Starting your own PR agency: Ditching your job to strike out on your own is not always easy. Claire Atkinson explores some of the questions you should consider - and how to do it right

Given the booming economy, few PR pros haven't thought about having their own name above the door. Running your own business offers all kind of attractions: an escape from office politics, greater creative freedom, the potential for personal growth and riches.

Given the booming economy, few PR pros haven't thought about having their own name above the door. Running your own business offers all kind of attractions: an escape from office politics, greater creative freedom, the potential for personal growth and riches.

Given the booming economy, few PR pros haven't thought about having their own name above the door. Running your own business offers all kind of attractions: an escape from office politics, greater creative freedom, the potential for personal growth and riches.

For Michele McCormick of MCC Communications, Sacramento, CA, the catalyst was an unusual one. 'I was inspired to go on my own when my then employer put me in charge of arranging for an elephant at a special event. Among other responsibilities, it became clear that elephant-poop management was part of the assignment, so I decided then I needed to take a different role.'

Whatever the reasons for making the break, you need to ask yourself a few simple questions before resigning your corporate or agency position.

Jane Wesman, who runs an eponymous New York boutique and has written a book for women launching their own businesses, Dive Right In the Sharks Won't Bite, suggests thinking about these issues: Can you deal with the uncertainty? Do you have lots of energy? Are you extremely articulate?

Do you have good media contacts? Can you motivate people?

If the answer to any of these questions is no, perhaps you need to find a business partner who can complement your skills - or stay where you are.

Once you've decided to go it alone, whether as a solo practitioner or as an agency founder, an essential step is to hire a lawyer and an accountant.

Many PR pros face the daunting task of negotiating non-compete clauses in their contracts. What corporate information you can take is also a matter of debate. (See sidebar.)

Wesman advises to avoid upsetting people when you leave. 'You are going to need everyone you've ever known,' she says. Though most practitioners claim they walked out of their jobs with nothing more than their contacts, some lucky few say their bosses were supportive and sent business their way.

Elliot Sloane, who quit Edelman PR Worldwide to establish Sloane & Co. in New York in 1998, says he has an informal kitchen cabinet of industry peers who gave him advice during his start-up phase. These people can also help when you come against problems you haven't experienced before.

'Visit with as many influential people as you can,' says Paul Owen, president of Owen Media in Seattle.

But before you officially open up, write a business plan for the first year of operation. Marc Hausman, 29, of Strategic Communications Group, Silver Spring, MD, opened his firm at the age of 24; on his first day of business he pushed his computer through 18 inches of snow during a blizzard. Now he's running a multimillion-dollar entity. 'I wrote a business plan for the first 18 months including our philosophy, our value proposition, target market and the financial situation,' he says.

Identifying your niche is an important step, too. 'Start the business in the field you're in,' advises Wesman. That view is echoed by Richard Levick, who trained as a lawyer and now represents them. 'You have to be the first or the biggest or the best at something, if that's in a small area or nationally,' says Levick, a principal of Levick Strategic Communications, Washington, DC, which represents some of the top law firms in the country.

'From our perspective, being a niche player is extremely important in distinguishing yourself.'

Some people start as solo practitioners, others set out with the intention of building an agency. Allan Ripp, who now counts Zagat as one of his clients, set up his business in 1989 as a soloist doing freelance projects while he worked as a journalist on a magazine. The agency has grown to six people with revenues doubling over the past year to dollars 1.3 million.

'I wish I'd taken a little bigger risk with real estate and staff numbers when I first started, 'says Ripp. 'I'm going through growing pains now and it's hurting my professional joints.'



Have a plan, but be flexible

Hausman, on the other hand, started out with the intention of becoming a big agency. His firm now employs 40 people. Hausman remembers hiring his first employee, who asked him if he had enough money to make payroll.

In fact, he began the business with little more than dollars 5,000, renting a dollars 65-a-month town house office to keep down the costs.

A popular option in starting your agency is working from home, but that takes discipline. Some PR pros find it difficult to concentrate, others find it difficult to switch off. Maria Hayworth, vice president of Hayworth Creative Advertising and PR, Ormond Beach, FL, says she decided to work at home to be near her children. She stops work for dinner and then, she says, 'once the kids are in bed, it's usually back to work at our at-home setup. The lights go out for us around 1 am.'

