By Rick Gould, CPA, J.D., Managing Partner
We tell all of the PR agency CEO’s that we counsel that if they continue to manage by benchmarking, manage by the numbers they will get through the current recession that will hit us the hardest in 2009. Here are some tips we offer that may be of help to you!
1. You MUST lay off staff if revenues are down…you can’t keep staff and “hope” things will get better. It takes courage and is painful but it must be done.
2. Cut costs wherever possible… freelancers, temp help, non-essential travel and entertainment.
3. Freeze hiring unless for a critical position…All staff needs to work harder and longer to get through the recession. Bonus staff members that do so after the firm is over the hump. Any staff members not willing to do so should be the first to go.
4. Defer bonuses other than for lower level account staff and admin staff who count on their week or two salary bonus to survive.
5. All management take pay cuts…They received big raises and bonuses when times were great in 2006 and 2007 and now they need to reduce compensation and/or forgo bonuses for the new year.
6. Use C-Suite Conference calling whenever possible instead of meetings that entail expensive travel and hotels. Do a line by line analysis of each cost and expense and look where it can be reduced.
7. Management teams must “manage” very tightly…staffing levels and mix of account teams. All staff should know that their commitment to efficiency and productivity is necessary and expected. The account teams need to work within client budgets to assure profitability.
8. Sublet space if you have space available after layoffs.
9. Meet the recession head on…What is needed now is leadership, discipline and guts to do what is best for the “firm”….(i.e. layoffs, cost-cutting and belt tightening across the board). PR agency CEO’s are smarter as a result of the recession of 2001-2002. Having gone through it they have built up cash reserves and learned how to manage by the numbers. They have also been open to advice by professionals who are in a position to help them.
10. There is no road map or crystal ball for 2009. The squeeze is on but it is not a surprise. It has been predictable for months. It was foreseeable. So PR pros should not complain, just roll up their sleeves and do what is needed to get through this and still maintain respectable profitability of at least 15% and hopefully 20%, which was the average of firms for last year.
At SGP we believe with tight management and knowing what is needed to be done the majority of the firms will be fine. CEO/Owners of smaller PR agencies that are not prepared for 2009 will most likely end up merging their firm into a larger firm and go back to being PR account execs and not need to worry about the back office, tight cash flow and managing the firm.
The key to strategy in a recession is KEEPING THE CLIENT, at all cost, especially when client relationships may be at risk due to disruption of account teams due to layoffs, and to client earnings declines. It means super attention to justifying PR program results and value; and maybe voluntary adjustment of client fee commitment. It’s better to negotiate a fee reduction on a temporary basis than lose the client forever.
To weather the coming New Year, CEO’s and Owners should cultivate a positive outlook and vision for their firms. Take advantage of your downtime by tightening management and improving accountability. Develop and increase marketing strategies and find other projects to provide and enhance the creative edge, unique to your own company’s strengths. Be sure to communicate your vision and be optimistic, as it will inspire enthusiasm. Let the downturn be the spark to drive innovation and creative thinking in 2009.