Understanding when each metric applies prevents both overvaluation (using revenue multiples for full agency sales) and undervaluation (applying EBITDA logic to book sales). The two are not competing methods. They are different instruments designed to value structurally different asset types — and matching the wrong instrument to the wrong asset is one of the most common pricing errors in agency M&A.
§ 01 · What a revenue multiple actually isThe simplest formula.
A revenue multiple calculates agency value as a direct multiplier of gross annual revenue: Value = Annual Revenue × Multiple. A book of business generating $200,000 in annual commission revenue at a 2.5× multiple = $500,000 valuation. The appeal: simplicity and directness. It focuses on the top-line revenue stream — which is exactly what a buyer acquires in a book or Slice transaction.
§ 02 · When revenue multiples are the right toolThe book-sale use case.
Valuing a book of business (fold-in) — the primary use case.
When a buyer absorbs clients and policies into their own existing operation, they don't acquire the seller's staff, office, or technology. In this context, the seller's EBITDA is irrelevant — the buyer applies their profit margin to your revenue stream. Their primary concern is the quality and size of the top-line revenue being added.
Fractional sales and Slices.
A veteran producer retiring their personal book, or an agency selling a non-core segment (such as a small benefits book to focus on P&C), should be valued on revenue transferred — not on the agency's overall EBITDA. Slices on Milly Books are almost always valued as book sales because they are pure asset transfers — the buyer is absorbing specific policies into their existing operation without taking on the seller's overhead.
§ 03 · The profitability blind spotWhy revenue multiples fail for full agencies.
For full agency sales — where the buyer acquires staff, culture, operational expenses, and liabilities — the revenue multiple has a fatal flaw: it ignores profitability.
Two agencies, both with $2 million in revenue. Agency A: 30% EBITDA margin → $600,000 in profit. Agency B: 15% EBITDA margin → $300,000 in profit. A revenue multiple values both at $5 million (at 2.5×). An EBITDA multiple immediately distinguishes them — Agency A is worth roughly twice Agency B from a cash flow perspective.
Never use a revenue multiple to value your entire operating agency. Buyers who lead with "2× revenue" are either pricing for the wrong transaction type or hoping the seller doesn't know the difference. Either way, the seller's correct response is to ask which transaction structure they're proposing — full agency or book sale — and to require the appropriate metric for each.
§ 04 · What drives the multiple itselfQuality factors for book multiples.
Whether revenue or EBITDA, the quality of the business dictates the multiple. For book and revenue multiples specifically, four factors do most of the work.
Desirable Lines of Business. P&C books often command different multiples than benefits or personal lines. High Client Retention (90%+). Proven stability; lower run-off risk; commands premium multiple. Strong Carrier Relationships. Access to preferred carriers is a significant intangible asset. Client Demographics. Younger client base means longer future revenue stream and higher multiple.
§ 05 · The actionable frameworkWhich metric, which range.
Full agency sale (staff, brand, operations) → Normalized EBITDA → typical range 5–12× EBITDA. Mapped to the canonical bands: 5× sits in the 4–6× distressed-or-internal band; 8–10× clears the market band; 10–12× pushes into the competitive band; the 12–19× kill-zone band is reserved for PE platform-thesis assets.
Book of business / fold-in → Revenue → typical range 2.0–3.0× revenue. Slices (specific book segment) → Revenue → typical range 1.5–2.5× revenue. Partial sale / producer retirement → Revenue → typical range 2.0–2.5× revenue.
Revenue multiples and EBITDA multiples live in different units. Comparing them directly — "I heard agencies sell for 2.5× revenue, but you're offering only 8× EBITDA" — is a category error. They measure different things.
The expense paradox quick-preview.
Sometimes a high-expense, low-EBITDA agency clears a higher number under a book-sale revenue multiple than under a full-agency EBITDA multiple — because the buyer's contribution margin on absorbed revenue can exceed what the seller's own bloated overhead would produce. This counterintuitive case is covered in [Full Agency vs Book of Business] in full — including the worked example where a $2M revenue agency clears more as a book sale than as a full agency.
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Terminology on this shelf
- Book of Business
- The complete portfolio of insurance policies managed by an agency — the asset sold in a fold-in or Slice transaction.
- Fold-In
- A book sale where the buyer absorbs clients into their existing operation; no staff, brand, or infrastructure transfers.
- Slice
- A custom-defined, data-bounded portion of the book of business sold independently through the Milly Books marketplace.
- Top-Line Revenue
- Gross revenue before any expenses — the basis for revenue-multiple valuation.
- Contribution Margin
- The marginal profit the buyer earns from adding the seller's revenue to their existing fixed-cost infrastructure; often the key economic driver of fold-in pricing.