If you plan to start small, you're going to need a financial cushion for the first few months, until the checks start rolling in. But if you have grand plans, funding your start-up is one of most important preliminary tasks. 'Open credit cards or save at least three months' worth of rent and groceries before you start,' Owen advises.

Levick says he started his business with dollars 1.1 million of his own cash, but if you don't have that luxury there are other places to go for help.

One West Coast PR pro, Bryan Eggers, has taken the unusual step of tapping the markets for start-up cash; earlier this year, Eggers filed with the SEC to take his firm public. 'Once cleared by the SEC, I'll have enough money to open an office and hire staff,' he says.

While few people are eager to have their businesses go into debt, most PR pros interviewed felt that establishing a credit line with the bank was an important safety net. A credit line allowed firms to cover expenses when funds were low.

Once you know where the money is coming from, you'll have a number of legal papers to file. Before you quit your current job, obtain state and city business licenses and get a federal tax ID number. Owen advises setting up as an S corporation or limited liability partnership if you're going to become an agency. Tom Geller, who has just established his second agency, San Francisco-based Bandwidth PR, says he opted to form a limited company.

Forming a corporation creates a legal entity that is distinct from its principals - an advantage if your business goes broke or gets sued. It also forces the founders to keep up-to-date with the accounts and paperwork.

The drawback is you end up paying tax on both your salary and the firm's profits.

Making sure you tackle the logistics is key. Many new agency chiefs admit they neglected business management in favor of spending time on client projects.

'I'd highly recommend anyone attempting to start a PR agency first seek out a certified professional business coach to determine you have the foundations of a successful business,' says Dan Collins, senior manager of media relations for Mercy Medical Center in Baltimore, who previously worked in a PR agency and also did his own freelance PR.

Pat Meier of Pat Meier Associates PR in San Francisco says she avoided the back-room operations as much as possible in her early days. That resulted in a situation where an employee started banking bill payments into a false account. 'I never again relinquished control of those things that are not strictly PR,' she says.



Building a solid business

Trust in staff is key. 'I wish I'd known that the biggest challenge would be the relationship you have with your staff,' says Hausman. Mark Bingham, president of The Bingham Group in San Francisco advises start-up entrepreneurs to 'hire a good second in command, someone who thinks the same way you would. At the start your expenses are really low, so make sure you pay your first couple of people well.'

But in order to afford great staff, and stay afloat, you must make sure you get paid. Many independent agencies advise getting a mix of retainer and project work to even out cash flow.

Geller advises getting clients to make at least one month's payment up front. 'I had a nightmare situation where I agreed to do some work for an event that was cancelled,' he remembers.

Asking for the first month's payment up front is standard business practice.

'The biggest problem I've had since I started my own company is cash shortages,' Paul Owen says. 'It happens once or twice a year. After three years in business your bank will offer you a line of credit. Take it.' He also finds that in the hi-tech industry business is cyclical with little coming in during the summer months.

If you set up without clients, finding them entails marketing your firm.

PR pros interviewed say much of their initial business came via referrals, but there is no harm in advertising. The Yellow Pages still turns up leads, according to one PR pro. The PRWeek directory is another option.

Kevin Doel, managing partner at Talon Partners, Dallas, says he was able to win clients against bigger agencies after taking advice from the president of a Web site (Salesproposals.com) established to help people write better pitches. Make yourself highly visible by attending tradeshows and networking at lunch and evening events to reinforce your presence.

Since entrepreneurs are attracted to other entrepreneurs, what better way to get going than by contacting small businesses like your own? Hausman says when he started he combed the recruitment and classified sections of the newspaper for companies that looked like they were growing and could use some PR expertise. He says it took him two months to get his first client.

Once your clients increase in number, you'll have the problem of finding staff to service them - a major headache these days for agencies big and small. For start-ups without a track record, it's even harder. Says Meier, 'One of the most important lessons is often taught in business school: hire your own replacement.'

That isn't so easy in this hot PR market; one PR pro tells how prospective employees asked if they would be offered stock in their clients' firms.

