This brief captures the 2022 Best Practices Study profile for the $1.25M–$2.5M tier — the band where an agency has moved past owner-only production into a small producer bench, and where the study's profitability peaks. Every figure here is a segment benchmark; the companion 2022 BPS tier reference explains how the tiers compare, and the year's strategic story is the 2022 context.
§ 01 · ProfitabilityProfitability & the Rule of 20.
This is the headline. At 32.7% Pro Forma EBITDA and a Rule of 20 of 28.1, the tier posts the highest profitability and the highest composite health score of any band in the 2022 study — a light cost base meeting strong growth.
| Metric | Average | Top quartile |
|---|---|---|
| Pro Forma EBITDA margin | 32.7% | 44.4% |
| Pre-tax profit | 29.1% | 48.7% |
| Rule of 20 score | 28.1 | 40.6 |
| Total Pro Forma compensation | 47.5% | — |
§ 02 · Revenue mixRevenue mix.
Commercial lines edge ahead of personal here, and the tier carries the richest contingent share of any band (10.0%) — a strong but carrier-discretionary line a buyer normalizes carefully.
| Line | % of revenue |
|---|---|
| Commercial lines | 45.5% |
| Personal lines | 38.0% |
| Contingent / bonus | 10.0% |
| Individual life & health | 3.1% |
| Group medical | 2.2% |
Revenue mix, at a glance.
Commercial-led, with the study's richest contingent tail. Bar widths are exact percentages of revenue.
§ 03 · Growth & concentrationGrowth & account concentration.
Healthy organic growth with a strong top-quartile, and meaningfully lower account concentration than the smallest tier — a more diversified, more defensible book.
| Metric | Average | Top quartile |
|---|---|---|
| Net-revenue organic growth | 8.6% | 21.2% |
| Net-revenue total growth | 8.3% | 20.5% |
| Top-10 accounts (% of commissions) | 14.4% | — |
§ 04 · ProductivityProductivity per person.
About 12.9 staff, with revenue-per-employee and spread-per-employee both stepping up from the smallest tier — the early-scale dividend.
| Metric | Average | Top quartile |
|---|---|---|
| Revenue per employee | $161,153 | $229,835 |
| Spread per employee | $88,395 | $151,839 |
| Total staff (average) | 12.9 | — |
§ 05 · Producer pipeline & stabilityThe pipeline read.
The youngest producer bench in the study (weighted-average age 46.2) and a stronger balance sheet (1.77 current ratio) than the smallest tier. Producer investment steps up too, though the five-year success rate eases from the smallest band.
| Metric | Average | Top quartile |
|---|---|---|
| Weighted-average producer age | 46.2 | — |
| 5-year producer success rate | 58.1% | 97.0% |
| NUPP (% of net revenue) | 1.1% | 3.7% |
| Current ratio | 1.77 | 3.81 |
| Tangible net worth (% of revenue) | 10.7% | 30.9% |
- The profitability peak. 32.7% Pro Forma EBITDA and a 28.1 Rule of 20 — the highest of any tier in the 2022 study.
- Richest contingent income. A 10.0% contingent share — strong, but carrier-discretionary and normalized in diligence.
- Youngest producer bench. A 46.2 weighted-average producer age — the most favorable perpetuation profile.
- Commercial-led. CL (45.5%) ahead of PL (38.0%), a more durable revenue base than the smallest tier.
- Diversified book. Top-10 accounts down to 14.4% of commissions.
- Lean cost base. A 47.5% compensation load — the lightest in the study.
The benchmark is the baseline, not the price.
Best Practices benchmarks don't value an agency — they're the operating baseline a valuation is built on. This tier reads as a premium profile: the highest Rule of 20 (28.1), the highest margin (32.7%), a young producer bench, and a diversified book. An agency at or above these clears the bar; one below it is exactly where a seller's pre-listing work, or a buyer's diligence focus, pays.
The largest single normalization in this band is owner compensation — the add-back to a market-rate replacement is what turns reported profit into the Pro Forma EBITDA a buyer prices. The companion financial & transactional mechanics reference walks the full bridge.
What BPS measures. The Best Practices Study tracks the operating and financial results of top-performing agencies nominated and designated through the study, segmented by revenue tier. This brief reflects the $1.25M–$2.5M band in the 2022 edition (calendar 2021 results).
Percentages of net revenue. Expense, compensation, and revenue-mix lines are expressed as a percentage of net revenue unless a dollar figure is shown.
Average and top quartile. The average is the segment standard; the top quartile is the aspirational stretch the study reports alongside it.
Frequency. The study publishes annually. Milly Books refreshes this brief with each new edition.