Survey: Agency profitability hit four-year low in 2009

NEW YORK: Profitability at US PR agencies dropped to a four-year low last year, but the drop was less steep than originally forecasted, according to the annual Benchmarking survey from StevensGouldPincus.

NEW YORK: Profitability at US PR agencies dropped to a four-year low last year, but the drop was less steep than originally forecasted, according to the annual Benchmarking survey from StevensGouldPincus.

The survey, which polled 111 PR agencies, reported an average profit margin of 13.5%, down from 15.6% in 2008 and 19.7% in 2007.

The average was brought down by firms with net revenues of under $3 million. The average operating profit for this category was 10.4%, well below those of larger firms.

Firms with revenues of between $10 million and $25 million reported an operating profit of 17%, and those between $3 million and $10 million netted 14.8%.

“I was pleasantly surprised with the numbers, because we did a survey earlier in the year and the predications were much worse than what the reality ended up being,” said Rick Gould, managing partner of the firm. “I think the second half of last year picked up, and every indication I have talking to CEOs and CFOs are that things are on the up revenue wise and bottom line wise.” 

As in previous years, the 15 “model firms” that SGP characterize as consistently meeting or exceeding performance target criteria reported an operating profit of 25.3%. Gould attributed that in large part to those firms' ability to hold professional staff salaries to 37.4% of total revenues.

Among the survey's other findings, the average staff turnover rate was 23.3%.

“That average turnover number is pretty consistent year to year. Firms weren't hiring last year, so you'd think people would hold onto their jobs,” Gould told PRWeek. “But it could be because of layoffs. Some firms had well over 30% turnover.”

The survey also found the average monthly minimum fee dropped to $9, 808, down from $10,332 reported the year prior.

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