Looking for a financial holding company business plan? You're in the right place.
A holding company that buys regulated businesses has to answer three questions before anyone lends or invests. What does it pay, and how is that paid for? How does cash move from the companies it owns up to the people who own it? And what happens to the debt if the acquired revenue comes in short? A template with blank boxes won't show you what a credible answer looks like.
In this article we'll walk through a complete sample plan for Summit Brook, a Salt Lake City holding company that owns an insurance agency and an investment advisory firm. We'll cover the structure, the regulators, the SWOT analysis and, in particular, all of the financials.
Here's what you'll be able to do after reading it:
- The group structure: see how a holding company, an agency and an advisory firm divide the work, so you can draw your own chart before a lender asks for one
- The regulatory line: learn why this plan owns no bank and what that choice does to the paperwork, so you know which rules you are writing around
- The management fee: see how a holding company pays for its own team, and where the rest of its cash comes from
- The purchase funding: find out how a $4.75 million raise splits between equity, a bank loan and seller notes, and how to defend the purchase prices
- The five-year consolidated accounts: follow each hire, amortisation charge and loan payment into the profit, cash and balance sheet
- The downside case: have an answer ready for "what if revenue is 20% short?", with the steps the founder takes, the covenant breach it leaves, and what the founder asks the bank to do
If you're putting together a plan for a group of small financial firms, read this before you write yours. Summit Brook is fictional, so keep what fits and change the rest.
In this plan
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The Group at a Glance
Summit Brook Holdings, Inc. is a Utah corporation that buys the business assets of two small, regulated financial firms on 1 January 2027 and runs them from one office in Salt Lake City. Each is bought by a newly formed subsidiary. Alder Creek Insurance Agency sells property and casualty cover and employee benefits to local businesses and households. Fairlane Financial Advisors is an investment adviser with $82 million of client assets that charges asset-based fees and takes no commissions. Summit Brook owns 100% of each subsidiary. Founder Nathan Cardwell, a former trust-department officer, is chief executive and owns 40% of the holding company.
The group raises $4,750,000: $750,000 from Nathan, $2,600,000 from four private investors, an $800,000 bank term loan and $600,000 of notes owed to the two sellers. Of that, $3,800,000 pays for the two firms, $95,000 buys shared equipment and fit-out, $182,000 covers deal costs, filings, rebranding and systems conversion, and $673,000 stays as cash reserve.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $2,300,000 | $2,505,000 | $2,725,000 |
| Net income after start-up costs | ($185,163) | $45,939 | $36,447 |
| Closing cash | $617,302 | $745,823 | $851,003 |
Year 1 shows a loss because $182,000 of one-off costs is charged to it and because amortisation of the purchase price and loan interest take most of an EBITDA margin that runs between 15% and 17%. Profit after that is small. Five-year net income adds up to about 4.7% of the $3,350,000 of equity, and the plan says plainly that this is a thin return.
The holding company has one job in cash terms. Each subsidiary pays it a management fee of 12% of revenue for the holding company's own team and sends up dividends from what remains. The holding company services the debt. Summit Brook owns no bank, trust company or insurance carrier, so it takes no deposits and underwrites no policies.
If revenue runs 20% below plan, the founder delays hires, drops the last one, leaves two seats empty, cuts marketing and his own pay and asks the sellers for a standstill on their notes. Cash stays positive in every year. The group still loses money in four of the five years and breaches its debt-service covenant in four, and the plan sets out what it would ask the bank to do.
Structure and Ownership
Who owns what
| Company | What it does | Who oversees it | People at opening | Year 1 revenue |
|---|---|---|---|---|
| Summit Brook Holdings, Inc. | Owns the shares, employs the shared team, charges the management fee | No licensing body of its own; named as a control person in the subsidiaries' filings | 2 | Management fee only, removed on consolidation |
| Alder Creek Insurance Agency (new subsidiary) | Property and casualty and employee-benefits placement | Utah Insurance Department, through agency and producer licences | 5 | $1,320,000 |
| Fairlane Financial Advisors (new subsidiary) | Portfolio management and planning for asset-based fees | A state securities regulator, with the SEC as a later possibility | 3 | $980,000 |
Nathan holds 40% of the holding company's shares, for $750,000 of cash plus the work of finding and closing both deals, and the four investors hold 60% for $2,600,000, an average of $650,000 each. The founder's shares vest over four years. A five-seat board holds two investor directors, Nathan, one independent director and one seat left vacant until a third purchase.
