For many agency owners, growth is not just a goal it’s a necessity. But scaling a specialized book of business comes with its own set of challenges, especially when balancing expansion, staffing, and strategic partnerships. For one Minnesota-based agency owner, building a niche commercial book in the cannabis insurance space was a successful endeavor but with rapid growth came the question: how and when do you capitalize on what you’ve built?
This story offers a real-world look at how one commercial insurance agency owner evaluated his options, the roadblocks he faced, and the role that Equity Expansion played in helping him chart a smarter path forward.
Based in Minnesota, the agency in question has carved out a strong niche in the cannabis insurance sector, with roughly 95–98% of its business in commercial lines, including cannabis dispensaries, low-dose THC beverage programs, and Main Street businesses like restaurants and machine shops.
Approximately 80% of the agency’s commercial book is cannabis-related, an emerging vertical in Minnesota’s rapidly evolving recreational market. The agency currently writes about $5 million in premium, generating an estimated $600K–$700K in revenue, and is seeing strong performance:
What started as curiosity about cannabis legislation evolved into deep expertise developed through direct work with the Minnesota House and Senate, helping shape compliance, and collaborating with carriers to properly underwrite this new market.
Despite the agency’s success, the owner knew he was entering a pivotal phase.
In the past year, he added four new team members, invested in internal accounting, and shifted the agency’s focus to process improvement. These were necessary moves but they increased overhead, which could create valuation challenges when evaluating potential partnership or acquisition offers.
He also found himself constrained by his existing relationship with a national aggregator, which offered support and carrier access but also came with a two-year non-compete clause and restrictive buyout terms.
As the owner put it:
“I’d love to grow through acquisition, but the economics have to make sense and right now, it would be tough to unwind our current partnership without a really compelling offer.”
Despite the limitations of his aggregator agreement, the agency owner wanted to better understand his options. He had already fielded one acquisition offer but turned it down.
“They didn’t offer equity, the comp was worse than what I already have, and I’d be selling my book just to make less money. It didn’t make sense.”
Still, the idea of eventually taking chips off the table, simplifying operations, and retaining upside intrigued him. He knew that if he were ever going to make a move, it would need to:
Enter Equity Expansion.
Equity Expansion approached the conversation with transparency and structure. The agency wasn’t ready to transact today, but Equity Expansion provided a roadmap for what a future partnership could look like both financially and operationally.
Financial Structuring: A Sample Scenario
If the agency were to pursue a $1M valuation, a potential partnership structure could include:
This kind of structure turns a single exit into a multi-phase wealth-building event, something that’s often impossible with traditional one-time sales.
Operational Support to Simplify Leadership
Equity Expansion also detailed what day-to-day relief could look like in a future partnership:
With the agency already growing and bringing on new staff, the timing wasn’t perfect but the owner appreciated the clarity around valuation metrics and where his financials needed to be to unlock top-tier multiples.
Cultural Alignment and Long-Term Fit
For Equity Expansion, the goal isn’t just financial. It’s about matching agency owners with partners who align on values how they treat their staff, their clients, and their legacy.
In the words of Equity Expansion:
“There are three things we vet before any introduction: Are they good people? Do they have the infrastructure to support your agency? And are they willing to pay market value or better?”
This resonated with the owner, who values his team and was adamant that any future deal preserves the client experience and company culture he worked hard to build.
A Smart Timeline for Future Partnership
While a partnership wasn’t immediately feasible due to existing aggregator constraints, Equity Expansion and the agency owner agreed to revisit discussions in six months. The rationale? Timing matters.
“If you want the full value multiple payouts, equity rollover, earnouts you need to explore partnership at least 36 months before your exit,” explained Equity Expansion.
By waiting too long, owners risk settling for 80 cents on the dollar, leaving wealth on the table. With 3–5 years left on the horizon, the Minnesota agency could be perfectly positioned to capitalize on its momentum if the timing and offer are right.
Conclusion: Planning Ahead Pays Off
This story is a powerful reminder that even thriving, fast-growing agencies benefit from exploring partnership options early. Understanding your valuation drivers, aligning your EBITDA with industry benchmarks, and timing your exploration correctly can mean the difference between a one-time payout and a life-changing equity event.
Whether you’re a niche agency like this Minnesota cannabis-focused firm or a more traditional P&C book, Equity Expansion offers confidential, no-obligation guidance to help you think through your best next move.
Ready to Explore Your Options?
If you're an agency owner generating $500K–$2M in revenue and considering a growth strategy, partnership, or exit, schedule a confidential consultation with Equity Expansion today.