The U.S. PR industry grew by just 4.8 percent last year, according to new research from PR–focused merger and management consulting firm Gould+Partners. The results of this survey were not consistent with the results of the annual Best Practices Benchmarking report released in June, showing that operating profit increased from 15.2 percent to 18.0 percent.
Based on stats from 237 North American PR agencies, most categories of firms had less growth than the prior year. The $10 million-to-$25 million group had the highest growth rate of 6.5 percent. The firms in excess of $25 million were flat, at 1 percent growth, consistent with what has been disclosed by the holding companies.
The second part of the study focused on industry growth in the 10 regions of its focus and average net revenues for each of the regions.
Growth for each of the ten regions in 2017 was not consistent with prior years. The leading growth region was Northern CA at 10.0%, DC was next at 9.2%, Southeast & Southwest both were at 8.3%, Northeast, Midwest and Canada were at 2.0%, Northwest was 1.2%. NY Metro and Southern CA were flat with just 0.2% growth.
Why don’t results reflect the Benchmarking study?
“The studies have two different objectives, both equally important,” explains said Rick Gould, CPA, J.D., the firm’s managing partner. “The Financial Benchmarking survey is to monitor best practices to improve profitability, which is needed to compete, to get quality, committed staff, at all levels, to build systems and infrastructure and [ultimately] build value to the firm.
“The Net Revenue Growth survey is not about bottom line profitability—it’s about bringing in new business and keeping the business you have (i.e., growth). What is happening now is many firms are in a rut—new business is replacing lost business, which equates to little or no growth.
“A reason many firms sell is because the owners believe they cannot grow without offering more services and having regional or global offices,” Gould adds.
An additional insight from the research was comparing holding company-owned agencies against independent firms
“One incredible finding in our analysis was that the top 15 holding company-owned firms only included five firms that had net revenue growth, and those firms only had slight growth—whereas the top 15 independent firms included only two that had a very slight decrease in net revenues,” Gould says. “The other thirteen of the top fifteen all had net revenue growth.”
So what are the top independents doing that the holding company firms are not? “I don’t know the answer, but maybe the independents are more laser focused on new business,” he posits. “Maybe the efforts on selling new services to existing clients are greater. Maybe the independents are retaining existing clients at a higher percent. We would all love to know the answer, and this will be a question we ask in our next Inside Edge survey in August.”
The survey is the sixth annual poll focused on net revenue growth by Gould+Partners, which has been conducting other industry wide surveys for 20+ years, including the recently released Best Practices Benchmarking Report and the Billing/Utilization Report.
