2001 Best Practices Study

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Pro Forma Pre-Tax Profit:
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.
Receivable to Payable Ratio:
Accounts receivable divided by accounts payable. This factor measures the collection practices
of an agency, with a lower ratio representing more timely collections.
Revenue Per Employee:
Net revenues divided by the average number of “full-time equivalent” employees your agency
employed during the most recently completed fiscal year.
Spread Per Employee:
Total revenue per employee minus compensation per employee. While revenue per employee
has been a standard productivity measure, the “spread” measures the dollars per employee
available to pay all other agency expenses and generate a profit for the agency. It is another
measure of productivity.
Stockholders’ Equity:
Total assets minus total liabilities. Stockholders’ equity reflects the “book value” of a firm.
Tangible Net Worth:
Total assets minus intangible assets equals total tangible assets. Total tangible assets minus
total liabilities equals tangible net worth. The tangible net worth is an important measure as it
represents the net value of the corporation if it were liquidated. Results are shown as a % of net
revenues.
Validated Producer:
Salesperson whose production supports the compensation received based on the existing
producer compensation percentage, formula or method used by the agency. If a salesperson
has been with the agency for over three years, they should be included as validated even if they
are not.
Working Capital:
Current assets minus current liabilities. This measures an agency’s ability to meet short-term
obligations.
QUESTIONS REGARDING THE STUDY RESULTS CAN BE DIRECTED TO:
Reagan Consulting
7 Piedmont Center, Suite 417
Atlanta, GA 30305
Email :
Phone: 404-233-5545
Fax: 404-237-5996