By Rick Goud, CPA, J.D.
The CEO may be the visionary leader of a PR firm, but a firm also needs a strong financial leader to maximize its potential. Most PR agency CEO’s are not financially savvy. For that matter I am being quite kind in my assessment.
It is fine to not master the financial end of the PR business. However, especially in recessionary times, know your limitations and lean heavily on your CFO for careful guidance and tutelage. If you do not have a CFO, find one. Now more than ever, you need to listen to the tune that YOUR numbers are singing.
One of my partners, Ted Pincus (Financial Relations Board founder and CEO, sold to what is now IPG in 2000), at StevensGouldPincus is among very few PR CEO’s that I have met that fully understand balance sheets and P&L’s. If you do not possess this unique combination of talents, then there are steps you can take.
What has become popular in many smaller agencies is to hire a part-time CFO. The part-time CFO may work 2-3 days per week, but will not come cheap. For example, if a full-time CFO commands an annual salary of $200,000, then a part-time CFO may command $100,000. The upside is you are getting the talent, experience and education of a $200,000 CFO. The value-added may be well worth the investment.
There are many highly experienced individuals that would welcome a part-time position, including well qualified, business-savvy mothers with young kids. The part-time position could result in a happy, motivated and very productive person, as well as a PR firm that improves profitability.
The CFO’s office should be right next door to the CEO. The CEO needs to meet with the CFO regularly, confide in her/him and most importantly have full confidence and trust in that person. Close proximity and communication are key.
We have recently witnessed billions of dollars lost forever as a result of corporate scandals marked by mismanagement, fraud and greed. Accountability and fiscal responsibility are now much higher up on the chart of boardroom priorities. Consumers demand it, and your clients likely demand it too.
The CEO, especially in PR agencies, is usually the eternal optimist, the strategist, the rainmaker. The CFO is usually the realist, the detail person, the one who can see behind the numbers, project the financial future of the firm and proactively recommend what could be a hiccup in net revenue and profitability trends. The CFO can and should tell you exactly if layoffs will be needed, or if you should be cutting back on freelancers, or subletting space or cutting back on T&E expenses. The sum of the CEO and CFO positions ideally nets a whole that is greater than that of its parts.