What each purchase costs
The prices are the plan's own. It does not claim they are market prices, and it does not source a market multiple. Each is set against the firm's own numbers, with the seller paid a market salary rather than the owner's historic draw.
| Alder Creek | Fairlane | |
|---|---|---|
| Price | $1,850,000 | $1,950,000 |
| Year 1 revenue | $1,320,000 | $980,000 |
| Price as a multiple of revenue | 1.4x | 2.0x |
| Stand-alone EBITDA after market-rate pay and its share of rent, software and insurance | $430,218 | $288,572 |
| Price as a multiple of that EBITDA | 4.3x | 6.8x |
The EBITDA figures are built from the plan's own cost lines, allocating group non-payroll costs by revenue. In a real purchase the sellers' tax returns and financial statements would replace them, and the add-backs (the owner's historic pay above the market salary, personal expenses run through the business, one-off costs) would be tested in diligence. The two figures sum to $718,790, and taking away the holding company's payroll of $344,170 leaves the group's Year 1 EBITDA of $374,620.
Why a holding company at all
Each business keeps its own licences, client records, staff and name. The holding company supplies what a firm of 3 to 5 people cannot afford alone: a controller who also coordinates compliance, a shared office and one set of systems. It also gives the sellers' clients a continuity story, because the people they know stay in place under three-year employment agreements.
The structure separates liability as well. A claim against the advisory firm sits in that company, behind its own professional-liability cover, and does not reach the agency's book. That separation holds only while the companies keep their own books, bank accounts and staff, which the operating plan commits to.
Where the Bank Holding Company Act stops
The Bank Holding Company Act defines a bank holding company as a company that controls a bank, and treats 25% or more of any class of a bank's voting securities as control (12 U.S.C. § 1841). Summit Brook owns no bank and will not buy a stake in one during this plan. The Act's registration and approval process for bank holding companies therefore does not apply to this plan.
The words "financial holding company" also name a status in federal banking law that is tied to bank holding companies. Summit Brook does not claim that status. Client documents describe the group as a financial services holding company, and the plan's title uses the phrase as a description of the structure. A later wish to buy a bank or trust company would need regulatory approval, a different capital structure and a different plan.
The regulators that do apply
Insurance. The Utah Insurance Department licenses agents and agencies. Because the agency is bought as assets into a new company, the new agency applies for its own licence and its carrier appointments before it can write business, and the producers' licences are moved to it. Closing is conditional on those steps, and the plan does not count on any particular outcome. The $12,000 line for licences and registrations covers the filing costs.
Investment advice. An adviser with less than $100 million of regulatory assets under management is generally regulated by its state. The SEC's Form ADV instructions allow registration with the SEC from $100 million, require it from $110 million, and let an SEC-registered adviser stay registered down to $90 million. Fairlane has $82 million at closing. The plan has year-end assets of $99 million in Year 2, $108 million in Year 3 and $118 million in Year 4, so the adviser moves into the range where SEC registration is optional in Year 3 and mandatory in Year 4, subject to the conditions in the instructions. The costs of that change sit inside the professional-fee and software lines; no separate figure is shown.
Moving client contracts. Section 205 of the Investment Advisers Act requires an advisory contract to provide that it cannot be assigned without the client's consent (15 U.S.C. § 80b-5). Buying the advisory firm's assets therefore means each client has to agree to move to the new company. The plan has the seller ask every household in writing, assisted by Nathan, within 90 days of closing, and expects 98% of assets to agree and stay. Clients who do not consent leave with their assets, and the seller notes are reduced under their offset clause by a formula tied to the loss.
A conflict the structure creates. The advisory firm charges asset-based fees and takes no commissions, while the sister agency earns commission when a client buys insurance on the adviser's recommendation or introduction. The advisory firm therefore does not call itself fee-only. It tells each client in writing before any introduction that the group earns commission on the insurance side, and it describes that conflict in its disclosure brochure. Clients are free to buy insurance elsewhere, and the adviser's pay does not vary with the placement.
Both purchases close only if the sellers, the lender and the regulators have each cleared their part. Neither the closing nor its timing is treated as certain.
Targets to the end of 2028
- Keep at least 90% of the acquired insurance premium and 98% of the acquired client assets through the first twelve months.
- Reach $99 million of client assets at Fairlane by December 2028.
- Write about $1.25 million of new insurance premium in 2028.
- Hold debt service cover above 1.4x and meet the bank's covenant at every quarter-end.
- Employ 11 full-time people by December 2028, with one controller who serves both subsidiaries and an outside compliance consultant for the advisory firm.
The Salt Lake City Market
What the labour data shows
The Bureau of Labor Statistics put the median pay of personal financial advisors at $105,070 in May 2025 and projects 1% employment growth from 2025 to 2035. For insurance sales agents the median was $62,280 in May 2025, with 3% growth projected over the same decade. Slow growth in headcount means firms win clients mostly from each other and from retirements. In the plan, advisory wages bracket the adviser median ($95,000 for the associate, $105,000 for the second adviser, $210,000 for the lead adviser, who is also the seller). The producer's $72,000 base sits above the agent median, and the account manager at $60,000 and service staff at $46,000 sit below it. These are national figures; no Utah-specific data was retrieved for this plan.
