2003 Best Practices Study
Analysis of Agencies with Revenues Less Than $500,000
PROFITABILITY (as % of Net Revenues)
A. Profitability Ratios
Average
+25% Profit
+25% Growth
Pre-Tax Profit
20.5% 25.1% 13.7%
42.8% 48.5% 37.7%
28.5% 35.5% 16.7%
Pro Forma Pre-Tax Profit (1) Operating Pre-Tax Profit (2)
(1) The agency's pre-tax profit when discretionary expenses (bonuses, compensation, and perks) made for the benefit of the owners, based solely on ownership, are removed (i.e., removing expenses that would not be incurred if a third party owned the agency. (2) Pre-tax profit minus contingents, bonus and investment income.
Profitability
10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% % Net Revenue
0.0% 5.0%
Pre-Tax Profit
Pro Forma Pre-Tax Profit (1)
Operating Pre-Tax Profit (2)
Average +25% Profit +25% Growth
B. Growth in Profitability (% change from prior year)
Average
+25% Profit
+25% Growth
Net Revenues (Total) Compensation Expense
6.7% 3.2% -6.9% 11.5% -5.4%
11.1%
17.7%
1.2%
5.6% 9.4%
Selling Expense Operating Expense
-13.5% 12.9%
23.5%
Administrative Expense
*
*
Pre-Tax Profit
5.7%
29.8% 37.3%
17.4% 36.8%
Operating Pre-tax Profit
16.7%
*-Insufficient Data
Growth in Net Revenues
Growth in Pre-Tax Profit
10.0% 12.0% 14.0% 16.0% 18.0%
30.0%
25.0%
20.0%
15.0%
0.0% 2.0% 4.0% 6.0% 8.0%
10.0%
5.0%
0.0%
Average
+25% Profit
+25% Growth
Average
+25% Profit
+25% Growth
Page 15 2003 Best Practices Study
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