The Best Practices Study (BPS) is the benchmarking program that anchors agency M&A valuation in North America. Produced annually by Reagan Consulting in partnership with the Independent Insurance Agents & Brokers of America, it surveys 250–280+ agencies and reports comparative data across six revenue tiers covering profitability, growth, productivity, expenses, staffing, producer metrics, and carrier relationships. This page covers why BPS is the valuation standard and how its distinctive features — Pro-Forma EBITDA, top-quartile data, and the Rule of 20 — are used.
The valuation-canonical earnings basis.
BPS reports profitability on a Pro-Forma EBITDA basis, and this is what makes it the M&A standard. The Pro-Forma adjustments: owner salary capped at market rate, excess benefits and perks removed, one-time items excluded. The result is an earnings stream comparable across agencies regardless of how the current owner compensates themselves — exactly the number a buyer needs to apply a multiple to.
When a multiple is quoted in agency literature — 8× EBITDA, 10× EBITDA, the kill-zone band at 12–14× — the EBITDA almost always refers to BPS-shape Pro-Forma EBITDA. Misapplied multiples produce systematic mispricing.
The contrast with GPS is the load-bearing distinction. GPS reports pre-tax profit including depreciation and amortization; BPS reports Pro-Forma EBITDA excluding them. The two are not interchangeable, and the M&A workflow uses BPS for valuation, GPS for operational diagnosis.
Average and top-quartile.
BPS structures its data across six revenue tiers, and for most metrics reports two columns — the average and the top quartile.
| Tier (Code) | Net revenue band |
|---|---|
| Code 1 | Under $1.25M |
| Code 2 | $1.25M–$2.5M |
| Code 3 | $2.5M–$5M |
| Code 4 | $5M–$10M |
| Code 5 | $10M–$25M |
| Code 6 | Over $25M |
Net revenue is gross revenue minus brokerage commission expense — the tiering basis. The two-column structure is BPS's second distinctive feature. The average column is the primary benchmark — where a typical agency in the tier sits. The top-quartile column is the aspirational stretch — where the top 25% of performers sit. A competitive seller benchmarks against the top quartile (it commands a materially higher multiple band); a strategic buyer aspires to engineer top-quartile performance post-close. No other Milly-consumed dataset reports a top-quartile reference.
The deal-readiness heuristic.
The Rule of 20 is the single most-cited deal-readiness heuristic in agency M&A, and it comes directly from BPS metrics. The formula: Organic Growth % + Pre-Tax Profit % ≥ 20 marks a premium-valuation candidate. An agency growing organically at 10% with a 12% pre-tax margin scores 22 — a premium candidate. An agency growing at 3% with an 8% margin scores 11 — well below the threshold, signaling either a growth or a profitability deficit.
The Rule of 20's value is its compression of two distinct value drivers — growth and profitability — into a single screening number. A buyer screening targets uses it as a fast first-pass filter; a seller preparing for sale uses it to identify whether their gap is on the growth side or the profit side. Organic growth (revenue growth excluding acquisitions) is the key growth input — it isolates the agency's underlying engine from the distortion of bolt-on M&A.
Where BPS data does work.
BPS data serves five core M&A workflows:
- Valuation benchmarking — compare a target's EBITDA, Rule of 20, and profitability to top-quartile peers in the same tier.
- Due diligence — validate expense ratios, staffing levels, and producer productivity against tier norms.
- EBITDA add-backs — identify Pro-Forma adjustments for owner comp and perks using tier-specific benchmarks.
- Integration planning — set productivity and staffing targets based on tier benchmarks.
- Carrier analysis — assess concentration risk versus industry norms by tier.
BPS pairs with GPS (the operational-variance complement for sub-$1.25M targets) and the broader agency benchmarks unified reference Pillar. The vintage-specific BPS data — 2022 and 2024 tier benchmarks, cross-year trends, and year-paired strategic context — is treated in the dedicated BPS-vintage pages.