Value Maximization Series: Systems & Processes

Video Transcription

Hello, I’m George Bucur, managing director and co-head of MarshBerry specialty practice. Serving specialty distributors such as MGAs (managing general agent), MGUs (managing general underwriter), wholesale brokers, and program managers, we’re here today to talk about value maximization.

Today we are in part two of a five-part series, focusing today on systems and processes. As we’ve talked about previously, valuation is generally fairly simple, although can be very ambiguous at the same time. Taking pro forma EBITDA (earnings before interest, taxes, depreciation, and amortization) multiplied against an EBITDA multiple arrives at value. We oftentimes get asked, what are the five most significant things me as an owner that I can work on that will influence my multiple. Well today, as I said we’re talking about systems and processes. Why is that? It’s because having effective and efficient systems and processes ultimately leads to higher revenue growth and/or profitability, both of which support higher valuations.

If you think about the major systems that exist you have your policy administration system, which is how your insurance retail brokers, wholesale brokers –however you define clients– interacts with you. The more efficient the process is, the more of a higher value add the counterparty is likely to have from that experience. Thereby, they come back and then they generate future revenue growth. Next, we have the CRM (customer relationship management) system. Oftentimes clients use the CRMs for marketing and outreach. Again, to hit the right people at the right time to generate future growth. Finally, we talk about the claims and the data analytics that go on into the underwriting systems. These are so critical because at the end of the day the MGAs lifeblood is their capacity, and the higher quality of the data and the analytics within the claims and underwriting system, the more effective and efficient they can be in underwriting, thereby keeping long and stable client relationships with their carrier partners –again enhancing the future likelihood of revenue and therefore valuation.

If you have questions about how any systems and processes may influence your operations from valuation perspective, or any of the other four valuation attributes that we are talking through, we encourage you to reach out. Until next time, be well.