Who sells and who competes
| Alternative | What a client gets | Why a client might choose it | How the Summit Brook companies differ by design |
|---|---|---|---|
| National brokerages and carriers' captive agents | One company's products or a large broker's marketplace | Brand and scale | Independent, local, with the same account manager year after year |
| Bank and trust-company wealth arms | Investments alongside banking | One relationship for deposits and investments | Asset-based fees with no proprietary products, and insurance reviewed by an agency in the same office |
| Independent advisers working alone | Personal service | Low cost, direct access to the owner | Planning and insurance placed by separate licensed teams under one compliance function |
| Online insurance sellers and robo-advisers | Quotes and portfolios on a screen | Price and speed | A named person for claims, benefits renewals and household planning |
| Other regional consolidators | The same buy-and-hold model | Larger balance sheets | A single office, a smaller deal size and sellers who remain employed |
The table describes what each type of alternative offers and how this group positions itself. It does not rank them, and it names no company or price because none was sourced for this plan.
Why some owners sell
Owners of small agencies and advisory firms reach a point where they want to reduce their hours without closing the business or selling to a stranger. Selling to a local buyer who keeps the name, the team and the clients answers that. This is a reading of seller motives, not a measured statistic.
SWOT
| Strengths | Weaknesses |
|---|---|
| Two going concerns with 10 people, books of business and clients already in place | Revenue depends on two sellers who could leave after their three-year agreements |
| Equity of 71% of the raise leaves room to absorb a bad year | A low return on equity: five-year net income is about 4.7% of capital invested |
| Shared compliance and finance functions that a firm of three could not afford | Founder has never owned an agency |
| Opportunities | Threats |
|---|---|
| Insurance clients who also need investment and retirement advice | A market fall that reduces advisory fees without warning |
| Owners nearing retirement looking for a local buyer | Carrier changes to commission schedules |
| Employer groups that need a retirement plan beside their benefits | A client who declines to move, or a regulator or lender who objects to the structure |
Who the Subsidiaries Serve
Insurance clients
Owner-run businesses with 10 to 75 employees in the Wasatch Front, from contractors and dental practices to light manufacturers, plus the owners' households. The agency has about 45 employer groups buying benefits and about 1,150 policies in force. The common trigger for a change of agent is a renewal that jumps in price or a claim that was handled slowly.
Advisory clients
About 135 households averaging roughly $600,000 of investable assets: business owners who have sold or are about to, and retirees drawing income. They ask for one fee that does not change with the products chosen, a written plan, and a person who answers the phone.
The overlap
The strongest sales path in the plan is an existing insurance client who also needs advice. An owner whose benefits plan the agency places is a natural prospect for a retirement plan, and the owner's household is a natural prospect for the adviser. The plan counts those introductions explicitly in the next section and does not expect every client to take a second service.
Growing the Books
Advisory: where new assets come from
| Source of new households | Households in Year 1 | Average assets | New assets |
|---|---|---|---|
| Introductions from the insurance agency's clients | 12 | $600,000 | $7.2 million |
| Referrals from accountants and attorneys | 5 | $500,000 | $2.5 million |
| Gross new assets | 17 | $9.7 million |
Outflows of $1.7 million (retirement withdrawals and departing clients) leave net new assets of $8 million, which takes assets from $82 million to $90 million. Introductions are 30 conversations with agency clients a year at a 40% conversion rate. Those are the plan's rates.
Insurance: what the agency has to write
After 10% of premium lapses and a 3% average rate rise, the agency writes about $1.25 million of new premium to reach $1,040,000 of property and casualty commission in Year 2. The agency president, the commercial producer and referrals from the adviser share that target. A second producer joins in month 25. Benefits revenue grows by about three employer groups a year.
How the fees are set
The advisory firm charges 1.0% of assets, which the model holds flat. The agency earns whatever commission each carrier agreement pays, blended at 12% on property and casualty business and about 4% on benefits premium of roughly $200,000 per employer group. Planning engagements are fixed-fee, about $3,000 on average.
Retention
The plan sets retention at 90% of insurance premium and 98% of advisory assets before new deposits. Acquired clients are told about the ownership change by letter from both the seller and Nathan in the first week, and each is called within a month. The seller notes carry an offset clause tied to lost revenue. The downside case does not count the offset, because it can only apply after a measurement date.
Marketing Spend
The first-year budget is $95,000: $40,000 of launch spend funded from the raise and $55,000 of running costs. The running cost is 2.4% of Year 1 revenue and 2.1% of Year 5 revenue ($66,000 of $3,205,000), because most growth is expected from existing clients and referral partners. Including launch spend, Year 1 marketing is 4.1% of revenue.
| Item | Year 1 spend | What it is meant to do |
|---|---|---|
| Group brand, client letters and website (launch) | $40,000 | Introduce the owners to existing clients without breaking the sellers' brands |
| Business-owner workshops | $14,000 | Joint evenings for agency clients on benefits, succession and retirement plans |
| Chamber and association memberships | $9,000 | Referral relationships with accountants and attorneys |
| Content and local search | $12,000 | Guides on renewals, retirement-plan duties and household planning |
| Direct mail to lapsed quotes and past prospects | $8,000 | Reopen quotes the agency did not win |
| Carrier co-marketing | $12,000 | Joint campaigns that carriers fund in part |
Spread across the 17 new advisory households and the roughly $1.25 million of new premium the plan needs by Year 2, the budget buys introductions rather than mass advertising. Marketing milestones are the client letters sent in the first week of January 2027, the first joint workshop in March, and 12 introductions from agency clients to the adviser by December.
