When we conduct a valuation at AgencyFocus, it’s never just about the numbers. Yes, the financials are a critical part of the story. But over time, we’ve seen that an agency’s structure, habits, and even culture can have just as much impact on value as what shows up on a profit and loss statement.

Here are some of the most common and costly mistakes I see when working with independent agencies. These aren’t just technical errors. They’re patterns that creep in slowly and chip away at value without anyone realizing.

Why Combining Sales and Service Roles Can Hurt Your Agency’s Value

Smaller agencies, especially those led by a single owner or a very lean team, often combine sales and service into one role. It’s usually out of necessity. The producer handles the sales, the servicing, and everything in between. But as the agency grows, this structure can become a liability.

In larger agencies, we typically see these roles split. Producers focus on generating business, and service staff handle client support. This delineation not only drives efficiency, but it also makes the agency more scalable. Buyers and investors look for operational clarity. When roles are muddled, it raises questions about how replicable or sustainable the operation is.

Agencies that don’t evolve past that all-in-one model may be limiting their potential without realizing it.

How High Expenses and Poor Tracking Reduce Your Valuation

Compensation is usually the single largest line item in an agency’s expense structure. For many, it’s around 50 percent of total expenses, though I’ve seen it run both higher and lower. If that structure isn’t built intentionally and bonuses, commissions, or salary increases are layered on without a clear plan, profitability suffers.

But it’s not just compensation. I’ve worked with agencies that didn’t realize how much their office space was costing them. A prime location in a high-rent market or managing multiple locations can quietly push occupancy expenses out of line with the agency’s size. In some cases, there’s space that isn’t even being used but is still being paid for.

Then there’s the discretionary spending. This is where things get interesting. I’ve reviewed financials with line items that include hunting leases, dance recitals, and even private airplanes, none of which were disclosed upfront. It’s common for owners to say, “There’s no discretionary expenses in here,” until we compare their expense structure to industry benchmarks and something doesn’t add up. When that happens, we have to go back and dig deeper.

Valuation isn't about policing these expenses. It’s about understanding them. But when owners aren’t fully aware of what’s running through the business, it makes it hard to assess real profitability, which is a critical part of the value equation.

The Impact of Technology and Automation on Agency Value

One of the most undervalued drivers of EBITDA I see today is automation. Agencies that embrace technology, whether that’s a modern AMS, automation tools, or outsourced support like virtual assistants, are often able to do more with fewer people. That efficiency shows up directly in their profitability.

I’ve reviewed agencies where IT and software costs are relatively high, but those costs are offset by significantly lower payroll. The result is a stronger EBITDA. And stronger EBITDA leads to a stronger valuation.

The flip side is agencies that are still heavily reliant on paper or manual processes. If you’re not maximizing the capabilities of your AMS or using tech to reduce admin burden, you’re leaving value on the table. In this market, efficiency matters.

Why Carrier Concentration Can Be a Risk in Your Valuation

We always look at the book of business during a valuation. Client mix, retention, and especially concentration are important indicators of risk.

One red flag we watch closely is when more than 25 percent of an agency’s book is tied to a single carrier. Such concentration can be risky. If that carrier changes its commission structure, adjusts contract terms, or exits a market, the impact on the agency is immediate.

But there’s nuance here. In some cases, heavy concentration with a single carrier can be a strategic choice. Certain contracts are highly valued, and some agencies build a niche by working almost exclusively with one or two carriers. I’ve seen agencies where 60 to 80 percent of the book is tied to a single carrier, but because of their relationship and contract value, that concentration enhances their appeal. This is especially true for a buyer who already has that carrier relationship in place.

It’s not always good or bad. But it is always worth understanding.

Why Not Knowing Your Financials Can Hurt Your Agency’s Worth

This is the one I can’t stress enough. The agencies that tend to be surprised by their valuation, usually in a negative way, are the ones that haven’t been paying close attention to their numbers.

Maybe they haven’t done a detailed review of expenses in years. Perhaps they don’t have a solid grasp of what their EBITDA is, or they’ve never benchmarked themselves against similar agencies. These owners often come to us late in the game, right before they want to sell, and realize too late that there’s work to do.

On the other hand, the most prepared owners I work with already know what their EBITDA is before we even start. They’ve thought about their structure, cleaned up their financials, and put systems in place that make the business easier to evaluate. These agencies are almost always more valuable, and the process moves faster and smoother.

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If there’s one piece of advice I’d give any agency leader right now, it’s this: pay attention.

You don’t have to overhaul everything overnight. But you do need to know your numbers. Review your expenses. Understand your compensation model. Know how your systems support or hold back your team. And don’t wait until you’re thinking about selling to ask these questions.

Valuation is not something that happens to you. It’s something you shape, decision by decision. The earlier you start, the more options you’ll have and the more control you’ll keep.