In our June 26 edition, we told you about the yearly Gould+Partners benchmarking study that showed PR firms struggling last year to reach 20% profitability. Large firms (revenue of $25 million and more) led the way at near-20% profitability, mid-sizers (revenue of $10 million to $25 million) were respectable at about 18% and smaller firms trailed at 13.5%.
The 20% profit mark is the accepted level, says Rick Gould, managing partner, Gould+Partners. Labor costs were the main culprits at the 101 U.S. and Canadian firm surveyed, he says. Industry average profitability was 15%, down slightly from 15.3% in 2015.
This week we delve deeper into the study, which will be released next month. As you can see in the top table, CEOs at firms specializing in travel and digital PR commanded the best rates. For PR executives (non-CEOs), the highest rates belonged to those in beauty/fashion and real estate.
Billing rates averaged $486/hour for CEOs of agencies with $25 million or more in revenue and $272/hour for agencies with less than $3 million in net revenue.
Productivity—measured by billable time utilization—has been far below optimal levels, Gould says. Executives are billing at 84.1% of their theoretical yearly capacity of 1,700 hours, the survey says [see lower table]. Some account executives are billing at an average of as high as 95%, others are averaging 70%.
The goal should be 90% at least for account staff not participating in management and bringing in new business, Gould says. Nearly all the firms in the survey that reached 20% profitability boasted executives who were billing at 90%, he adds.
