Best Practices agencies continue excellent organic growth and profitability, according to the 2024 update of the Best Practices Study by the Big “I" and Reagan Consulting.

The Best Practices Study update is the last in its three-year cycle, examining the firms that qualified as a 2022 Best Practices agency. The annual study, conducted jointly in a longstanding partnership between the Big “I" and Reagan Consulting for the past 31 years, provides critical performance benchmarks in six agency revenue categories ranging from under $1.25 million to over $25 million.

“Best Practices agencies saw historic levels of growth, producing the best results achieved in the three decades the Best Practices Study has been conducted," says Charles Symington, Big “I" president & CEO. “We congratulate these top agencies for their dedication to excellence. All agencies can learn from the study's insights to improve their operational durability as the independent agency channel continues to show robust health even through the considerable challenges posed by the current hard market." 

The Best Practices Study analyzes takeaways from nominated Best Practices firms throughout the nation that have been recognized for outstanding management and financial achievement in categories such as income and expense distribution; revenue and profitability growth; sales and service staff compensation and productivity; technology expenses; and property & casualty and life-health carrier representation. 

“The big question was whether it was possible to beat last year's record-breaking positive results, and Best Practices agencies have done it again," says Tom Doran, a partner with Reagan Consulting. “In addition to exceptional growth, we also saw continued investment in new producer development. This investment in future growth engines is crucial for agencies to ensure new producers are ready to pick up the slack when the p&c market eventually softens."

Key findings from the update include:

• Organic growth reaches a record high. At 10.6%, organic growth levels were driven by property & casualty rates, solid new business and account retention. All but two revenue categories showed improved organic growth results compared to 2023, with the under $1.25 million group experiencing a 5.4% rate, down from 6.4%, and the over $25 million seeing a 9.8% rate, down from 10.8%. 
• Profitability remained at historically high levels. At 25.7%, Best Practices agency profitability remained steady, falling just behind last year's results of 25.8%.
• The Rule of 20 results hit an all-time high. The Rule of 20, calculated by adding organic growth to 50% of pro forma EBITDA (earnings before interest, taxes, depreciation and amortization), continued the past three years' exceptional results with a record 24.8. The Rule of 20 is the best metric with which to gauge overall agency health. 
• Sales velocity holds steady. Sales velocity remains at healthy levels in each revenue category, averaging 14.5% and holding steady from 2023's average of 14.7%.
• Producer recruitment and development remains healthy. Net unvalidated producer payroll (NUPP), a measure of producer recruitment and development, held steady at 1.9%, compared to 2.0% in 2023, which leaped from 1.1% in 2022. A healthy NUPP investment is 1.5%-2.0%, a marker hit by every Best Practices revenue category, indicating that Best Practices agencies are appropriately reinvesting in future growth engines. 
• Shareholder and producer ages hold steady. The weighted average shareholder age (WASA) was 54.4, holding steady from 54.3 years in 2023, and the weighted average producer age (WAPA) was 49.9, a slight increase from 49.6 years. Agencies should manage these two metrics carefully as lower WASA and WAPA are critical to long-term agency perpetuation. 

The annual Best Practices Study began in 1993 as a joint initiative between the Big “I" and Reagan Consulting and studies leading agencies and brokers in the country to help independent agents build the value of their agencies.

For more information on the Best Practices program or to purchase a copy of the 2024 Best Practices Study Update, visit the Big “I" Best Practices webpage.

AnneMarie McPherson Spears is IA news editor.