Bobby Reagan, Executive Chairman of Reagan Consulting, has spent a career assessing insurance agency quality. Reagan's framework uses an iceberg metaphor: most observers see only the visible tip; the load-bearing mass sits below the waterline. The 50+ metrics Reagan applies in evaluation organize into four hierarchical layers. This Tactical names each layer, what it contains, and why focusing attention at the bottom of the iceberg — counterintuitively — drives the strongest sustained performance in the layers above.
The four layers, top to bottom.
Tip — current operating results.
The visible top of the iceberg — what shows up on financial statements. Two sub-metrics carry most of the weight: Growth (organic and total) and Profitability (EBITDA, EBITDA margin). These are the numerator-and-denominator of the valuation calculation — the bands a buyer references when first looking at the agency. They are necessary but not sufficient: strong Layer 1 alone does not signal sustained quality.
Mechanics — how current results are achieved.
The first layer below the surface. Approximately 15 sub-metrics covering the quality of the operating engine: sales velocity and retention rates; revenue per employee, compensation per employee, spread per employee; results by department, division, office; amount of specialization. This layer assesses whether the visible results are produced by a healthy operating engine — or by burning capital. A premium Layer 1 number sitting on a fragile Layer 2 is a buyer red flag during second-read diligence.
Capacity — gas in the tank.
The mid-depth layer — forward-looking operational durability. Four key sub-metrics: WAPA (Weighted Average Producer Age — the producer-cohort actuarial pressure); NUPP (Net Unvalidated Producer Payroll — the cost of producers who haven't yet validated to a self-sustaining book); age-banding of sales velocity; average staff age. This is where the producer-generation-gap diagnostic lives in valuation analysis. A premium-band agency with a strong Layer 1 but a Layer 3 showing actuarial pressure is signaling that the visible results will not persist.
Underlying health — the foundation.
The bottom of the iceberg — qualitative foundational health. Approximately 10 qualitative dimensions: leadership and leadership succession; quality of staff; capacity for recruiting and training; culture; technology utilization; uniform systems and procedures; strength of carrier relationships; value-added services offered; balance sheet health; restrictive covenants and perpetuation health. These factors are difficult to quantify but, per Reagan, "long term, they are significantly more important." Strong Underlying Health drives sustainable improvement in the upper layers.
The intuitive temptation is to focus on the visible top of the iceberg. Reagan's empirical finding: top three layers are readily quantifiable; the bottom layer (Underlying Health) is mostly qualitative — and it's where sustainable performance originates. Focus attention starting at the bottom.
The same iceberg reads three different ways.
For principals who want to remain privately held with superior performance: Focus attention below the waterline, starting at the bottom. Top-line results are not sustainable without a strong foundation. Building Underlying Health requires understanding performance vs. best practices and acting to narrow the gap. For principals seeking to sell or merge: Recognize that Underlying Health issues you can't address may be the actual reason you're selling — and that recognition is healthy, a legitimate reason to merge with a firm that brings the missing capabilities. Transparency about Layer 4 gaps actually helps deal selection. For acquirers: Build your own Underlying Health — it drives long-term success and positions you as a destination for sellers needing those capabilities. Underlying Health is your competitive differentiation as an acquirer.
Why the four layers matter in valuation.
The Performance Iceberg framework is the conceptual foundation for how sophisticated buyers and sell-side advisors actually evaluate agencies. Understanding it gives sellers the language to position themselves and gives buyers a structured underwriting lens.
The deterministic 2.0× revenue baseline that many platforms use operates on the visible Layer 1 (revenue). Multiplier adjustments are informed by Layers 2–4 data when sellers provide it. A premium-band multiple is almost never achieved on Layer 1 alone — it requires the operator profile to read coherently through the deeper layers.
Different buyer types weight the layers differently. Some PE buyers focus heavily on Layer 1 (the financial-engineering thesis). ICP-03a-i tuck-in buyers care more about Layer 4 (the cultural and operational fit they can extend). ICP-03b-ii regional roll-ups underwrite across all four layers. The buyer's read of the iceberg determines the structure of the offer as much as the multiple itself.
Terminology on this shelf
- Performance Iceberg
- Reagan Consulting's four-layer framework for agency quality assessment, organized as visible-to-foundational.
- Current Operating Results (Layer 1)
- Growth and profitability — the visible quantitative metrics on the financial statements.
- Mechanics (Layer 2)
- How results are being achieved — productivity, retention, specialization sub-metrics.
- Capacity (Layer 3)
- Forward-looking capacity — producer demographics, sales-velocity age banding, NUPP, WAPA.
- Underlying Health (Layer 4)
- Qualitative foundational health — leadership, culture, technology, carrier relationships, balance sheet.
- WAPA
- Weighted Average Producer Age — the industry-standard producer-cohort metric.
- NUPP
- Net Unvalidated Producer Payroll — the cost of producers who haven't yet validated to a self-sustaining book.