New research from PR-focused M&A advisory services firm Gould+Partners finds that U.S. PR agency profitability was 19.7 percent of net revenues (fees + markups), up from 18.2 percent a year ago, according to PR professionals responding, by invitation, to the firm’s annual Benchmarking survey.
A total of 40 prominent best of class, quality firms participated, according to Rick Gould, CPA, J.D., managing partner of the New York City-based firm.
According to the survey, firms with under $3 million in revenue netted 15.8 percent, exactly the same as 2020. Firms in excess of $3 million up to $10 million netted 19.5 percent, up from 18.1 percent while firms in excess of $10 million up to $25 million netted 20.1 percent, up from 17.0 percent in 2020. Shops in excess of $25 million netted 21.3 percent, up from 20.2 percent and indicative of increased growth of the larger firms, both organic and via acquisiiton.
“One of the most significant findings of the survey is that, among G+P ‘invited firms,’ the agencies consistently meet or exceed the G+P model performance target criteria and continue to remain profitable even during a recessionary or a pandemic year,” Gould said.
“In 2021, as in previous years, many of 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,” he 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.”
Other noteworthy findings in the study include:
- Revenue per professional staff averaged $257,732, slightly up from $255,409 in 2020.
- Total overhead averaged 23.4 percent, from 23.6 percent in 2020.
- Staff turnover for the year averaged 25.4 percent, up from 18.0 percent in 2020.