It’s not a pretty picture for the PR industry. Among a wide swath of firms, growth is down and profitability is flat.
Adding insult to injury, PR firm owners are failing to boost their billing rates in order to compensate for increases in salaries and other expenses.
Whether it’s the large holding companies or smaller PR firms, more and more agencies are facing some strong economic headwinds.
“The PR industry is going through a perfect storm right now due to growth gridlock,” said Rick Gould, CPA, J.D., managing partner, Gould+Partners, which specializes in PR management and PR M&A. “Firms are not growing, they’re not profitable and it’s got to change.”
Gould made the warning during a recent presentation in New York titled, “Fireside Chat: The State of the PR Industry.” Gould was joined by Michael Belfer, accounting and audit partner at Anchin and head of the firm’s Public Relations and Advertising Industry Group.
With certain exceptions, of course, the state of the PR field remains quite precarious these days.
The accelerating pace of change—fueled by the move to digital communications—may be overwhelming certain firms’ ability to adapt their business practices and generate new revenue streams.
“Most [PR] firms have an empty cup,” Gould said, adding that industry profitability has been flat for the past few years (roughly 15 percent), per Gould+Partners 2017 Best Practices Benchmarking report.
“Hundreds of firms are losing money—and the main reason is overservicing,” Gould added. “Overservicing is the knife that goes through the heart of PR firms.”
Overservicing, or scope creep, has started to plague the industry. PR firms continue to capitulate to clients who essentially demand that firms work for free. This is unsustainable.
Part of the reason why overservicing is getting worse is heightened competition from marketing, advertising and social media agencies. Another reason is fear of losing the client.
“You’ve got to be prepared for the scope of work and price it accordingly,” Belfer said. “It’s getting to know your clients and having them appreciate the value you’re providing.”
Despite huge demands on their time, PR firm owners and managers must carve out some budget to train staffers how to reduce overservicing, via time management and other tools both online and offline.
“You have good quality people who get raises every year,” Belfer said, pointing to the importance of raising billing rates to compensate for salary increases. “Does the client expect you to eat that?”
During the presentation Gould and Belfer share myriad tips and best practices for how PR firm owners can get overservicing under control and improve their overall management practices.
The duo also offered remedies for several other topics top of mind among PR firm
These topics included how to create flexible schedules to reflect dramatic changes in the workplace—including telecommunicating plans—and the need to promote more women to the C-suite, lest they leave the firm or the PR industry altogether.
Right now, women comprise roughly 70 percent of the PR industry overall, but just 30 percent of the top executives roles. Growing competition for talent within the PR field makes the situation even more acute.
To watch the entire presentation via Facebook Live, please click here. The presentation starts at 4:00.
Sign up for our email newsletter, Inside Edge…Business Strategy for PR, Media & Creative Service Agencies.