An unplanned business is not a business.
The heart of my planning has been a commitment to systematic, ground-up business forecasting—year in and year out. This discipline has not only provided a roadmap for our agency’s growth, but has helped manage in the kind of uncertain economic times we are facing today.
I am always surprised to discover how few public relations agencies take full advantage of the power of forecasting. Many, I suspect, consider it bureaucratic—appropriate perhaps for a big, multinational company but akin to cracking a chestnut with a steam hammer in the world of PR, where spontaneity and agility are seen to be reigning agency values. In fact, nothing could be further from the truth.
Forecasting is a powerful communications tool and, like all good communications, it fosters focus, trust and clarity. It aligns the entire organization behind shared goals. It strengthens the senior management/practice leader relationship, based on common performance objectives. It compels practices to think strategically about how they will achieve revenue in the year ahead. It offers a dashboard to executive management for mid-course adjustments.
I noted earlier that forecasting is a ground-up discipline. This means that the process begins at the practice group level. At our agency, during the fall of each year, these leaders draw up detailed business plans for the following year. These include not just revenue forecasts for current clients but the annual fee value of each new client they intend to sell. Market trends, the economy and the level of lead development in each practice area influence the numbers forecasted. If nothing else, this discipline forces practices to step back from the whirlwind of client work and think about where they are going and how they will get there.
We next hold a series of in-depth, one-on-one meetings—often lasting the better part of an afternoon—between senior and practice leadership to review and refine this thinking. Realism is the watchword in these sessions. For example, we plan for a minimum of 10% client loss, depending on the economic outlook, even projecting which specific accounts are likely to depart and when. Similarly, we temper new business projections with harsh economic realities. We encourage practice leader push-back against management desires and expectations; this tension is essential to the process.
Forecasting is not just about delivering practice revenues. It also addresses what the agency must provide practices to reach their goals. We forecast new hires (when and at what salary levels) and research required, and each practice provides a marketing plan with budget for the year.
My colleagues are often surprised to learn how granular our forecasting is. We actually project the business on a month-to-month basis for the coming year, taking into account issues like seasonality of new business and anticipated project revenue spikes.
What emerges from this process is a surprisingly accurate crystal ball; we habitually come anywhere from on target to within 10% of forecasts each year. Part of the reason is that achieving forecasts trigger bonus payments for all agency officers—from VPs on up. It’s not just enough to meet individual goals; two-thirds of incentive compensation hinges on achieving practice specific and agency wide projections.
Of course, much of what I’ve just described is elementary business forecasting applied to the world of PR. But this is only one part of the process. It is essential that forecasting move beyond an abstract strategic planning exercise to become a communications tool that focuses and motivates all employees throughout the agency. That process consists of the following:
1. An off-site senior management meeting to review what each practice leader sees in the year ahead.
2. Distilling forecasts into five or six simple and concise agency goals for the year. These usually focus on targets for overall revenue growth, new business, client retention, new practice initiatives, marketing achievements and the like.
3. Distributing goals to every employee and posting throughout the agency.
4. Producing regular reports on progress against them to the entire firm. This happens quarterly, beginning in January with a firm-wide State of the Agency address where we present forecasts and goals for the new year.
If done right, forecasting enables smart, quick decisions, managing defensively and keeping employees motivated amidst the fog of economic uncertainty—such as we face today. PRN
Ken Makovsky is president and CEO of PR agency Makovsky + Company. He can be reached at firstname.lastname@example.org.