By R ick Gould, CPA, J.D.
Recession contrary “Model Firm”? What is a recession contrary Model Firm?
A recession contrary PR firm dispels the notion that a firm can justify poor performance if we are in an economic slowdown. Uncertain times, financially challenged periods or whatever the label assigned, the fact remains that recession contrary PR firms use benchmarking (not rationalizing) to weather the storm.
I have closely tracked a select group of firms since the years following September 11, 2001 and the unpredictable Tech explosion/implosion. These firms, while evolving through the same conditions and changing business world as their competitors, developed the ability to maintain 25-30% profitability. They continuously pour investment dollars back into their firm by hiring quality staff, expanding space in desirable working conditions, giving generous staff benefits and bringing in the best technology and outside consultants.
The one common thread among these recessions contrary Model Firms is that they consistently manage by the numbers. They manage by benchmarking.
Recession contrary Model Firms keep their labor cost under 50% of Net Revenues. They keep their Operating Expenses at around 25% with their major item, rent, between 6 – 8%. Managing using key benchmarks assures them the requisite profitability needed to grow and increase the value of their PR firm.
For additional insights from the 2009 Best Practices Benchmarking Report please see the StevensGouldPincus Blog at: http://stevensgouldpincusblog.blogspot.com/
Monday, June 22, 2009
Tuesday, May 19, 2009
Diversifying Your Specialties Can Add to Your Bottom Line
By Rick Gould, CPA, J.D.
PR firms, regardless of their specialty, usually learn and master the fundamentals of successful PR campaigns. They develop skill sets not only as publicists but also as counselors and advisors.
Those that specialized in disciplines as technology, travel and financial/IR did extremely well in prosperous times… but their profitability plummeted during the tech meltdown and the financial bust we are experiencing now.
I suggest a change of direction in these unusual times. To insulate your firm from future hard times and recessionary cycles, hire a top notch PR specialist in a specialty different from your current offerings.
Diversify your client service offerings. Build the new specialty and invest in it. Be entrepreneurial. Take a risk, oversee it, and provide guidance… but allow others to run it and develop it. This will provide a cushion when revenues may be slipping in your primary specialties.
Let’s use law firms as an example. Those specializing in M&A transactions during boom years moved into restructuring and turnaround specialties when deals were infrequent. Bankruptcy law firms that were looking for work when the economy was good are now searching for attorneys with a bankruptcy background. And firms that created class-action specialties as corporate C-suite and Madoff-type frauds were uncovered are now thriving. The time to create these specialties is when it is a deliberate, measured choice… not when done in panic or survival mode.
These unusual times may require a change in direction. Diversifying makes the challenge more transparent and keeps the firm focused on long-term viability.
PR firms, regardless of their specialty, usually learn and master the fundamentals of successful PR campaigns. They develop skill sets not only as publicists but also as counselors and advisors.
Those that specialized in disciplines as technology, travel and financial/IR did extremely well in prosperous times… but their profitability plummeted during the tech meltdown and the financial bust we are experiencing now.
I suggest a change of direction in these unusual times. To insulate your firm from future hard times and recessionary cycles, hire a top notch PR specialist in a specialty different from your current offerings.
Diversify your client service offerings. Build the new specialty and invest in it. Be entrepreneurial. Take a risk, oversee it, and provide guidance… but allow others to run it and develop it. This will provide a cushion when revenues may be slipping in your primary specialties.
Let’s use law firms as an example. Those specializing in M&A transactions during boom years moved into restructuring and turnaround specialties when deals were infrequent. Bankruptcy law firms that were looking for work when the economy was good are now searching for attorneys with a bankruptcy background. And firms that created class-action specialties as corporate C-suite and Madoff-type frauds were uncovered are now thriving. The time to create these specialties is when it is a deliberate, measured choice… not when done in panic or survival mode.
These unusual times may require a change in direction. Diversifying makes the challenge more transparent and keeps the firm focused on long-term viability.
Monday, April 27, 2009
2009 Benchmarking Survey
By Rick Gould, CPA, J.D.
