Agency profitability returns to pre-recesson levels

NEW YORK: PR agencies last year posted their strongest performance since the recession, with 2011 profit margins increasing to 18.6 percent according to a report from communications consultancy StevensGouldPincus.

NEW YORK: PR agencies last year posted their strongest performance since the recession, with 2011 profit margins increasing to 18.6 percent according to a report from communications consultancy StevensGouldPincus.

The report, which surveyed 105 prominent agencies in the US and Canada, found agency profitability rose three percent since 2010, reaching the highest level since a 19.7 percent margin in 2007.

Rick Gould, managing partner at StevensGouldPincus, attributed the higher profits to better business management at agencies in the wake of the economic downturn.

“Firms got very nervous during the recessionary years, so they were much more focused on managing their labor and overhead,” Gould said. “When the CEO isn't sleeping at night, they start managing the business much better.”

Firms with net annual revenues below $3 million reported 20.5 percent profitability, higher than the overall average. “The thrilling result of this is that the smallest firms did so well," added Gould. "I don't remember that happening over the past 20 years."

Average monthly fees charged by agencies rose to $9,867 from $8,385 in 2010, further evidence of a rebound from the economic slowdown. The report also found that revenue per member of professional staff rose to $209,945 from $205,941 in 2010, a key benchmark of an agency's health, Gould said.

“Many firms were overstaffed and over servicing, but now management is keeping a close eye on that,” he explained.

Average staff turnover at agencies remained steady, falling to 22.5 percent from 22.9 percent in 2010.

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