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Analysis of Agencies with Revenues

Greater Than $10,000,000

PROFITABILITY (as % of Net Revenues)

A. Profitability Ratios

Average

+25% Profit

+25% Growth

Pre-Tax Profit

10.9%

18.3%

13.4%

Pro Forma Pre-Tax Profit

(1)

16.3%

24.7%

17.2%

Operating Pre-Tax Profit

(2)

1.3%

7.5%

4.5%

(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.

B. Growth in Profitability (% change from prior year)

Average

+25% Profit

+25% Growth

Net Revenues (Total)

14.9%

16.6%

23.8%

Compensation Expense

11.9%

9.1%

19.9%

Selling Expense

9.2%

8.7%

23.6%

Operating Expense

10.1%

9.7%

17.8%

Administrative Expense

11.2%

17.5%

7.7%

Pre-Tax Profit

32.8%

46.5%

48.2%

Operating Pre-tax Profit

14.4%

30.7%

-28.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

% 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%

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%

40.0%

45.0%

50.0%

Average

+25% Profit

+25% Growth

Growth in Pre-Tax Profit

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