I urge all PR Firms to participate in the 2009 StevensGouldPincus PR Firm Benchmarking Survey. Last year we had 105 firms participate.
The report will provide both comparative historical stats for 2008, trends and a tool for you to budget & plan for 2009. You will be on top of and in control of where you can improve your operations.
Managing by Benchmarking is the most expedient and effective way to assure your profitability goals.
The industry profitability Benchmark was 22.0% two years ago, 19.7% last year. I believe it will be lower for 2008… but how much lower?
The survey is for U.S. and Canadian firms and includes the leading and most profitable independent firms. We also summarize key stats by our “Model Firms,” firms that we have been tracking over the years and have shown a consistent pattern of strong profitability in both boom and recessionary times. These stats alone will justify your efforts in completing the survey.
Remember - all submissions are in confidence, no names are ever mentioned and all stats are averaged by size, region and specialty.
If you need a survey sent to you please email Yadi Gomez, ygomez@stevensgouldpincus.com
Our deadline is Friday, May 1, but if you need an extension please email me at rgould@stevensgouldpincus.com or call me at 212-896-1909.
Thank You!
P.S. Firms use this survey as a vital resource for planning. We highly appreciate the time you put in and be sure that your participation further assures its validity.
I urge all PR Firms to participate in the 2009 StevensGouldPincus PR Firm Benchmarking Survey. Last year we had 105 firms participate.
The report will provide both comparative historical stats for 2008, trends and a tool for you to budget & plan for 2009. You will be on top of and in control of where you can improve your operations.
Managing by Benchmarking is the most expedient and effective way to assure your profitability goals.
The industry profitability Benchmark was 22.0% two years ago, 19.7% last year. I believe it will be lower for 2008… but how much lower?
The survey is for U.S. and Canadian firms and includes the leading and most profitable independent firms. We also summarize key stats by our “Model Firms,” firms that we have been tracking over the years and have shown a consistent pattern of strong profitability in both boom and recessionary times. These stats alone will justify your efforts in completing the survey.
Remember - all submissions are in confidence, no names are ever mentioned and all stats are averaged by size, region and specialty.
If you need a survey sent to you please email Yadi Gomez, ygomez@stevensgouldpincus.com
Our deadline is Friday, May 1, but if you need an extension please email me at rgould@stevensgouldpincus.com or call me at 212-896-1909.
Thank You!
P.S. Firms use this survey as a vital resource for planning. We highly appreciate the time you put in and be sure that your participation further assures its validity.
Thursday, April 23, 2009
Gameplan for the Recession of 2009
Reposted from Monday, January 5, 2009
By Rick Gould, CPA, J.D.
We tell all of the PR agency CEO's that we counsel that if they continue to manage by benchmarking, manage by the numbers they will get through the current recession that will hit us the hardest in 2009. Here are some tips we offer that may be of help to you!
1. You MUST lay off staff if revenues are down...you can't keep staff and "hope" things will get better. It takes courage and is painful but it must be done.
2. Cut costs wherever possible... freelancers, temp help, non-essential travel and entertainment.
3. Freeze hiring unless for a critical position...All staff needs to work harder and longer to get through the recession. Bonus staff members that do so after the firm is over the hump. Any staff members not willing to do so should be the first to go.
4. Defer bonuses other than for lower level account staff and admin staff who count on their week or two salary bonus to survive.
5. All management take pay cuts...They received big raises and bonuses when times were great in 2006 and 2007 and now they need to reduce compensation and/or forgo bonuses for the new year.
6. Use C-Suite Conference calling whenever possible instead of meetings that entail expensive travel and hotels. Do a line by line analysis of each cost and expense and look where it can be reduced.
7. Management teams must "manage" very tightly...staffing levels and mix of account teams. All staff should know that their commitment to efficiency and productivity is necessary and expected. The account teams need to work within client budgets to assure profitability.
8. Sublet space if you have space available after layoffs.
9. Meet the recession head on...What is needed now is leadership, discipline and guts to do what is best for the "firm"....(i.e. layoffs, cost-cutting and belt tightening across the board). PR agency CEO's are smarter as a result of the recession of 2001-2002. Having gone through it they have built up cash reserves and learned how to manage by the numbers. They have also been open to advice by professionals who are in a position to help them.
