2002 Best Practices Study
Analysis of Agencies with Revenues Between $500,000 and $1,250,000
PROFITABILITY (as % of Net Revenues)
A. Profitability Ratios
Average
+25% Profit
+25% Growth
Pre-Tax Profit
13.9% 20.6%
26.7% 38.1%
18.0% 25.6% -4.0%
Pro Forma Pre-Tax Profit (1) Operating Pre-Tax Profit (2)
2.2%
7.6%
(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
-5.0% 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
9.4%
15.7% 12.9% -5.5% -1.4%
20.0% 22.4% -2.4% 12.8%
11.7% -5.0% 5.1% -1.6% -3.6% -0.7%
Selling Expense Operating Expense
Administrative Expense
1.2%
5.5% 9.6%
Pre-Tax Profit
34.3% 48.1%
Operating Pre-tax Profit
15.5%
Growth in Profitability
-5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
Net Revenues (Total)
Pre-Tax Profit
Average +25% Profit +25% Growth
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