The deal was back by private equity firm AnaCap Financial Partners.
Established in 2005 by parent company Xbridge, Simply Business was among the first online brokers within the commercial insurance market.
The company has achieved rapid growth from revenues of £4.2m in 2006 to £22.9m in 2012. It now insures more than 225,000 small businesses across the UK.
Simply Business is led by chief executive Jason Stockwood, who joined the business in 2010. He has held senior positions at Travelocity, Lastminute.com and Match.com. AnaCap's Peter Cartwright and Ben Hollowood will now join the board of directors.
Stockwood said: "The management buyout enables us to build on this success, accelerating our growth aspirations and vision for the future, while continuing to innovate and challenge the traditional industry model."
Peter Cartwright added: "This is a rare opportunity to support the management buyout of a clear market leader in a fast-growing niche of the insurance industry."
Simply Business has a team of UK-based insurance specialists and employs more than 200 staff across offices in London and Northampton.