2017 Best Practices Study-Study Sponsors

([HFXWLYH 6XPPDU\

$JHQFLHV EHWZHHQ

PLOOLRQ DQG

PLOOLRQ LQ UHYHQXH

3URILWDELOLW\ 3URGXFWLYLW\

Pro Forma Metrics: # of Employees

Top Quartile

27.5

34.1%

Average

26.2%

22.8%

86.23

16.6

14.1%

Revenue per Employee Compensation per Employee Spread per Employee

$201,356

$260,901

Pro Forma Operating Profit

Pro Forma EBITDA

$124,427

$94,048

Average

Top Quartile

$76,929

$111,708

Comparison Group Average

Top Quartile

The Rule of 20 measures an agency's shareholder returns. It is calculated by adding 50% of an agency's Pro Forma EBITDA margin to its organic commission & fee growth rate. An outcome of 20 or higher means an agency is likely generating, through profit distributions and / or share price appreciation, a shareholder return of approximately 15% - 17%, a typical agency / brokerage return under normal market conditions. The graph to the right provides a look at the Rule of 20 results for agencies in this revenue category. The solid black line represents all combinations of organic growth and EBITDA margin that result in a Rule of 20 score of 20.

x

50.0%

45.0%

40.0%

35.0%

30.0%

25.0%

Profitability (EBITDAMargin)

20.0%

x

15.0%

10.0%

5.0%

0.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Organic Growth

Note: Firms identified as outliers have been set to have a maximum growth of 20% or a maximum profitability of 50%. They appear on the graph line bordering the chart instead of plotting their actual results.