At PR News we tackle many of the hot-button issues associated with communications, ranging from crisis management to social media. But we can’t forget that PR first and foremost is a business, and public relations agencies, grappling with an increasingly globalized economy, have to treat it that way.
PR agencies, of course, are adept at telling a story, dealing with the media or cauterizing reputational wounds suffered by their client.
But the knock on PR shops tends to be that they don’t spend enough attention to generating lead revenue, P&Ls and other financials that are designed to create a healthy balance sheet.
PR folks who work at the corporate level have a CFO in-house who constantly has his or her eye focused on the top and bottom line, and communicators need to act accordingly.
Not so much on the agency side. With that in mind, we offer a few tips on the benefits of PR agencies hiring a part-time CFO, compliments of Rick Gould, managing partner of PR M&A consultancy StevensGouldPincus.
> Billing and proposals. The part-time CFO will monitor billing rates and productivity. The CFO will determine the baseline hours, and the available client hours, for each staff person. Typically, this will be around 1,700 hours, but varies in each agency, depending on each staffer’s allowance for vacation time, personal time, paid holidays, maternity leave and training.
> Best practices. I always preach, “Run your firm as if you are going to sell it.” A part-time CFO can do that for you, in terms of setting up the right systems, preparing monthly financials and tracing the benchmarks/industry standard for the best practices.
> Budget. A part-time CFO can create budgets that will be the basis of your fee quotes. She will prepare a “rolling budget” that is updated monthly, accounting for new hires, new business, lost business and infrastructure.
> Cash management. Effective cash management is a necessity to sustain and grow any PR agency. An agency may show high profitability but be insolvent. That sounds incredible, but I have seen it many times. The profits may all be in the receivables. If the receivables are not collected the agency will not survive. The part-time CFO will assure that receivables are collected in a timely way and, if not, recommend appropriate action.
> Managing a crisis and/or economic downturn. The part-time CFO must know how to manage a recession or downturn. She must predict the unexpected, have a conservative approach, maintain at least two months of fixed labor and overhead in a reserve account and not spend advances on fees and/or out-of-pockets on operating costs. Sometimes, the unexpected is caused by a loss of major client(s).
Follow Matthew Schwartz: @mpsjourno1