US public relations agency profitability has rebounded from a 2009 four-year low of 13.5 percent of revenues to 18.6 percent, according to an annual benchmarking survey conducted by consulting firm StevensGouldPincus. That means PR firms profits in the US are almost back to their pre-recession levels.
A total of 105 agencies based coast to coast and Canada reported 18.6 percent average profitability, compared with a 15.6 percent in 2010, 13.5 percent in 2009, 15.6 percent in 2008 and a 19.7 percent margin in pre-recession 2007, according to Rick Gould, managing partner of the New York-based merger and management consulting firm.
Firms under $3 million in revenues were the most profitable, at 20.5 percent. Firms with revenues of between $3 million and $10 million netted 17.4 percent, those between $10 million and $25 million netted 16.8 percent and those in excess of $25 million netted 19.2 percent, respectable in challenging economic times. All four categories improved from the previous year.
According to Gould, SGP “model firms”—a dozen agencies consistently meeting or exceeding the SGP model performance target criteria—continue to remain far above average during recessionary times. In 2011, as in previous years, they averaged an operating profit margin in excess of 20 percent, partly due to their ability to hold professional staff salaries to under 40 percent of revenues, total labor cost at 50 percent and operating expenses at under 30 percent.
Other noteworthy findings:
• The average monthly minimum fee stipulated by agencies was $9,867; up from the $8,385 reported a year ago – reflecting a rebound from the past couple of years. This benchmark varied widely between sizes of firms. Firms between $10 and $25 million averaged $9,291 and firms in excess of $25 million averaged $15,340, a 20 percent increase from the previous year.
• Revenue per professional staff was up to $209,945 from $205,941 last year. Firms in excess of $10 million in net revenues averaged in excess of $238,000, consistent with last year.
• Total overhead averaged 25.5 percent a drop of almost 3 percent, indicative of tighter managing of costs.
• Staff turnover for the year averaged 22.5 percent, slightly under the previous year.