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Analysis of Agencies with Revenues
Between $2,500,000 and $5,000,000
PROFITABILITY (as % of Net Revenues)
A. Profitability Ratios
Average
+25% Profit
+25% Growth
Pre-Tax Profit
12.2%
22.4%
19.9%
Pro Forma Pre-Tax Profit
(1)
21.2%
36.7%
28.1%
Operating Pre-Tax Profit
(2)
5.9%
14.2%
10.4%
(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)
14.4%
20.6%
26.6%
Compensation Expense
15.0%
21.0%
22.7%
Selling Expense
7.9%
11.6%
11.4%
Operating Expense
8.9%
14.5%
18.0%
Administrative Expense
-3.8%
-4.0%
-6.6%
Pre-Tax Profit
12.2%
14.4%
33.6%
Operating Pre-tax Profit
11.2%
15.5%
5.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
% Net Revenue
Pre-Tax Profit
Pro Forma Pre-Tax Profit (1)
Operating Pre-Tax Profit (2)
Profitability
Average +25% Profit
+25% Growth
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Average
+25% Profit
+25% Growth
Growth in Net Revenues
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Average
+25% Profit
+25% Growth
Growth in Pre-Tax Profit
Page 59
2003 Best Practices Study