Running Three Companies as One Office
The shared office
About 4,200 square feet in a mid-rise office building in Salt Lake City, at roughly $27 a square foot a year all-in ($113,000 in Year 1), on a five-year lease. The three companies sit on one floor with locked client-file rooms for each of the two subsidiaries.
Keeping the companies separate
Each subsidiary has its own bank accounts, books, client agreements, insurance cover and licensed staff. Premium collected by the agency stays in its own trust account. The advisory firm's custodial accounts are with outside custodians and never with the holding company. The holding company provides services under a written agreement and bills for them through the management fee and at-cost recharges.
What the management fee does
The fee is 12% of each subsidiary's revenue and pays for the holding company's own team: the founder, the controller and compliance coordinator, and the shared systems work. Rent, software, insurance and professional fees are bought by the holding company and recharged to the subsidiaries at cost, on top of the fee. The table shows what each subsidiary has left after its own payroll, before direct costs, shared costs and pay raises, and how much of the holding company's payroll the fee covers.
| Year 1 | Year 3 | Year 5 | |
|---|---|---|---|
| Insurance agency revenue | $1,320,000 | $1,540,000 | $1,790,000 |
| Less its own payroll with on-costs | ($530,860) | ($622,300) | ($622,300) |
| Agency left after own payroll | $789,140 | $917,700 | $1,167,700 |
| Advisory and planning revenue | $980,000 | $1,185,000 | $1,415,000 |
| Less its own payroll with on-costs | ($463,550) | ($596,900) | ($746,760) |
| Advisory firm left after own payroll | $516,450 | $588,100 | $668,240 |
| Management fee at 12% of the two subsidiaries' revenue | $276,000 | $327,000 | $384,600 |
| Holding-company payroll with on-costs | $344,170 | $344,170 | $344,170 |
| Fee as a share of holding-company payroll | 80% | 95% | 112% |
The fee covers four fifths of the holding company's payroll in Year 1 and all of it by Year 5. The balance in the early years comes from dividends the subsidiaries send up from profit, and the dividends also meet the group's debt service: $241,277 of interest and principal in Year 1 and $267,358 a year from Year 2. Dividends are limited by Utah corporate law and by each regulator's financial-condition requirements, which the controller checks before each payment.
Systems and client data
One agency-management system, one portfolio-management and planning system, one customer database that records which companies serve a client, and one accounting ledger with a separate entity for each company. Software costs $72,000 in Year 1 and $92,000 by Year 5. Client information is held under a written information-security plan, and the advisory firm's records are kept in the form its regulator expects.
Licences and cover
- Agency licence and producer licences held by the named individuals, with continuing-education records kept by the controller.
- State registration of the adviser, and a Form ADV that names the holding company and Nathan as control persons.
- Errors and omissions cover for the agency, professional liability for the adviser, cyber cover, general liability, and directors and officers cover for the holding company, budgeted at $52,000 in Year 1.
- Key-person life and disability cover on Nathan and on each seller during the employment term.
- A written disclosure of the commission the group earns when one subsidiary introduces a client to the other.
Who does the work
Ten people at opening and 13 by Year 4. Hires follow revenue: an adviser in month 19, a second producer in month 25 and a second senior adviser in month 43.
Leadership and Oversight
Nathan Cardwell, founder and chief executive
Nathan spent nine years in the trust and investment department of a regional bank in Salt Lake City, ending as a vice president responsible for business-owner clients. He then spent five years leading corporate development at an employee-benefits brokerage, where he sourced and negotiated the purchase of six small agencies. He holds a securities representative registration and an insurance producer licence. His $750,000 is the proceeds of an earlier sale of shares and his own savings.
Where the team is thin
Nathan has never owned an agency or run an advisory firm, and neither seller has run a group. The plan covers that by keeping both sellers in charge of their own companies for three years, by tying part of their payment to retention, and by seating an independent director who ran an independent agency for twenty years.
The two sellers and the risk they carry
The agency's former owner stays as agency president at $165,000 and the advisory firm's former owner stays as lead adviser at $210,000, salaries at the level an owner of a firm that size would draw. Each has a three-year employment agreement with a non-solicitation clause that a Utah lawyer has reviewed. Each is also paid part of the price through a seller note, $300,000 apiece, that is reduced if acquired revenue is lost. A seller who leaves in year two takes client relationships with them, and the plan has no protection against that beyond the agreement, the note and the retention targets.