Many firms have circumvented this issue by forming virtual networks staffed by independents that work on a project basis.'There has never been a better time to launch a PR firm in history,' says Elizabeth Ames of media-oriented PR agency i-Media Communications in New York. 'But this is not real. It is not going to go on forever. The question is, Are we prepared for it to end?'



Timing is everything

PR and marketing are often regarded as the first fat to be trimmed when times get tough. Robbie Vorhaus, founder of the thriving agency Vorhaus & Co., reveals that he ended up dollars 125,000 in debt with dollars 80,000 on credit cards during the recession that hit in the nineties. That forced him to seek a taxi cab license as a fallback. Vorhaus, who started his agency in an apartment across the hall from his own and got 10 phone lines installed for his five staff, advises: 'Fake it, until you make it.'

Joe Riser, GCI Group's vice president of corporate and technology in Los Angeles, went back to a staff job after running his own agency, Emphasys, for five years. He launched in the middle of a recession and tried to compete with larger-scale agencies by renting an expensive office. However, he then had difficulty getting payment from clients.

Riser ultimately went back to a staff post recognizing that being good at working with entrepreneurs does not necessarily make you one. 'My greatest discovery was I'm great at what I do, which often means working side-by-side with entrepreneurs,' he says.

Deciding whether you have what it takes to be an entrepreneur begins with asking yourself the questions that Wesman alluded to. Are you ready to take the plunge?



FLYING SOLO: TALES FROM SOME WHO HAVE TAKEN THE PLUNGE

Name: Marc Hausman

Former Agency: Boscobel Marketing Communications (Silver Spring, MD)

Current (owned) Agency: Strategic Communications Group (Silver Spring, MD)

Year established: 1996

Agency niche: Technology

No. of employees when started: One

No. of employees now: 40

Why started agency: 'I wanted the challenge of building an agency that reflected my belief that advertising and public relations are most successful when they support the client's business goals.'



Names: Maria Hayworth and Kevin Hayworth

Former Agency: Visit Florida (Tallahassee, FL) (Maria), Moore Consulting Group (Tallahassee, FL) (Kevin)

Current (owned) Agency: Hayworth Creative Advertising & Public Relations (Ormond Beach, FL)

Year established: 1999

Agency niche: Travel & tourism

No. of employees when started: Three

No. of employees now: Five

Why started agency:

'Enjoying what you do every day is the difference between being committed and being committed. You'd have to be crazy not to know the difference.'



Name: Pat Meier

Former Agency: Hi-Tech Public Relations (San Francisco; now an office of Golin/Harris)

Current (owned) Agency: Pat Meier Associates Public Relations (San Francisco)

Year established: 1985

Agency niche: Emerging and mature technology companies

No. of employees when started: Two

No. of employees now: 12

Why started agency: 'I wanted a place where we celebrate collectively our successes. A place devoid of politics where employees have ownership of their achievements and the satisfaction of seeing a campaign to fruition.'



Name: Noemi Pollack

Former Agency: The Bohle Co. (Los Angeles)

Current (owned) Agency: The Pollack PR Marketing Group (Los Angeles)

Year established: 1985

Agency niche: Boutique generalists (structured with five 'practice groups' focusing on industries)

No. of employees when started: Two

No. of employees now: 14

Why started agency: 'I had a vision that a boutique agency, unencumbered by parent companies and size, would allow for senior-level hands-on involvement on all clients' accounts and offer the luxury of choice as to which clients would grow together with the agency.'



Name: Richard S. Levick

Former Agency: Jaffe Associates (Washington, DC)

Current (owned) Agency: Levick Strategic Communications (Washington, DC)

Year established: 1998

Agency niche: Legal

No. of employees when started: Three

No. of employees now: 32

Why started agency: 'To be the world leader in legal communications and to do it right - providing unique and exceptional value to clients and employees.'



