2000 Best Practices Study

IV. Profitability - % of Net Revenues (Agencies with Revenues Between $5,000,000 and $10,000,000) A. Profitability Ratios Average +25% Profit +25% Growth Pre-Tax Profit 11.6% 21.4% 11.8% Pro Forma Pre-Tax Profit (1) 15.4% 25.0% 15.7% Operating Pre-Tax Profit (2) 0.4% 9.0% 0.5% (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% % 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 $5,000,000 and $10,000,000

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