Lender terms
The bank takes a pledge of the shares of both subsidiaries and a limited guarantee from Nathan of $300,000. It sets a covenant of 1.25x debt service cover, tested quarterly, and requires annual accounts reviewed by an outside accounting firm. These are fictional terms for this example.
Advisers
Outside counsel with securities and insurance practices, a regional accounting firm that reviews the consolidated statements each year, and a compliance consultant who tests the advisory firm's procedures once a year. Their fees are in the $113,000 professional-fee line.
Consolidated Group Financials
These tables consolidate the holding company and both subsidiaries, with monthly detail for 2027 and annual figures for 2028 to 2031. Payments between group companies, including the management fee, cancel out on consolidation and are described in the operating plan instead.
Paying for the two purchases
| Use of funds | Amount |
|---|---|
| Purchase of the insurance agency (business assets, client book and goodwill) | $1,850,000 |
| Purchase of the advisory firm (business assets, client contracts and goodwill) | $1,950,000 |
| Shared office: computers, phones, secure document storage | $40,000 |
| Shared office fit-out | $55,000 |
| Legal, diligence and accounting for both purchases | $95,000 |
| New licences and registrations for the two acquiring subsidiaries | $12,000 |
| Group brand, client letters and website | $40,000 |
| Systems conversion: one client database and one accounting ledger | $35,000 |
| Cash reserve at the holding company | $673,000 |
| Total uses | $4,750,000 |
| Source of funds | Amount |
|---|---|
| Nathan Cardwell's savings | $750,000 |
| Four private investors (common stock) | $2,600,000 |
| Bank term loan | $800,000 |
| Seller notes (both sellers) | $600,000 |
| Total sources | $4,750,000 |
The group raises $4,750,000. Nathan Cardwell puts in $750,000, four private investors put in $2,600,000, and $1,400,000 is debt: an $800,000 bank term loan at 9.5% over ten years with interest only for the first six months, and $600,000 of seller notes at 6% over five years. Debt is 29% of the total and equity 71%. The two purchase prices come to $3,800,000. The price multiples are not sourced market data: the agency costs 1.4 times its revenue and the advisory firm 2.0 times. Measured on each firm's stand-alone EBITDA after paying its seller a market salary, which the plan derives from its own cost lines and which the sellers' records would replace in diligence, the agency's price is 4.3 times an EBITDA of $430,218 and the advisory firm's is 6.8 times an EBITDA of $288,572. The rates are not quoted lending terms. The $673,000 reserve equals about four months of Year 1 operating costs. It is large because both companies pay salaries that do not fall when revenue does.
What the figures rest on
- Alder Creek Insurance Agency brings $1,320,000 of 2027 revenue: $960,000 of property and casualty commission on about 1,150 policies and $8.0 million of premium at a 12% blended commission, and $360,000 of employee-benefits commission from about 45 employer groups at roughly $8,000 each. Retention is set at 90% a year. To reach $1,040,000 in Year 2 after lapses and a 3% average rate rise, the agency has to write about $1.25 million of new premium. Benefits revenue grows by about three groups a year.
- Fairlane Financial Advisors manages $82 million at closing, held by about 135 households averaging roughly $600,000, and charges 1.0% of assets. Net new assets are $8 million in Year 1 and $9 million, $9 million, $10 million and $11 million after, so year-end assets are $90, $99, $108, $118 and $129 million. No market return is allowed for in either direction. Advisory fees are the average of opening and closing assets times 1.0%, which gives $860,000 in Year 1 and $1,235,000 in Year 5. The fee rate is not a market figure.
- Planning and retirement-plan fees are $120,000 in Year 1, about 40 engagements at an average of $3,000, growing to $180,000 by Year 5.
- Direct costs are 8% of property and casualty commission (producer commission outside base pay, and chargebacks), 6% of benefits commission, 4% of advisory fees (portfolio platform and reporting) and nothing on planning fees. The engine applies the Year 1 blended rate of 5.8% to every later year.
- Payroll adds 27% to wages for payroll taxes, health cover, workers' compensation and a retirement match. Wages in the personnel table are launch rates, and 3% annual pay raises are charged as a separate line from Year 2. Each seller stays on at an owner-level salary: $165,000 for the agency president and $210,000 for the lead adviser. The producer pay shown is the base salary only.
- The group shares one office of about 4,200 square feet at about $27 a square foot a year, all-in, for $113,000 in Year 1. Insurance for the group (professional liability for the agency and the adviser, cyber, directors and officers, general liability) is $52,000 in Year 1. Professional fees of $113,000 include an outside compliance consultant for the advisory firm. No Salt Lake City rent survey or insurance quote was available, so treat them as planning figures.
