Communications & New Media Nov 2015 Vol 29 No 11

The most critical benchmark in PR — un update
By Richard Goldstein
There are many benchmarks in the PR industry.
However the one benchmark that is
critical to the success of the PR firm is Revenue
Per Professional.
Right now, before
you do anything
else, take a minute
and look at your
RPP versus other
PR firms in your
fee range. RPP is
the average income
generated per professional;
the people
on your staff
whose time you
Richard Goldstein is
a partner at Buchbinder
Tunick & Company
LLP, New york, Certified
Public Accountants.
bill to clients and
whom you depend
on for the financial
health of your firm.
Generally, if your
overhead and other
costs are controlled, the higher income
your firm generates per professional, the
higher your operating profits.
Agency Statistics
Rick Gould wrote in the second edition
of his book The Ultimate PR Agency Management
Handbook, “One long-standing
industry benchmark should be generating
$165,000-$175,000 in fee billing each year,
for each employee (note: all employees).
This is an average figure that takes into
account your agency’s billable as well as
non-billable staff. Very profitable PR firms
are often able to drive the average up to the
$200,000 range. In reality, there is no reason
not to shoot for a higher average, as the target
provides both considerable motivation,
and highly tangible markers of exactly how
much revenue a healthy agency should enjoy.”
Rick goes on to say — and I agree — that
an even more important benchmark is revenue
per full time equivalent employee.
This range could be between $185,000 and
$235,000, depending on size, location and
specialty of the agency.
So where are we today? According to Rick’s
“PR Industry 2015 Best Practices Benchmarking”
report (based on 2014 results),
Revenue Per Staff for 2014 was $182,206.
This is revenue per total number of staff
regardless of whether they are account or
administrative. RPP was $214,111. Firms
with net revenues in excess of $25 million
averaged $213,801. Firms in D.C. averaged
$246,390. In the Midwest, $248,875.
This benchmark is a key indicator of
productivity for professional staff. If professional
salaries and agency overhead are
effectively managed, the resulting benchmark
(professional salaries/revenue and
overhead/revenue) should be an indicator
of overall agency profitability.
If the RPP amount is high — in excess of
$200,000 — but professional account salaries
are also high — in excess of 44% —it
is possible to have high revenue per professional
with only moderate profitability.
So what does this all mean? Why is RPP
so important? RPP asks two important
questions: how productive/billable are/
were your account staff? In other words,
how efficiently were your professionals utilized?
Are your billing rates as high as they
should or could be? Do you even know how
to properly determine your agency billing
rates?
An example
If your revenue last year was about $3.0
million, and you had 15 billable professionals
(you should consider freelance as professionals
for this purpose), your average RPP
is $200,000. This is less than the industry
average of approximately $208,000 for an
agency this size. In effect, $120,000 of revenue
was left on the table based on the Gould
report RPP statistic. However, in my view, a
good deal more was lost. According to Rick,
the average billable hours for a staff person
involved in client matters should be 1,700
hours, less for the key officers and professionals
who pitch new work. On average,
I use 1,500 hours per professional to take
the other factors into consideration. (1,500
hours assumes an 89% utilization rate, the
average for the industry according to the
Gould report). Therefore, the agency in my
example generates 22,500 billable hours. If I
divide this by the $3.0 million revenue generated,
I arrive at an average billing rate of
$133 per hour.
Take your profitability temperature
One of the first things I look at when I
first meet an agency is their rate per hour.
Going back to the previous example, assume
the agency above generates 23,150
hours (14 professional employees working
approximately 1,600 hours and the CEO/
COO working 750 hours on client matters).
Dividing this by the revenue of $3.0
million, the average billing rate per hour is
$130, not great by any standard. Something
here just does not make sense! This is even
more critical when I am told the agency has
an average billing rate per hour of $185. Believe
me I have seen this to be $75 for many
agencies.
Some management considerations from
the past:
Financial Management
It is critical that your professional staff
understands the meaning of account management.
Account management is bringing
the firm’s management, professional and
creative services to bear against a client’s
problems and opportunities so that you
serve the client with maximum effectiveness,
while also generating income and
profits.
Your staff needs to understand that managing
these dual responsibilities will not
only lead to professional success but can be
personally gratifying as well.
Management sometimes complain that
frequently account professionals seem to
forget who they are working for. They do
a great job of serving the client but neglect
the agency’s need to make a profit. Your
younger employees, and yes, even your veterans,
need to recognize early on that they
cannot invest more hours on behalf of a client
than the client is willing to pay for. Most
want to do the best job for their client, and
that often creates a tendency to over service
that often leads to over-budget or write-off
situations. A lesson in account management
can go a long way to increase RPP!
PR news brief
Karbo Communications program
targets tech start-ups
with technology startups, PR is generally not high
on the priority list. Funding may eventually materialize
— if the company has a successful debut, that is—
but is far from a sure thing. Now tech startups have
the opportunity to enter a market with a bigger PR
impact and better visibility, thanks to a new program
that Karbo Communications has introduced.
The PowerStart PR Launch Program, created for
pre-Series A technology companies, is offered via a
tiered pricing structure.
The offering includes the Karbo Communications’
Essential Differentiation and Messaging (EDM) process,
spokesperson coaching, story pitching to top-tier
press, media kit/press material development, interview
management and social media content.
In addition, companies have the option to purchase
à la carte items such as video creation, contributed
article placements, customer case studies, speaking
opportunities, award submissions, promotions, advertising
and review programs.
There are more than 20,000 startups in the Silicon
Valley alone, Karbo Communications said. According
to CB Insights via Fortune, startup funding for the U.S.
is projected to reach a whopping $70 billion by the
end of this year.
“The reality is that a lot of startups have phenomenal
products, but they lack the financial resources to
execute top-flight launches,” said Julie Karbo, founder-CEO
of Karbo Communications, in a statement. “At
Karbo Com, our philosophy is that you only have one
chance to launch your company, and it should be with
your strongest foot forward. If a startup waits until
acquiring a Series A round to make an impact, they
risk the market simply passing them by.”
www.ODwyERPR.COM | NOVEMBER 2015 57