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Is PR Agency Management Unraveling? Billing-Rate Stagnation in 2015 Should Concern PR Firm Leaders

billable time utilization, Gould+Partners, Marketing, Pr, PR agencies, PR agency business, PR billing rates, PR firm, PR industry, PR management, PR productivity, PR utilization, Public relations, Rick GouldAgency Productivity at Sub-Par Levels, Data from Gould+Partners Shows

Are PR agencies struggling to keep busy—or are they perhaps being too generous with their time? New research from PR–focused merger and management consulting firm Gould+Partners reveals that many of the nation’s firms did not increase their hourly rates in 2015. Based on responses from 106 agencies based in the U.S. and Canada, billing rates are now averaging $448 per hour for CEOs of agencies with $25 million or more in revenues, and $301 per hour among agencies with under $3 million in net revenues, said Rick Gould, managing partner and director of the survey.

Productivity—measured by billable time utilization—has been far below optimal levels, Gould said. Senior VPs are billing out only 58.9% of their theoretical yearly capacity of 1,700 hours, according to the survey.

And while some account executives are averaging as high as 95%, others are averaging as low as 70%. The average for the second year in a row was 89.0%, which is close to target.

“The goal for account executives should be at least 90%—a goal reached by almost all firms achieving 20% profitability,” Gould said.

Productivity averaged less than 90% for account execs in most of the 14 PR specialties tracked. “At least 90% should be expected for account staff not involved in management and new business,” Gould added.

The survey is an annual poll focused on billing rates and agency staff utilization prepared by Gould+Partners. The management consulting firm has been conducting industrywide surveys for 25 years such as the recently released Best Practices Benchmarking Report.

“The good news is that, as firms are growing, they become more profitable as a result of tighter management,” said Gould. “Firms that have a part-time or full-time CFO have better controls, higher billing rates and higher productivity/utilization. The industry is still growing, 6.6% this past year.”

He added, “The bad news overall for the industry is that billing rates were flat and productivity has decreased. The other discouraging piece of data is that smaller firms, under $10 million in net revenues, are averaging only 14% operating profit, after imputing a normal (market) salary for the owners. That’s not good enough to build value for the firm. The solution is to implement tighter time management and profitability controls, and you will see the results.”

The industry growth report will be released in mid-August. 

Following the distribution of the G+P full survey results to those agencies that participated, copies will be available on request after September 1. To receive a copy of the survey, contact Rick Gould.

Source: Gould+Partners; edited by Richard Carufel

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