Solid Financial Management Adds to the Value of Your Agency

What is the easiest pathway to maximize value? The answer is simple. Get to the mark of 20 percent operating profit.

One proven method for understanding and effectively managing a PR business is using financial benchmarks. Knowing the key ratios and their benchmarks gives management the tools to fine-tune financial operations in order to increase overall net worth and value.

Fundamentally, benchmark analysis is the process of calculating comparisons among specific pieces of information readily available on your agency’s balance sheet and P&L. While the numbers themselves are highly important, with benchmark analysis, 7oucan quickly look at relationships between numbers and make a solid analytic assessment of your agency’s financial health.

You can use benchmark analysis to examine your PR agency’s current performance—now and in comparison to past periods. You can also use benchmarks to compare its performance to that of other companies, such as your competitors or other companies that are doing extremely well or poorly.

The benchmarks you calculate may reveal broad trends that can help with your decision making. It is not necessary to calculate ratios to more than one decimal place. They need only be accurate enough to prove useful to you.

Making Financial Repairs before You Sell

PR firms must repair financial problems before presenting the agencies to prospective buyers. Presentation becomes a major concern for a seller anticipating close inspection from prospective buyers. And it’s only natural to try to display your best face when you’ve decided to cash in your most valuable asset.

Your firm’s accounting records need to be in perfect shape before you start talking to possible buyers. You should have CPA financials. Unfortunately, many firms don’t have strong financial statements, and that immediately makes them lose credibility in the eyes of buyers. Without professional financial statements, your firm looks amateurish and sloppy. You immediately lose value, both tangible and intangible.

Staying on top of record keeping throughout the life of an agency can make a big difference in the long run.

The content of this blog was extracted from the recently published “The Ultimate PR Agency Financial Management Handbook”