If any industry could come out of the chaos of 2021 with a positive outlook, it is public relations. While events in 2020 helped elevate communication as essential, 2021 built on that notion, particularly with the emergence of COVID-19 vaccines and information needs for a world ‘returning to normal.’
And while normalcy and reopening seem delayed in some respects, the need for communicating changes in vaccine directives and other policies remains a high priority for every organization.
Data from Davis+Gilbert LLP, a law firm that works with many communication businesses, shows 95 percent of PR outlets surveyed anticipate net revenue increases in 2022, a far more optimistic look to the future than at the same time last year.
This is great news for those in the process of creating a budget for 2022. While fundamental needs for organizations may have changed in terms of operational costs, a reassessment of strategy can provide opportunities for a beneficial re-allotment of funding.
2021 saw tightening of many organizational budgets, but also a reprieve from changes in operational costs. According to the Davis+Gilbert survey, PR firms took steps to increase profitability, which included reducing discretionary business and entertaining expenses and a reduction in speculative and client business travel. Many clients are now used to conducting meetings via Zoom, Slack or Microsoft Teams.
Rick Gould, CPA and managing partner at Gould+Partners, has been involved in the financial side of the PR industry for over 30 years. He says it’s not too late to start 2022 budget planning, particularly as it should be considered a rolling statement, with continued revisions as conditions change. These could include a major hiring of an executive or the acquisition of a big new client.
Hinda Mitchell, president at Inspire PR Group, agrees. “Q4 is when a lot of new business for the following year is coming in, and current clients are adding new projects and budgets. So even as we’re projecting, those projections are changing.”
The Budget Breakdown
The budget should start with a detailed projection on three main items: net revenue, labor and overhead budget.
Net revenue should include a look at your legacy clients as well as an educated guess of the pipeline. Consider what business may come in and what, of projected new business, are longshots, Gould says.
He notes that it’s critical to perform a “line-by-line projection of what your present staff can handle and what you will need in order to cover new business projected…It’s best to have the team in place prior to an influx of business,”he adds.
As far as who should be included in the budgeting process, Gould advises that, across a larger firm, managing directors and chief financial officers across all locations be included. Many organizations also include their account leaders, who are closest to projections on a client’s anticipated budget. Gould says it’s also acceptable to bring in a freelance CPA or outside consultant, who can put a great budget together in only a few days’ time.
“Budgeting should not be a one-person function,” Gould says. “Owners are usually the worst ones to do it. Because they are PR people, they are not financial people.”
Of course, 2022 will continue to be a good year for job seekers as organizations reinvest in their talent and continue to expand. In fact, the Davis+Gilbert survey found that one of the greatest challenges for PR firms is retaining talent and hiring new staff to keep up with workload.
As a result, Gould advises adding employment agency fees to the budget, which will likely be needed as a result of the Big Resignation. He suggests adding 20 to 30 percent of the starting salary to the budget for each position.
“Training, signing bonuses and raises to match other firms poaching your key staff will be necessary,” he says.
Similarly, Mitchell is looking closely at labor costs. She’s also considering investments in her current and potential team members.
“We are budgeting aggressively for salaries and bonuses, and we anticipate raises to be higher than usual,” Mitchell says. “Our focus is on retention of our team — and making the spends and other amenities/benefits/policies to do what’s necessary to keep our great talent.”
Mitchell says Inspire PR is anticipating an increase in healthcare costs, which range from 9 to 13 percent each year, as well as increasing benefits that promote self-care, including travel and PTO. She also expects to add several associates, likely within the first quarter of 2022, and will continue to invest in professional development for her current staff.
“In addition to a good paycheck, we know our team wants to grow and develop as PR pros — and as humans,” she says.
Gould says a good average for labor costs is to shoot for them to come in at 50 percent of your budget and for your overhead costs to come in at 25 percent.
“Keeping labor costs at 50 percent is challenging,” he says. “But the key is having a good team in place when you land that client, versus having to go out and find the people to service it.”
This may be one of the most contested budget areas for 2022. Rent is a large consideration, which according to Gould, usually accounts for 6 to 7 percent of the net revenue budget.
According to the Davis+Gilbert survey, 55 percent of respondents expected to retain their workforce on a full-time remote basis through the end of 2021, but Gould advises against giving up the physical office completely.
‘I don’t recommend giving up space, but you can downsize,” he says. “If a lease is up, don’t sign another lease that extends for five or 10 years, but consider places like WeWork or a sublet. Right now a lot of space is very cheap.”
Mitchell agrees and says her firm will keep its office, even though the agency is currently in a hybrid, two-day-a-week model that is “working well.” And, when the firm outgrows its space, it will not look for a larger office, but will instead focus on changing schedules to keep a rotation or to allow for ‘hoteling’ desks, for example.
“In a COVID-emerging world, I firmly believe that having our team under one roof, even if it’s infrequently, has value,” she says. “And in our work with the team to identify favorable policies and benefits, flexibility that included both home and office work was sought…We invest a lot of time and financial resources in the growth of our team.”