The walls came tumbling down for all sectors of business in 2020, but many PR agencies managed to buck the trend, according to PR professionals responding to the latest benchmarking survey conducted by Gould+Partners. The new data shows U.S. PR agency profitability was 18.2 percent of net revenues (fees + markups), up from 17.4 percent a year ago.
A total of 40 prominent best of class, quality firms were invited to participate. 37 firms participated, according to Rick Gould, CPA, J.D., managing partner of the New York City-based M&A Advisory firm that specializes in the PR and creative services sectors.
According to the survey, firms with under $3 million in revenue netted 15.8 percent. Firms in excess of $3 million up to $10 million netted 18.1 percent, while firms in excess of $10 million up to $25 million netted 17.0 percent. Shops in excess of $25 million netted 20.2 percent, indicative of increase organic growth of the larger firms.
“One of the most significant findings of the survey is that, among G+P ‘invited firms,’ the agencies consistently meeting or exceeding the G+P model performance target criteria continue to remain profitable even during a recessionary or a pandemic year,” Gould said, in a news release.
“In 2020, as in previous years, these firms averaged an operating profit margin well in excess of 20 percent, partly due to their ability to hold professional staff salaries to under 40 percent of net revenues, total labor cost at 50 percent and operating expenses at around 25 percent,” Gould added. “This should be the goal for all firms. Any decrease in operating profit was totally attributable to an increase in labor cost without a corresponding increase in fees. The PPP program was a lifeline for many PR firms.”
Other noteworthy findings in the study include:
- Revenue per professional staff averaged $256,667
- Total overhead averaged 23.6 percent
- Staff turnover for the year averaged 18.0 percent, but firms under $3 mill in net revenues were at 26.0 percent turnover, attributed to downsizing during the pandemic