NEW YORK—Public relations agency profitability in the US increased to 16.2 percent of net revenues from 15.8 last year according to those responding to the annual benchmarking survey from M&A consulting firm Gould+Partners, which includes 104 prominent agencies across the US and Canada.
Those firms reported 16.2 percent profitability, which compares with 18.8 percent in 2012, 18.6 percent in 2011, and 15.6 percent in 2010, according to Rick Gould, managing partner of the New York-based firm.
Firms up to $3 million netted 16.1 percent (up from 14.8 percent), those in excess of $10 million up to $25 million netted 17.0 percent (down from 18.6 percent) and those in excess of $25 million netted 15.8 percent (down from 17.9 percent).
G+P’s “model firms”—the dozen agencies consistently meeting or exceeding the firm’s model performance target criteria—remain far above average during slow or recessionary times. In 2014, as in previous years, they averaged an operating profit margin well in excess of 20 percent, partly due to their ability to hold professional staff salaries to less than 40 percent of net revenues, total labor cost at 50 percent and operating expenses at around 25 percent.
“This should be the goals for all firms,” says Gould. “Any decrease in operating profit was totally attributable to an increase in labor cost without a corresponding increase in fees."
The 19 Canadian firms participating averaged an operating profit of 19.5 percent. None of the US regions broke the 20 percent barrier.
Revenue per professional staff was up to $214,111 from $200,710 last year. Staff turnover for the year averaged 19.8 percent, 21.8 percent last year.
[Image: Flickr user Tracy O]
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