2017 Best Practices Study

Profitability

Employee Productivity

Rule of 20 Score

Pro Forma Metrics: # of Employees

Top Quartile

Average

28.8%

24.2

21.2%

277.41

20.4%

15.7

11.6%

Revenue per Employee Compensation per Employee Spread per Employee

$209,821

$259,953

Pro Forma Operating Profit

Pro Forma EBITDA

$133,400

$105,581

Average

Top Quartile

$76,421

$105,984

Comparison Group Average

Top Quartile

Notes

Organic Growth & Profitability Scatter Plot

Pro Forma EBITDA margin (shown above) was 20.4% for firms in this revenue category, the lowest in the Study . 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.

•

50.0%

45.0%

40.0%

•

35.0%

30.0%

25.0%

Profitability (EBITDAMargin)

20.0%

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.