Like other professional service businesses, the coronavirus surprised public relations agencies of all sizes and has dealt a devastating short-term blow. PR M&A advisory firm Gould+Partners released new survey results that gather a temperature read on how the North American PR industry is coping with the trauma of the coronavirus pandemic.
Over the long-term the industry always rises in better shape and performance. For the short-term, managing partner Rick Gould’s primary advice is to negotiate with your existing clients to adapt to their needs and, by all means, keep their retainers coming in even if they need to be reduced.
The survey received 87 responses from agencies of all sizes across the country. Of those firms, 57.5 percent said they had already experienced client terminations, while 85.0 percent have had retainer clients suspend their account. Most of the responding firms are attempting to retain their employees, the remaining 14.9 percent have had to terminate staff to some extent.
Interestingly, the survey found that 12 firms (13.8 percent) had furloughed some employees—defined as reduced or eliminated salaries but continued to provide benefits; 18.4 percent of the responding firms stated that there have been involuntary salary reductions company wide; while 9.2 percent reported voluntary pay cuts. Almost all eligible firms are filing for the Federal Payroll Protection Plan. However, the issue is whether the eight-week period will be enough to cover staff salaries without a corresponding recovery of fees lost.
“More than any survey we’ve ever conducted, we received a large amount of comments from agency CEOs.” said Gould. “One remains cautiously optimistic, while another reported that they are beginning to see a second wave of clients cutting back. One firm with revenues up to $3m said that the client reductions they are witnessing are not concentrated in any particular industry, and that it was simply across the board. On the bright side, a $3-10m firm reported signing a new client at the time of the survey and was optimistic.”
He identifies three issues that are top of mind for just about all PR firm C-Suite executives:
- “Will the many clients that put our fees and services ‘on pause’ ultimately return, at the same retainer, or will they terminate our firm as a result of their ongoing cash crunch?”
- “How many staff (and who) will need to be laid off, furloughed or agree to substantial pay cuts as a result of the reduction in clients and fees?”
- “Will we receive the CARES Act Payroll Protection Plan loan?”
“As of today, few firms have received any funding, especially on the East Coast. We should know a lot more this soon since the next round of funding has been approved by Congress and signed by Trump,” Gould adds. “We’ll be doing an updated survey in the coming weeks to get a new reading on the issues above.
“I believe these three issues are what keep the owners, especially of the firms under $10 million in net revenues, up at night,” he added. “The bags under their eyes tell the story.”