Public relations firms are expected to prosper in 2008, even though the overall U.S. economy is facing the prospects of a down year. This forecast is based on recent survey data from the Council of Public Relations Firms, and, most recently, from comments made by experts participating in a Council-sponsored event: “Briefing on the Economy and Its Implications on Public Relations Firms.”
Panelists for the Council’s February 29th webinar included David Wyss, chief economist for Standard & Poor’s, Alan Gottesman, managing director of West End Communications/Consulting; and Bruce Bishop, CFO, Next Fifteen U.S., a parent company to many leading PR companies such as Text 100, Bite Communications and Outcast Communications.
Bishop said today’s economy is a "great opportunity to make your business stronger." During an economic downturn, he explained, PR firms should be doing the following:
· Make sure you are happy with your client base and weed out your weak clients.
· Invest in your business. Tap into your strengths and fine-tune those processes even further.
· When it comes to staffing, you have to take care of your best people to enhance loyalty and retain employees over the long term.
· Make opportunistic hires now for when the market improves.
· If you have to make staff cuts, do so judiciously — redeploy good people to other accounts.
· Go through your cost structure and find non-staff related costs you can cut.
“In summary,” Bishop said, “when you’re in tough times, give up margin points to strengthen your position for when times get better. This shows a depth of talent in your management team.”
“The greatest mistake firms make,” he added, is that they “over-hire and don’t manage their staffs well. Always be prepared for a downturn. Remember to reward people for work they do and get rid of weak people who don’t pull their weight.”
With regard to where salaries might be headed, he said this depends on how deep the economic downturn becomes. “Demand will be lower if the unemployment rate increases. And, if it does, there will be less pressure on wage growth. But for people you want to keep, pay them well in good times and bad times. If not, when the market picks up, they’ll leave.”
Gottesman agreed, noting that “keeping track of employees gives you a perspective on profitability. The more work you have to do, the more people you need.”
More often that not, when revenues are squeezed, staff is cut. PR firms need good people as clients, today shift away from big budget advertising to more public relations. In times of economic pressure, Gottesman noted, it gives firm CEOs a chance to show how well they manage their firms, “and if you want to consider the sale of your company in these economic times, remember the sale of a PR firm is on an earn-out basis. That means you now have the opportunity to build your company for future earnings.”
Gottesman said the shift toward PR will continue. “The outlook is quite good, but be careful,” he warned. “More than half of your revenues go out through your staff.” PR firms have grown 55 percent by head count since 1990. Advertising has grown by 14 percent by head count.
For the long-term, “regardless of the economy, PR employment will continue to grow,” he said.
“Economic forecasting is a confidence game and when consumers stop spending — and they are — we will have a recession,” according to Wyss. “We are at the beginning of a recession” and the early move to cut the prime interest rate and issue rebates “will make the recession relatively short and mild.”
“Fundamentally, the state of the economy comes down to the consumer. Will they continue spending? Now, they are getting squeezed between lower home prices and higher oil prices, Wyss said. “Consumers are 70percent of the U.S. GDP. Expect $4 per gallon for gas by the summer and for housing starts to be at their lowest by mid-2008.”
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