |
| Revenue per full-time equivalent at year end | $74,809 | $84,611 | $103,343 | $125,013 | $147,835 |
| Average monthly revenue | $9,351 | $10,576 | $12,918 | $15,627 | $18,479 |
| Monthly revenue needed to cover operating costs | $10,665 | $13,170 | $13,726 | $14,369 | $14,742 |
| Debt service cover (EBITDA / interest + principal) | – | – | – | – | – |
A year pays for itself when average monthly revenue passes the "needed" line in the ratios table. Year 3 averages $12,918 a month against $13,726 needed. Year 4 averages $15,627 against $14,369. There is no loan, so debt service cover does not apply.
If a quarter of the book fails to transfer
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $91,235 | $106,601 | $130,554 | $156,533 | $182,778 |
| Net income before start-up costs | ($18,638) | ($29,703) | ($14,503) | $1,577 | $20,607 |
| Net income after start-up costs | ($62,138) | ($29,703) | ($14,503) | $1,577 | $20,607 |
| Closing cash | $74,763 | $45,197 | $30,125 | $30,967 | $50,817 |
This case runs the risk the plan itself names. A quarter of the closing schedule fails to transfer, so the agency starts with 375 policies instead of 500, and retention is 80% in every year for every policy. The response: marketing is cut by 20%, Renata takes a 20% pay cut to $32,000 and no distribution is paid. The earn-out is a direct cost at 20% of transferred-book renewals, so it shrinks with the commission: it totals $44,350 over the five years instead of $65,463. Cash stays above zero throughout, but the cushion is thin. The lowest year-end cash is $30,125 at the end of Year 3 and the lowest equity is $43,656 in the same year. Equity ends Year 1 at $87,862. Year 4 earns $1,577 and Year 5 $20,607. A uniform 20% fall in every revenue line, the standard test, would cut deeper in the later years, because the earn-out protects the agency only against lost policies, not against slow new business.
Sources
- Bureau of Labor Statistics, Insurance sales agents: job count for 2025, the 2025 to 2035 growth projection, May 2025 median pay and the note on how agents are paid.
- Pennsylvania Insurance Department, Continuing education requirements: 24 hours of continuing education in each two-year licensing cycle.
- Pennsylvania Department of Revenue, Corporation tax rates: corporate net income tax of 6.99% for 2027, stepping down to 4.99% from 2031.
- Federal corporate income tax rate of 21%: 26 U.S.C. section 11(b).
Commission schedules, average premiums, retention, the book's price and the multiple it implies, carrier consent status, and agency costs are this example's own figures. They are not published market figures.
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