Most benchmarking errors are vocabulary errors. A term used loosely — "growth," "profit," "revenue per person" — hides a methodology choice that changes the answer. This is the working glossary; the deeper methodology comparison behind it is the GPS-vs-BPS guide.
§ 01 · Profit and growthThe terms that move a valuation.
The valuation-bearing metrics are where loose language costs the most. EBITDA (earnings before interest, taxes, depreciation, and amortization) is the standard valuation metric, drawn from the Best Practices Study; pre-tax profit (from the Growth & Profitability Study) includes D&A and typically reads 1–3 points lower — they are not interchangeable. Organic growth strips out acquired revenue and is the primary valuation driver, while total growth lumps both together. And the Rule of 20 — organic growth rate plus EBITDA margin — is the single cleanest valuation read: 20 or above signals a premium, the mid-teens are market, below 15 trades at a discount.
| Metric | What it measures | Benchmark / threshold |
|---|---|---|
| EBITDA margin | Normalized operating profitability | ~22%–28%; top quartile 30%+ |
| Rule of 20 | Organic growth % + EBITDA margin % | ≥20 premium · 15–19 market · <15 discount |
| Organic growth | Growth excluding acquisitions | Primary valuation driver |
| Account retention | Clients retained year over year | 90%+ target |
| Revenue per employee | Net revenue ÷ FTE | ~$150K–$200K |
§ 02 · Productivity and the bookOutput per person.
Revenue per employee (net revenue divided by full-time-equivalent staff) is the headline productivity figure; its operational cousin, commission per person, may exclude fee income, so the two diverge for a fee-heavy agency. Spread — net revenue minus total compensation, per employee — measures the gap between what staff produce and what they cost. Retention is read at a tighter threshold than most metrics (a 10% gap matters, not just 25%) because it compounds: book value is a stream of renewals, and small retention erosion is large value erosion over time. Carrier concentration — premium with the largest carrier or top few — is a risk metric, where high concentration is a dependency, not a strength.
§ 03 · Balance sheet and successionHealth and timing.
Two balance-sheet terms are decisive. Trust position (cash and trust funds against premiums payable) is a compliance metric — below 1.10 is critical. Tangible net worth (assets minus intangibles minus liabilities) is the conservative asset read acquirers use for earnouts and seller notes. On the people side, two weighted-age metrics drive succession timing: WAPA (weighted average producer age) and WASA (weighted average shareholder age) — both above 55 signal high perpetuation risk and are central to M&A timing. The way these flag against peers is the variance-analysis guide.
Half of benchmarking is arithmetic; the other half is knowing which word you're using. "Profit," "growth," and "revenue per person" each name two different numbers — and the difference is exactly where a negotiation lives.
§ 04 · Cross-walking the termsWhat lives where.
The practical lesson is that many metrics exist in only one study. Trust position, working-capital days, location tiers, and per-line service-rep loads are operational-study territory; EBITDA, organic growth, Rule of 20, top quartile, and tangible net worth are profitability-study territory. When a term appears in both — current ratio, compensation ratio, retention — confirm the revenue basis before comparing across them. The map of which source carries which metric is the benchmark library, and the figure all of this ultimately feeds is the Book Valuation Engine's deterministic range.
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Terminology on this shelf
- EBITDA
- Earnings before interest, taxes, depreciation, and amortization — the standard valuation metric.
- Organic growth
- Revenue growth excluding acquisitions — the primary valuation driver.
- Rule of 20
- Organic growth rate plus EBITDA margin; ≥20 signals a premium valuation.
- Spread
- Net revenue minus total compensation, per employee.
- WAPA / WASA
- Weighted average producer age and shareholder age — succession-risk signals, both high above 55.