3 Ways for PR and Ad Agencies to Maximize Profitability

Pitching the media is easy (well, not really), but improving profitability is hard. Without a solid profitability strategy, PR agencies may just be spinning their wheels.

The sooner agencies develop ways to maximize profitability the better they will be well-positioned financially when the siren song of selling comes knocking. With that in mind, here are three surefire ways to maximize your agency’s profitability and spike your top and bottom lines.

1.   Grow the top lineprofit

•      Work the pipeline no matter how good business is
•      Set minimum retainers “against hours”
•      Raise the retainer annually
•      Raise the billing rates whenever you give raises
•      Seek opportunities to sell organically

2.   Build a high performance staff strategy

•      Minimize turnover
•      Build a quality second tier of management
•      Implement an equity participation program
•      Create new business generation incentives
•      Use quality freelancers

3.   Manage by benchmarking

•      Net revenue per professional should have a goal of at least $200K+
•      Labor cost should be no more than 55 percent of net revenues
•      Operating expense costs should be no more than 26 percent of net revenues
•      Rent should be no more than 7 percent (included in the 26 percent) of net revenues
•      Ninety-percent utilization is the productivity benchmark for all account staff not doing new biz and/or management

by Rick Gould

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