10. There is no road map or crystal ball for 2009. The squeeze is on but it is not a surprise. It has been predictable for months. It was foreseeable. So PR pros should not complain, just roll up their sleeves and do what is needed to get through this and still maintain respectable profitability of at least 15% and hopefully 20%, which was the average of firms for last year.
At SGP we believe with tight management and knowing what is needed to be done the majority of the firms will be fine. CEO/Owners of smaller PR agencies that are not prepared for 2009 will most likely end up merging their firm into a larger firm and go back to being PR account execs and not need to worry about the back office, tight cash flow and managing the firm.
The key to strategy in a recession is KEEPING THE CLIENT, at all cost, especially when client relationships may be at risk due to disruption of account teams due to layoffs, and to client earnings declines. It means super attention to justifying PR program results and value; and maybe voluntary adjustment of client fee commitment. It's better to negotiate a fee reduction on a temporary basis than lose the client forever.
To weather the coming New Year, CEO's and Owners should cultivate a positive outlook and vision for their firms. Take advantage of your downtime by tightening management and improving accountability. Develop and increase marketing strategies and find other projects to provide and enhance the creative edge, unique to your own company's strengths. Be sure to communicate your vision and be optimistic, as it will inspire enthusiasm. Let the downturn be the spark to drive innovation and creative thinking in 2009.
By Rick Gould, CPA, J.D.
We tell all of the PR agency CEO's that we counsel that if they continue to manage by benchmarking, manage by the numbers they will get through the current recession that will hit us the hardest in 2009. Here are some tips we offer that may be of help to you!
1. You MUST lay off staff if revenues are down...you can't keep staff and "hope" things will get better. It takes courage and is painful but it must be done.
2. Cut costs wherever possible... freelancers, temp help, non-essential travel and entertainment.
3. Freeze hiring unless for a critical position...All staff needs to work harder and longer to get through the recession. Bonus staff members that do so after the firm is over the hump. Any staff members not willing to do so should be the first to go.
4. Defer bonuses other than for lower level account staff and admin staff who count on their week or two salary bonus to survive.
5. All management take pay cuts...They received big raises and bonuses when times were great in 2006 and 2007 and now they need to reduce compensation and/or forgo bonuses for the new year.
6. Use C-Suite Conference calling whenever possible instead of meetings that entail expensive travel and hotels. Do a line by line analysis of each cost and expense and look where it can be reduced.
7. Management teams must "manage" very tightly...staffing levels and mix of account teams. All staff should know that their commitment to efficiency and productivity is necessary and expected. The account teams need to work within client budgets to assure profitability.
8. Sublet space if you have space available after layoffs.
9. Meet the recession head on...What is needed now is leadership, discipline and guts to do what is best for the "firm"....(i.e. layoffs, cost-cutting and belt tightening across the board). PR agency CEO's are smarter as a result of the recession of 2001-2002. Having gone through it they have built up cash reserves and learned how to manage by the numbers. They have also been open to advice by professionals who are in a position to help them.
10. There is no road map or crystal ball for 2009. The squeeze is on but it is not a surprise. It has been predictable for months. It was foreseeable. So PR pros should not complain, just roll up their sleeves and do what is needed to get through this and still maintain respectable profitability of at least 15% and hopefully 20%, which was the average of firms for last year.
At SGP we believe with tight management and knowing what is needed to be done the majority of the firms will be fine. CEO/Owners of smaller PR agencies that are not prepared for 2009 will most likely end up merging their firm into a larger firm and go back to being PR account execs and not need to worry about the back office, tight cash flow and managing the firm.
The key to strategy in a recession is KEEPING THE CLIENT, at all cost, especially when client relationships may be at risk due to disruption of account teams due to layoffs, and to client earnings declines. It means super attention to justifying PR program results and value; and maybe voluntary adjustment of client fee commitment. It's better to negotiate a fee reduction on a temporary basis than lose the client forever.
