2000 Best Practices Study
IV. Profitability - % of Net Revenues (Agencies with Revenues Less than $500,000) A. Profitability Ratios Average +25% Profit +25% Growth Pre-Tax Profit 9.2% 27.9% 17.7% Pro Forma Pre-Tax Profit (1) 15.2% 29.9% 17.1% Operating Pre-Tax Profit (2) 4.4% 17.2% 1.3% (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
30.0%
25.0%
20.0%
15.0%
10.0%
5.0% % Net Revenue
0.0%
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 Selling Expense Operating Expense Administrative Expense
0.3% 9.1% 8.8% 2.9%
6.6% 11.6% 5.3% 3.6%
10.0% 3.3% 5.4% 7.5%
-11.1%
-9.0% -24.5%
Pre-Tax Profit
-10.1% -11.8% -21.3% -16.9% -26.3% -25.1%
Operating Pre-tax Profit
Growth in Pre-Tax Profit
Growth in Net Revenues
12.0%
0.0%
10.0%
-5.0%
8.0%
-10.0%
6.0%
-15.0%
4.0%
-20.0%
2.0%
0.0%
-25.0%
Average
+25% Profit
+25% Growth
Average
+25% Profit
+25% Growth
Analysis of Agencies with Revenues Less than $500,000
23 of 113
Made with FlippingBook