Names: Tracey Weinberg and Greg Harris

Former Agency: Image Dynamics (Baltimore) (for both)

Current (owned) Agency: Weinberg Harris & Associates (Baltimore)

Year established: 1991

Agency niche: Consumer marketing, product launches, b-to-b, retail and hospitality

No. of employees when started: Two

No. of employees now: 15

Why started agency: 'Starting our own agency gave us the opportunity to truly define goals and opportunities and measures for success for both our clients and the firm. It afforded us the opportunity to create a team-oriented environment where quality of service standards are constantly being internally challenged and raised.' (Tracey Weinberg, president)



THE LEGAL NICETIES: PROTECTING YOURSELF WHEN YOU LEAVE

When Mark Coker decided to set up his own public relations agency, he was advised by his lawyer not to tell his boss about his decision.

Coker, now president of Dovetail Public Relations, Los Gatos, CA, decided to be up-front and informed him of his plans. To his dismay, 'before I packed up they brought me a letter warning me about recruiting their clients,' he says. According to Coker, his boss drove to one client's office and threatened to sue if it signed with him. Though the client soon dropped the agency, it didn't sign with Coker either.

If you're planning to jump ship and start a PR agency of your own, you're going to want to bring along some provisions - whether they're in the form of Rolodex cards, computer files or clients. The only problem will be the tension between your employer - who would no doubt prefer that you go bare - and your need to be outfitted for survival. And, of course, you're not immune to a well-timed legal challenge.

PRWeek talked to labor and employment lawyers to get their take on how to walk the very precarious plank from your old firm to your new. While these lawyers weren't dispensing legal advice - each situation, after all, is fact- driven, depends on the state you're in and varies according to the risk you're willing to assume - our analysts did mention the following points.

1. Read the rules before you go.

'Take stock of what the written obligations to your current employer are,' suggests Peter Altieri, of New York's Epstein Becker & Green. A contract might spell out in some detail what you can and cannot do in terms of soliciting clients, competing with your employer and taking materials.

Even if you have no contract, other documents, such as employment handbooks, might contain restrictions.

The complete absence of written materials doesn't absolve you from acting with a certain degree of decency. 'While you are still there, you do have fiduciary duties, including the duty of loyalty, even in the absence of a noncompete agreement, a nonsolicitation agreement or a confidentiality agreement,' explains James Esseks, a partner at New York's Vladeck, Waldman, Elias & Engelhard, which represents employees.

2. Use precaution in forming any alliance with clients.

'It's important not to actively solicit deals or engagements that were either ongoing at a former employer or in the pipeline,' says Altieri.

Even if you aren't bound by a noncompete clause, certain common-law restraints might restrict you from soliciting clients before you leave, the general principal being that you can't unfairly compete with your employer. 'It would be safer to (approach clients) immediately following your departure,' suggests Arthur Abelman, counsel to New York's Moses & Singer, who counts the PRSA among his clients. 'Send an announcement out.'

3. Lighten your load.

'Don't leave your former office with anything that is not your truly personal property,' suggests Michael Lasky, a partner at New York's Davis & Gilbert. 'Typically, if a departing PR person says, 'I did a marketing plan, I wrote it, I presented it, can I take a copy of it with me?' the answer is no.' While there may be some exception if documents were given to third parties and are sufficiently public, Lasky suggests that if you need something you did for a client, don't take it from your former firm, but ask the client for a copy after you've opened up your own shop.

'Clearly, anything the company owns from computer files to any client materials is all company property,' explains Lasky's partner Lewis Rubin.

'A Rolodex gets into a gray area.' The better your information, the more likely it will be considered to be proprietary. 'It really all depends on what's on the Rolodex,' says Lasky. 'The devil's in the details.'

4. Don't let your secretary rat you out.

Don't use your employer's facilities to establish new business for yourself, says Altieri. Don't ask your assistant to download your files onto floppies; nowadays employers can determine what files were deleted from a PC, copied onto discs or e-mailed. 'Once they find out (what you took), they are in a better situation to go after you' and claim that you misappropriated information, Esseks warns.

5. Remember that you have no friends.

Piss anyone off enough, and they'll be willing to have at you publicly.

Even though 'litigation is very difficult and expensive to pursue,' Altieri says, employers left behind 'have to strike the balance between that (cost) and sending a message to their current workforce.' Even if you never reach a trial - many of these matters are settled out of court or handled by an arbitrator - the legal meter will be ticking and may well set you back.

If you want to outlast any legal headaches, talk to your lawyer before zbailing out.

Lori Tripoli.





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