- Both purchases are asset purchases made by newly formed subsidiaries, so the buyer acquires a tax basis in the client books and goodwill. The engine has no goodwill line: the two prices are entered as capital assets and written off straight-line over 15 years, which is $253,333 a year. Computers and equipment ($40,000 over 5 years, $8,000 a year) and office fit-out ($55,000 over 7 years, $7,857 a year) bring the annual charge to $269,190. The 15-year life and the tax deductibility of the purchase price are planning figures for the group's tax adviser to confirm. A stock purchase would not give the same basis without a further election.
- The holding company charges each subsidiary a management fee of 12% of its revenue, covering the holding company's own team: the founder, the controller and compliance coordinator, and the shared systems work. Rent, software, insurance and professional fees are bought by the holding company and recharged to the subsidiaries at cost on top of the fee. The fee moves profit between group companies and has no effect on the consolidated tables.
- Receivables average 30 days. The engine starts with no receivables, so the $189,041 balance builds during Year 1 and holds down Year 1 operating cash. In a real purchase the buyer pays for the working capital it acquires, so this overstates the Year 1 cash outflow.
- Tax is charged at the federal corporate rate of 21% and a Utah corporate rate of 4.5%, the rate reported in the Utah Tax Commission's 2025 corporation return instructions. The rate may change, and the instructions could not be opened directly for this plan. Start-up costs are not deducted for tax in the model, which overstates tax slightly. A pass-through structure is not modelled.
- No distributions are paid in the five years. Retained earnings turn positive only in Year 5, and cash is held to meet the bank's covenant and to cover a bad year. The investors' return in this example therefore depends on a later sale or a further purchase, which the plan does not model.
Revenue by subsidiary line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Property and casualty commissions | $960,000 | $1,040,000 | $1,125,000 | $1,215,000 | $1,310,000 |
| Employee-benefits commissions | $360,000 | $385,000 | $415,000 | $445,000 | $480,000 |
| Advisory fees on client assets | $860,000 | $945,000 | $1,035,000 | $1,130,000 | $1,235,000 |
| Planning and retirement-plan fees | $120,000 | $135,000 | $150,000 | $165,000 | $180,000 |
| Total revenue | $2,300,000 | $2,505,000 | $2,725,000 | $2,955,000 | $3,205,000 |
| Growth on prior year | – | 9% | 9% | 8% | 8% |
Insurance commissions supply 57% of Year 1 revenue and 56% of Year 5, and advisory and planning fees supply the rest. Commissions renew without new selling. Advisory fees follow client assets, which in this model grow only through deposits, so a fall in markets would cut that line directly.
The first twelve months
| Month | Property and casualty commissions | Employee-benefits commissions | Advisory fees on client assets | Planning and retirement-plan fees | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $76,100 | $39,600 | $68,900 | $12,600 | $197,200 | $36,432 |
| Feb 2027 | $76,900 | $27,600 | $69,400 | $11,400 | $185,300 | $25,219 |
| Mar 2027 | $77,700 | $26,400 | $69,900 | $11,400 | $185,400 | $25,314 |
| Apr 2027 | $78,400 | $26,400 | $70,400 | $9,100 | $184,300 | $24,277 |
| May 2027 | $79,200 | $27,600 | $70,900 | $8,000 | $185,700 | $25,596 |
| Jun 2027 | $79,900 | $28,800 | $71,400 | $8,000 | $188,100 | $27,858 |
| Jul 2027 | $80,700 | $36,000 | $71,900 | $6,900 | $195,500 | $34,830 |
| Aug 2027 | $80,700 | $26,400 | $72,400 | $6,900 | $186,400 | $26,256 |
| Sep 2027 | $81,500 | $26,400 | $72,900 | $9,100 | $189,900 | $29,554 |
| Oct 2027 | $82,200 | $27,600 | $73,400 | $10,300 | $193,500 | $32,946 |
| Nov 2027 | $83,000 | $28,800 | $73,900 | $11,400 | $197,100 | $36,338 |
| Dec 2027 | $83,700 | $38,400 | $74,600 | $14,900 | $211,600 | $50,001 |
Both companies are bought as going concerns, so January already runs at about $197,000 of revenue. Benefits renewals lift January and July, and planning fees peak in December. EBITDA is positive in every month, from $24,277 in April to $50,001 in December. The lowest month-end cash comes in Jan at about $494,000 after allowing for the 30 days that clients take to pay. That trough sits well below the Year 1 closing cash because the first month carries the start-up costs before the year's earnings arrive.
