A thoroughly and honestly completed questionnaire protects the seller as much as it supports the buyer's evaluation. The 22 sections cluster into four logical groups.
The four logical groups.
Financial & Legal Architecture (Sections 1, 2, 18, 19).
The skeleton of the entity and its financial history. Sec 1 — Entity Structure: legal form (C-Corp, S-Corp, LLC, partnership), state, formation date, fiscal year, management structure. Sec 2 — 5-Year Financial Statements: tax returns, balance sheet, income statement by line (CL, PL, L&H), expense breakdown. Sec 18 — Historical Narrative & Milestones: founding story, key milestones, ownership changes, litigation history. Sec 19 — Prior Acquisitions: purchases of competing agencies or books in past 5 years, purchase price, earn-out structure, success/failure, lessons learned.
The Asset — Book of Business (Sections 3, 6, 7, 12, 14, 17).
The core economic asset. Sec 3 — Policy & Client Counts by line. Sec 6 — Retention Rates by line on commission basis (renewals / prior-year commissions); 3-year retention trend. Sec 7 — Revenue Segmentation (Direct Bill vs Agency Bill — Agency Bill carries default risk). Sec 12 — Large Client Disclosure — for each client >1% of revenue or top 10: name, industry, expiration date, producer, tenure, LTM commission, non-piracy agreement status. Sec 14 — Carrier Relationships — top 12 carriers, commission % (new vs renewal), 3-year loss ratio trend, contingency bonus history, carrier withdrawal risk. Sec 17 — Specialty Programs (custom programs, exclusive relationships, profit-sharing).
Human Capital & Producers (Sections 8, 9, 10, 11, 20, 21, 22).
The engine of the business. Sec 8 — Producer Information (the Vesting Problem): name, title, non-piracy signed (Y/N), vested in book (Y/N) and percent vested, ownership %, commission splits new vs renewal, 12-month new business and renewal production. A 100%-vested producer owns the clients; the agency cannot sell those accounts without permission. Non-piracy agreements make the book defensible even when the producer is vested. Sec 9 — New Business by Producer; Sec 10 — Renewal Business by Producer; Sec 11 — Average Commission Rates; Sec 20 — Employee Census & FTE Calculation; Sec 21 — Employee Benefits; Sec 22 — EPL Coverage.
Operational Infrastructure (Sections 4, 5, 13, 15, 16).
The systems and operational backbone. Sec 4 — Filing System: alphabetical (risky for E&O) vs transactional (preferred) vs digital. Sec 5 — E&O Coverage: carrier, policy limit, deductible, claims-made vs occurrence, 5-year claims history. Claims-made policies require tail coverage post-acquisition (150–300% of annual premium). Sec 13 — AMS: vendor, version, cloud vs on-premise, customizations. Legacy AMS = integration headache. Sec 15 — Outside / Brokered Business. Sec 16 — Lease & Facility Terms: expiration date, annual cost, transferability.
The six deal-killer risk areas. Client concentration (Sec 12) — any single client >5% triggers 15–30% valuation reduction per concentration point. Producer vesting without non-piracy (Sec 8) — 20–40% reduction on the vested book. Missing non-piracy agreements — portable book assumed lost. Carrier loss ratio deterioration (Sec 14) — contingency income at risk. E&O claims history (Sec 5) — larger indemnification escrow demanded. High owner compensation (Sec 19) — EBITDA add-back lowers valuation if above market. The Disclosure Shield: anything disclosed in the questionnaire cannot later become an indemnification claim. Honesty isn't just ethical — it's legal protection.
Terminology on this shelf
- Vested Producer
- Producer who owns their book of business; can leave and take clients if non-piracy agreement not in place.
- Non-Piracy Agreement
- Legal contract prohibiting producer from soliciting clients or staff for 12–24 months if they depart.
- Concentration Risk
- Single client or producer representing >5% of revenue; creates vulnerability if lost.
- Loss Ratio
- Claims paid divided by commissions earned; rising ratio signals deteriorating client quality.
- FTE
- Full-Time Equivalent — standardized labor unit; used to benchmark productivity (revenue per FTE).
- Risk Shifting (Disclosure Shield)
- Disclosure of known issues in questionnaire to create legal defense against future indemnification claims.
- Tail Coverage
- Extended-reporting-period E&O coverage purchased post-acquisition; 150–300% of annual premium.