The research from Plimsoll Publishing that a quarter of PR agencies will not see out next year in their current form is a shocking statistic. But is there any foundation behind it?
It certainly seems at odds with the industry's present healthy state with few examples of agencies going to the wall and most acquisitions being of a strategic nature rather than the bailing out of a failing brand.
Industry experts believe the research, based on financial accounts, normally applied to manufacturing industries is not compatible with a services industry like PR which is not assets-based. An example given is that it is only in recent years that WPP has posted positive shareholder funds.
Yet Plimsoll, which has completed individual financial analysis of 863 agencies, say a quarter of those are borrowing heavily to cover overheads.
One anomaly is these losers may be privately-run businesses which have hived off profits to avoid paying higher taxes. As a result the risk of going out of business may not be so great, concedes Plimsoll.
Unlikely as it is that Plimsoll's bold predictions will come true, a downside to the industry's entrepreneurial spirit is that it can result in too many talented PROs running companies without adequate business acumen.