Selling or Buying an Agency? Your Commission Statements Are the Diligence
Your carrier statements are the record a buyer can test. A management report typed in week one is not a substitute for the carrier page.
A buyer can listen to a retention story. A buyer can check a statement. The second one is diligence.
The window is shorter than the filing cabinet
DealFlow OS publishes a buyer checklist, not a price. For most independent agency acquisitions in the $1 million to $5 million revenue range, it says thorough diligence takes 45 to 75 days from the letter of intent. That figure is DealFlow's, for that band. It is not a rule for every sale.
The same checklist flags management-system data that does not agree with carrier commission statements. The statements are how you answer the question. A report you type in week one is not the carrier's page.
If you might sell in the next two years, the monthly close is the diligence file. The four checks, the expected-policy list, and the chargeback log are the binder. You will not reconstruct years of statements in the second week of a review.
What the checklists actually request
Milly Books tells buyers to request 24 months of commission statements, along with carrier contracts and contingency schedules. Separately, it calls missing reconciliations a data-quality red flag, because those reconciliations are ordinary hygiene for an agency on a management system. Read those as two requests. Have the statements. Be able to show the tie.
"Reconciled" here means you can show, for a month, that the statement lines, the deposit, and the revenue in the books describe the same dollars, with the differences listed. A folder of PDFs and a profit and loss statement in the same ballpark is not that showing.
Retention is the lines, not the slide
The buyer is not required to accept the retention percentage on your slide. Policy-level lines show which policies paid, which stopped, and when.
That list is the missing-policy check, kept. A policy that left the statement and never returned is a lapse a single percentage can still average away. A rewrite, with a new number, can look like a lapse and a new sale at the same time. The lines settle it.
You do not need a sync to the agency management system to start. You need the statements, and the policy identifiers on them, kept in one place. Direct sync remains custom work, which is the limit in the AMS article. A sale that assumes the buyer can log in and pull a perfect history is waiting on a project you have not done.
Contingent income is where the price moves
Base commission follows policies you can point at. Contingent commission follows a carrier's bonus formula, a growth target, a loss ratio, or a mix of those, and it often pays once a year. A buyer who pays you for a contingent you already received is paying for the past. A buyer who pays you for a contingent you expect next March is paying for a formula the buyer may not satisfy.
PolicyBalanceHub says some carriers can claw contingencies back if the agency changes ownership. The contract, not the teaser, says whether a change of control forfeits the bonus or demands it back. If you have not read that clause for each carrier that pays you a contingent, the buyer will.
Put the contingents on their own schedule. The rows below are a template, not a result.
| Carrier | Last payment | What it was tied to | Change-of-control clause read | Included in the asking price |
|---|---|---|---|---|
| Example carrier A | March, prior year | Growth target, per their plan | Not yet | No, until the clause is read |
| Example carrier B | March, prior year | Loss ratio | Forfeited on change of control | No |
Leave a contingent out of the price until the clause is read. Leaving it in, and calling it recurring revenue, is how a deal re-trades in diligence.
The trust account has to agree with the carrier
PolicyBalanceHub also asks for 12 months of trust-account statements, reconciled against the carrier statements for the same period. Premium that belongs to the carrier, or to the insured, is not commission. A statement can show commission inside a sweep that also moved premium. If the trust account and the statements disagree, the buyer cannot tell operating cash from money that was never yours.
This is the same bank check as the monthly close, applied to the balance sheet a buyer will read. The deposit for commission should be traceable to statement lines. The trust balance should be traceable to premium you have not remitted.
What to have in the room
- Carrier commission statements a buyer can compare with the management system, which is the check DealFlow describes.
- At least 24 months of commission statements, per the Milly Books checklist, and a reconciliation for the months you claim are closed.
- A list of open items, with age, rather than a stack of untouched differences.
- Policy-level lines a buyer can use to see which policies paid and which stopped.
- A contingent schedule, with the change-of-control clause marked for each carrier.
- Twelve months of trust activity that agrees with the carrier sweeps, per the PolicyBalanceHub checklist, or a written list of what does not.
- No reliance on a management-system sync to produce the history during the review.
If you are a year out from a sale, or you are buying a book and the statements are the only clean record, a guided pilot on a recent month shows what a reconciled package looks like. You bring approved statements. You see matches, exceptions, and the payout evidence. It does not value the agency, and it does not sync the management system.
Questions agencies ask
How many months of carrier statements should you have ready?
Milly Books tells buyers to request 24 months of commission statements, and it treats missing reconciliations as a data-quality red flag. DealFlow OS says diligence for many deals in the $1 million to $5 million revenue range runs 45 to 75 days, and it tells buyers to compare management-system data with carrier commission statements. Keep the statements month by month so you are not reconstructing them in week two.
Why do contingent commissions move the price?
A contingent follows a carrier formula and often pays once a year, so it is not the same revenue as commission on a policy you can point at. PolicyBalanceHub notes that some carriers can claw contingencies back if ownership changes. Read that clause before the amount is treated as part of the price.
What to read next
Operations8 min read
The Monthly Commission Close: Four Checks Every Carrier Statement Needs
A carrier statement is closed only when the book, the rate, the producer, and the bank deposit agree. Leave one of those open and the month is still open.
Finance8 min read
The Commission You Never See: Finding Expected Policies Missing From Carrier Statements
The expensive miss is often a policy that never appears on the statement. Compare the book you expected to get paid on, not only the lines the carrier printed.
Technology8 min read
Your AMS Says One Thing, the Carrier Paid Another: Working the Gap
An agency management report and a carrier statement are different pictures taken at different times. Reconcile them beside each other. Do not wait for a sync to make them identical.
See what a reconciled month looks like before diligence
Bring one approved carrier statement. A guided pilot shows the match, the open items, and the payout evidence a buyer would ask to see. It does not value the agency, and it does not sync your management system.