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Standards & Guidelines For Appraising Insurance Agencies / Brokerages 2015


Fair Market Value (ASA) -- The amount at which property would change hands between a willing seller and a willing buyer at arm’s length in an open and unrestricted market when neither is acting under compulsion and when both have reasonable knowledge of all relevant facts.

Going Concern Value (ASA) -- (1) The value of an enterprise, or an interest therein, as a going concern that is expected to continue to operate into the future. (2) Intangible elements of value in a business enterprise resulting from factors such as having a trained workforce, an operational plant, and the necessary licenses, systems and procedures in place.

Going Concern Value is the Fair Market Value of an agency under continued current ownership and / or management with no (or only limited known) changes taking place. A Going Concern is appropriate for estate planning purposes and for some divorce or partner dispute valuations in which the agency is expected to continue to operate in a fashion similar to its current and recent performance and operation.

Goodwill -- The intangible advantage or benefits enjoyed by an company beyond the mere value of the capital stock, funds or property employed therein, resulting in the general patronage and encouragement which it receives from constant and habitual customers on account of its local position, reputation, skill or influence.

(a) Enterprise / Commercial Goodwill -- An intangible asset arising as a result of name identity, reputation, customer loyalty, location, products, services, and similar factors; which exists independent of any individual owner or employee.

(b) Personal / Professional Goodwill -- An intangible asset which attaches to the person or professional as a result of confidence in his/her skill and ability; which would likely be extinguished in the event of the person’s death, retirement or disability.

Net Income vs. Income (ASA) -- Often confused, “net income” refers to monetary receipts less expenses, including taxes. “Income” refers to monetary receipts without regard to expenses and taxes.

Net Operating Income -- Operating Income, less Commission Expense for ceded commissions and / or fees to other agents or producers who own the Expiration Rights associated with clients that are placed through the agency being valued.

Operating Income -- Generally, income generated directly from client revenues, including commission income (both direct billed and agency billed) and fee income.

Proforma Income Statement -- An income and expense statement that is purified of non-recurring income or expenses, and altered for changes to income and expenses as the result of known or projected changes, with the assumed modifications documented as appropriate to the circumstances of the valuation.

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