2003 Best Practices Study

Analysis of Agencies with Revenues Between $5,000,000 and $10,000,000

FINANCIAL STABILITY

A. Current Ratio

A current ratio greater than 1:1 indicates that cash and assets with short-term maturities

are sufficient to meet a firm's short-term obligations.

Average

Top 25%

Liquidity/Current Ratio

1.08:1

1.41:1

B. Tangible Net Worth

other capital expenditures and handle stockholder redemption obligations. The tangible net worth is an important measure as it represents the net value of the corporation if it were liquidated. A low or negative tangible net worth impacts a firm's ability to invest in new opportunities, develop new products, hire new employees, make

Top 25%

Average

Tangible Net Worth (as % of Net Rev)

6.1%

18.8%

C. Receivables

1. Receivables/Payables Ratio

This factor measures the collection practices of an agency, with a lower ratio representing more timely collections. (Calculated by dividing total receivables by total payables at a given point in time.)

Average

Top 25%

Receivables/Payables Ratio

52.7%

14.6%

2. Aged Receivables

Average

Top 25%

Over 60 Over 90

14.0% 10.0%

3.2% 1.0%

CARRIER REPRESENTATION

A. Number of Carriers Represented

Average

+25% Profit

+25% Growth

Personal Lines National

9.0 4.1

6.7 4.6

16.3

Regional

5.4

Commercial Lines National

21.2

9.0 5.3

33.1 10.9 65.7

Regional

8.3

Total Carriers

42.6

25.6

B. Commission Income as % of Net Revenue

Average

+25% Profit

+25% Growth

% of Net Rev from Top Carrier % of Net Rev from Top 3 Carriers

12.4% 26.2%

13.8% 28.2%

15.2% 27.5%

C. Service Center Use

Total Pers'l Lines Commissions placed in Carrier Service Center Total Comm'l Lines Commissions placed in Carrier Service Center

11.2%

23.4%

4.3%

1.3%

*

0.6%

Page 80 2003 Best Practices Study