15 / 97
Analysis of Agencies with Revenues
Less Than $500,000
PROFITABILITY (as % of Net Revenues)
A. Profitability Ratios
Average
+25% Profit
+25% Growth
Pre-Tax Profit
20.5%
42.8%
28.5%
Pro Forma Pre-Tax Profit
(1)
25.1%
48.5%
35.5%
Operating Pre-Tax Profit
(2)
13.7%
37.7%
16.7%
(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.
B. Growth in Profitability (% change from prior year)
Average
+25% Profit
+25% Growth
Net Revenues (Total)
6.7%
11.1%
17.7%
Compensation Expense
3.2%
1.2%
5.6%
Selling Expense
-6.9%
-13.5%
9.4%
Operating Expense
11.5%
12.9%
23.5%
Administrative Expense
-5.4%
*
*
Pre-Tax Profit
5.7%
29.8%
17.4%
Operating Pre-tax Profit
16.7%
37.3%
36.8%
*-Insufficient Data
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
% Net Revenue
Pre-Tax Profit
Pro Forma Pre-Tax Profit (1)
Operating Pre-Tax Profit (2)
Profitability
Average +25% Profit +25% Growth
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Average
+25% Profit
+25% Growth
Growth in Net Revenues
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Average
+25% Profit
+25% Growth
Growth in Pre-Tax Profit
Page 15
2003 Best Practices Study