2000 Best Practices Study
IV. Profitability - % of Net Revenues (Agencies with Revenues Between $500,000 and $1,250,000) A. Profitability Ratios Average +25% Profit +25% Growth Pre-Tax Profit 12.3% 18.5% 15.6% Pro Forma Pre-Tax Profit (1) 20.1% 35.2% 19.4% Operating Pre-Tax Profit (2) 1.3% 3.7% 10.7% (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% % 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
Analysis of Agencies with Revenues Between $500,000 and $1,250,000
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