This brief captures the 2022 Best Practices Study profile for the smallest revenue tier — owner-driven agencies still small enough that one or two producers carry the book. 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.
The tier runs a strong Pro Forma EBITDA margin on a relatively light compensation base — the advantage of an owner-operated structure. Its Rule of 20 score of 23.5 clears the 20 threshold comfortably.
| Metric | Average | Top quartile |
|---|---|---|
| Pro Forma EBITDA margin | 23.9% | 38.8% |
| Pre-tax profit | 28.1% | 59.4% |
| Rule of 20 score | 23.5 | 38.6 |
| Total Pro Forma compensation | 48.2% | — |
§ 02 · Revenue mixRevenue mix.
The most balanced book of any tier — commercial and personal lines sit almost level. That even split spreads carrier and segment risk, but it also means heavier personal-lines exposure than the larger tiers carry.
| Line | % of revenue |
|---|---|
| Commercial lines | 43.7% |
| Personal lines | 44.8% |
| Contingent / bonus | 5.6% |
| Group medical | 1.5% |
| Individual life & health | 1.6% |
Revenue mix, at a glance.
A near-even commercial / personal split with a modest contingent tail. Bar widths are exact percentages of revenue.
§ 03 · Growth & concentrationGrowth & account concentration.
2022 (reporting strong 2021 results) was a high-growth year across the study. The smallest tier posted healthy net-revenue organic growth — but it also carries the heaviest account concentration of any tier, a key-account risk a buyer prices.
| Metric | Average | Top quartile |
|---|---|---|
| Net-revenue organic growth | 9.5% | 18.1% |
| Net-revenue total growth | 10.0% | 20.5% |
| Top-10 accounts (% of commissions) | 18.5% | — |
§ 04 · ProductivityProductivity per person.
With roughly 6.4 staff, this is a lean operation — and its revenue-per-employee is the lowest of any tier, the structural cost of sub-scale. The spread per employee, though, holds up well.
| Metric | Average | Top quartile |
|---|---|---|
| Revenue per employee | $134,607 | $200,084 |
| Spread per employee | $71,783 | $136,507 |
| Total staff (average) | 6.4 | — |
§ 05 · Producer pipeline & stabilityThe pipeline read.
The tier's defining risk sits here. Its five-year producer success rate is actually the highest in the study (65.9%) — but it invests the least in the pipeline (NUPP 0.6%), and its thin current ratio (1.07) leaves little balance-sheet cushion. A weighted-average producer age of 50.3 underlines the perpetuation question.
| Metric | Average | Top quartile |
|---|---|---|
| Weighted-average producer age | 50.3 | — |
| 5-year producer success rate | 65.9% | 100% |
| NUPP (% of net revenue) | 0.6% | 2.0% |
| Current ratio | 1.07 | 2.69 |
| Tangible net worth (% of revenue) | 12.0% | 30.7% |
- Most balanced book. Commercial (43.7%) and personal (44.8%) lines sit almost level.
- Lean and profitable. A 23.9% Pro Forma EBITDA margin on a light 48.2% compensation load.
- Highest account concentration. Top-10 accounts are 18.5% of commissions — a key-account risk a buyer prices.
- Best producer success rate — but lowest investment. 65.9% five-year success, yet NUPP of just 0.6% of revenue.
- Thin balance sheet. A 1.07 current ratio leaves little cushion versus the larger tiers.
- Perpetuation question. A 50.3 weighted-average producer age, with under-investment in the next generation.
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. For the smallest tier, the figures that move a multiple are the Rule of 20 (23.5), organic growth (9.5%), and producer-pipeline investment. The standout risk is concentration: at 18.5% in the top-10 accounts, a single departure moves the number.
The largest single adjustment between reported and normalized earnings 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 under-$1.25M 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.