Payroll across the group
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and chief executive (holding company) | $175,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Controller and compliance coordinator (holding company) | $96,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Agency president (insurance) | $165,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Account manager (insurance) | $60,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Customer service representative (insurance) | $46,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Commercial producer (insurance) | $72,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Benefits specialist (insurance) | $75,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Lead adviser (advisory) | $210,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Associate adviser, CFP (advisory) | $95,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Paraplanner (advisory) | $60,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Adviser (advisory) | $105,000 | Month 19 | – | 1 | 1 | 1 | 1 |
| Second producer (insurance) | $72,000 | Month 25 | – | – | 1 | 1 | 1 |
| Second senior adviser (advisory) | $118,000 | Month 43 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $1,338,580 | $1,405,255 | $1,563,370 | $1,638,300 | $1,713,230 |
Ten people are on payroll at opening: two at the holding company, five at the insurance agency and three at the advisory firm. The two sellers stay under three-year employment agreements at $165,000 and $210,000, which is what an owner of a firm that size would draw. The advisory firm adds an adviser in month 19, the insurance agency a second producer in month 25 and the advisory firm a second senior adviser in month 43. Full-time headcount is 10 at the end of Year 1, then 11, 12, 13 and 13. Payroll with on-costs rises from $1,338,580 to $1,713,230 over the five years, and the pay-rise line adds $215,025 to costs by Year 5. Compliance for the advisory firm rests on the controller and an outside consultant, not on a full-time officer.
Consolidated profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $2,300,000 | $2,505,000 | $2,725,000 | $2,955,000 | $3,205,000 |
| Direct costs (producer commission, platform fees, chargebacks) | ($132,800) | ($144,637) | ($157,339) | ($170,619) | ($185,054) |
| Gross profit | $2,167,200 | $2,360,363 | $2,567,661 | $2,784,381 | $3,019,946 |
| Payroll incl. on-costs | ($1,338,580) | ($1,405,255) | ($1,563,370) | ($1,638,300) | ($1,713,230) |
| Rent | ($113,000) | ($116,000) | ($120,000) | ($124,000) | ($128,000) |
| Utilities | ($9,000) | ($9,300) | ($9,600) | ($9,900) | ($10,200) |
| Marketing | ($55,000) | ($60,000) | ($62,000) | ($64,000) | ($66,000) |
| Insurance | ($52,000) | ($56,000) | ($60,000) | ($63,000) | ($66,000) |
| Professional fees | ($113,000) | ($115,000) | ($117,000) | ($120,000) | ($123,000) |
| Software subscriptions | ($72,000) | ($78,000) | ($84,000) | ($88,000) | ($92,000) |
| Licences, registrations and continuing education | ($14,000) | ($15,000) | ($16,000) | ($17,000) | ($18,000) |
| Carrier meetings, travel and client events | ($18,000) | ($20,000) | ($22,000) | ($23,000) | ($24,000) |
| Equipment replacement and new-hire kit | $0 | ($8,000) | ($6,000) | ($10,000) | ($6,000) |
| Bad debt allowance | ($8,000) | ($9,000) | ($10,000) | ($11,000) | ($12,000) |
| Annual pay raises (3% a year) | $0 | ($42,158) | ($95,209) | ($151,915) | ($215,025) |
| EBITDA | $374,620 | $426,650 | $402,482 | $464,266 | $546,491 |
| Depreciation | ($269,190) | ($269,190) | ($269,190) | ($269,190) | ($269,190) |
| Interest | ($108,593) | ($97,599) | ($84,982) | ($71,374) | ($56,692) |
| Income tax | $0 | ($13,922) | ($11,862) | ($30,375) | ($54,170) |
| Net income before start-up costs | ($3,163) | $45,939 | $36,447 | $93,327 | $166,438 |
| Deal costs, filings, rebrand and systems conversion, expensed at opening | ($182,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($185,163) | $45,939 | $36,447 | $93,327 | $166,438 |
EBITDA is $374,620 in Year 1, 16.3% of revenue, rises to $426,650 in Year 2, dips to $402,482 in Year 3 (14.8%) as an adviser, a second producer and three rounds of pay raises arrive ahead of revenue, and reaches $546,491 in Year 5. Amortisation and depreciation of $269,190 a year and Year 1 interest of $108,593 absorb most of it, so net income before start-up costs is a loss of $3,163 in Year 1, then $45,939, $36,447, $93,327 and $166,438. The $182,000 of deal costs, filings, rebrand and systems conversion is charged in Year 1, which makes that year a loss of $185,163. Over five years net income after start-up costs adds up to about $157,000, 4.7% of the $3,350,000 of equity. That is a low return on invested capital. The structure pays the sellers at prices they would accept and the founder and sellers at owner-level salaries, and little profit is left for the investors until revenue grows past the Year 5 level or a third acquisition adds earnings without a matching increase in overhead.
Where the cash goes
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($105,014) | $298,280 | $287,555 | $343,613 | $415,080 |
| Acquired client books and equipment | ($3,895,000) | $0 | $0 | $0 | $0 |
| Funding received | $4,750,000 | $0 | $0 | $0 | $0 |
| Bank and seller-note principal repaid | ($132,684) | ($169,759) | ($182,376) | ($195,984) | ($210,665) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $617,302 | $128,521 | $105,180 | $147,629 | $204,415 |
| Closing cash | $617,302 | $745,823 | $851,003 | $998,632 | $1,203,047 |
Closing cash is never below $617,302, the Year 1 figure, and reaches $1,203,047 in Year 5. Year 1 operating cash is negative at $105,014 because the start-up costs, interest and the $189,041 receivables build all fall in that year. No distributions are paid. The cash that accumulates is a buffer against the covenant and a starting point for a third purchase, which would be funded and modelled separately.
