July 6, 2011
After sinking to a four-year low in 2009, profitability among U.S. PR agencies rose to 15.6 percent of revenues in 2010 — the same profit margins the profession enjoyed in 2008.
The results come from consulting firm StevensGouldPincus’ annual Best Practices Benchmarking Survey, which analyzed data from more than 100 prominent U.S. agencies. Although not on par with the 19.7 percent margins of 2007, the upward trend is promising, the report noted.
"The StevensGouldPincus report brings good news about agency profits. Many firms are increasing revenues by providing more integrated communications services, including digital and social media," J.R. Hipple, 2011 chair of the Counselors Academy, told PR Tactics. "Perhaps most important, PR counselors are proving that they have the skills to help clients deal with complex issues, especially how to adapt to the wildly changing communications environment."
The survey also found a dozen or so agencies, dubbed “model firms,” which consistently met or exceeded the model performance target criteria and remained far above average, even during a recession. In 2010, these firms averaged operating profit margins in excess of 20 percent, partly by keeping staff salaries to less than 40 percent of revenues, total labor cost at 50 percent and operating expenses at less than 30 percent. This should be the goals for all firms, the study recommended.
Other significant findings include:
• The average monthly agency fee was $8,385, down from the $9,808 in 2009. Firms with revenues between $10 and $25 million averaged fees of $12,222, while firms with revenues more than $25 million averaged fees of $12,811.
• Revenue per professional staff was $205,941 in 2010, up from $197,714 in 2009. Firms in excess of $10 million revenues averaged more than $230,000.
• Staff turnover for the year averaged 22.9 percent, slightly under the previous year.