To weather the coming New Year, CEO's and Owners should cultivate a positive outlook and vision for their firms. Take advantage of your downtime by tightening management and improving accountability. Develop and increase marketing strategies and find other projects to provide and enhance the creative edge, unique to your own company's strengths. Be sure to communicate your vision and be optimistic, as it will inspire enthusiasm. Let the downturn be the spark to drive innovation and creative thinking in 2009.
Now May be the Best Time to Acquire
Reposted from Monday, March 9, 2009
By Rick Gould, CPA, J.D.
For most prospective buyers, an acquisition in this period of economic uncertainty appears high risk. Some buyers may be hoarding cash reserves previously earmarked for acquisitions in case the downturn sticks around longer than anticipated.
However, now may be an opportune time to acquire IF:
• A firm is stable financially and has a clear vision and strategy, and
• A firm’s strategy is to strengthen core business, create a new niche division or to have another “existing” office.
While the strategy of most firms in a downturn is to focus on maintaining the core clients and specialties, an acquisition can be a positive option to supplementing core values. Expanding in scale and scope can both add to a firm’s bottom line and post-recession position. More time is available during a recession to focus on effectively transitioning the merged firm.
From a sellers’ perspective, we have found that many who have never entertained selling before are doing so now. They are looking to be relieved of back office, gain depth of staff, have access to additional capital, protect their present financial position and secure the family financial future. The correctly matched buyer will support their priorities and values.
Other prospective sellers have realized from this downturn that being an entrepreneur is not always lucrative and fun. The financial and personal risk became more real, and they concluded that managing all aspects of the PR agency may not be for them. PR and client service are their passion, and their preference moved away from independent entrepreneurship and toward securing a senior level position within a larger PR firm.
Although valuation multiples have certainly decreased, we do not anticipate they will be further reduced.
The best positioned buyer firm will have a solid acquisition investment plan. Such a plan consistently points to the goal of making an already valuable buyer’s business even more valuable.
When managed, cultivated and executed properly, the acquisition investment for the buyer will have a significant payback. The value-added in earning potential will be in multiples more than its cost once the investment is recouped. Few, if any, of the major public firms today grew solely through organic growth.
What may spell economic uncertainty to selling firms could translate to major opportunity for those properly positioned on the acquiring side.
By Rick Gould, CPA, J.D.
For most prospective buyers, an acquisition in this period of economic uncertainty appears high risk. Some buyers may be hoarding cash reserves previously earmarked for acquisitions in case the downturn sticks around longer than anticipated.
However, now may be an opportune time to acquire IF:
• A firm is stable financially and has a clear vision and strategy, and
• A firm’s strategy is to strengthen core business, create a new niche division or to have another “existing” office.
While the strategy of most firms in a downturn is to focus on maintaining the core clients and specialties, an acquisition can be a positive option to supplementing core values. Expanding in scale and scope can both add to a firm’s bottom line and post-recession position. More time is available during a recession to focus on effectively transitioning the merged firm.
From a sellers’ perspective, we have found that many who have never entertained selling before are doing so now. They are looking to be relieved of back office, gain depth of staff, have access to additional capital, protect their present financial position and secure the family financial future. The correctly matched buyer will support their priorities and values.
Other prospective sellers have realized from this downturn that being an entrepreneur is not always lucrative and fun. The financial and personal risk became more real, and they concluded that managing all aspects of the PR agency may not be for them. PR and client service are their passion, and their preference moved away from independent entrepreneurship and toward securing a senior level position within a larger PR firm.
Although valuation multiples have certainly decreased, we do not anticipate they will be further reduced.
The best positioned buyer firm will have a solid acquisition investment plan. Such a plan consistently points to the goal of making an already valuable buyer’s business even more valuable.
When managed, cultivated and executed properly, the acquisition investment for the buyer will have a significant payback. The value-added in earning potential will be in multiples more than its cost once the investment is recouped. Few, if any, of the major public firms today grew solely through organic growth.
What may spell economic uncertainty to selling firms could translate to major opportunity for those properly positioned on the acquiring side.
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