Consolidated balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $617,302 | $745,823 | $851,003 | $998,632 | $1,203,047 |
| Accounts receivable | $189,041 | $205,890 | $223,973 | $242,877 | $263,425 |
| Acquired client books and equipment (net) | $3,625,810 | $3,356,619 | $3,087,429 | $2,818,238 | $2,549,048 |
| Total assets | $4,432,153 | $4,308,333 | $4,162,404 | $4,059,747 | $4,015,519 |
| Bank and seller-note debt | $1,267,316 | $1,097,557 | $915,181 | $719,198 | $508,532 |
| Paid-in capital | $3,350,000 | $3,350,000 | $3,350,000 | $3,350,000 | $3,350,000 |
| Retained earnings | ($185,163) | ($139,224) | ($102,777) | ($9,451) | $156,987 |
| Total liabilities and equity | $4,432,153 | $4,308,333 | $4,162,404 | $4,059,747 | $4,015,519 |
Debt cover and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | 16.3% | 17.0% | 14.8% | 15.7% | 17.1% |
| Net margin (before start-up costs) | -0.1% | 1.8% | 1.3% | 3.2% | 5.2% |
| Payroll incl. pay raises as share of revenue | 58% | 58% | 61% | 61% | 60% |
| Revenue per full-time equivalent at year end | $230,000 | $227,727 | $227,083 | $227,308 | $246,538 |
| Average monthly revenue | $191,667 | $208,750 | $227,083 | $246,250 | $267,083 |
| Monthly revenue needed to cover operating costs | $158,535 | $171,017 | $191,488 | $205,190 | $218,752 |
| Debt service cover (EBITDA / interest + principal) | 1.6x | 1.6x | 1.5x | 1.7x | 2.0x |
The break-even row is on an EBITDA basis: it is the monthly revenue at which gross profit covers operating costs, before interest, principal or tax. Average monthly revenue exceeds it in every year, by 21% in Year 1 and 19% in Year 3. Once loan interest and principal are included, the needed monthly revenue is about $179,900, $194,700, $215,100, $228,800 and $242,400 across the five years, and the cushion shrinks to 7%, 7%, 6%, 8% and 10%. Debt service cover is 1.6x in Year 1, 1.5x in Year 3, the low point, and 2.0x in Year 5. A bank covenant of 1.25x, the level used in this example, is met in every year of the base case.
If fees and commissions fall 20%
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $1,840,000 | $2,004,000 | $2,180,000 | $2,364,000 | $2,564,000 |
| Net income before start-up costs | ($307,839) | ($138,209) | ($206,738) | ($130,419) | $17,509 |
| Net income after start-up costs | ($489,839) | ($138,209) | ($206,738) | ($130,419) | $17,509 |
| Closing cash | $456,516 | $516,884 | $313,911 | $168,760 | $151,049 |
This case cuts every revenue line by 20% in every year, which in the advisory firm means client assets 20% lower. The response: every hire from month 13 starts six months later, the second senior adviser is dropped, marketing is cut 20%, Nathan takes a 20% pay cut to $140,000, one account manager seat and the paraplanner seat are left empty from month 7, and the sellers agree a standstill that makes the seller notes interest-only for 24 months. The seller-note offset clause, which would reduce the notes if acquired revenue is lost, is not counted: it could apply only after a measurement date, so it gives no relief in Year 1. On those terms closing cash is never below $151,049, but the group loses money in four of the five years and Year 1 equity is $2,860,161. The covenant does not hold. Debt service cover is 0.53x, 1.45x, 0.46x, 0.63x and 1.00x across the five years, so the 1.25x covenant is breached in every year except Year 2, which looks better only because of the standstill. The response is to approach the bank before the first test date for a covenant holiday or a reset to a cash-interest test, with the reserve as support. The plan counts on no outcome: the bank may refuse, and could then demand repayment. The result also depends on cost action in every year, and leaving two seats empty reduces service capacity, which could cost further revenue.
Sources
- Cornell Law School, Legal Information Institute, 12 U.S.C. § 1841, definitions under the Bank Holding Company Act and 15 U.S.C. § 80b-5, Investment Advisers Act section 205.
- SEC, Form ADV instructions (thresholds for SEC and state registration of investment advisers, Part 1A, Item 2).
- Bureau of Labor Statistics, Personal financial advisors and Insurance sales agents, Occupational Outlook Handbook, May 2025 wage data.
- Utah State Tax Commission, TC-20 corporation return instructions, 2025 (4.5% corporate rate, as reported in a search result; the document could not be opened directly).
- Utah Insurance Department, Producer licensing.
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