THE AGENCY BUSINESS: Expanding a PR firm's offerings requires careful consideration

Many specialty PR agencies expand into new disciplines and offer new services to grow business. But agency heads warn that it takes serious consideration and research before diversifying.

Many specialty PR agencies expand into new disciplines and offer new services to grow business. But agency heads warn that it takes serious consideration and research before diversifying.

When David Fuscus launched Xenophon Strategies three years ago, a firm initially specializing in crisis, he was already planning to expand its offerings once the business was firmly established. He next launched a public affairs practice, bringing in key senior people to front the new area, then later added food and government affairs. The firm's latest expansion is into the energy industry, in partnership with Morgan Meguire, a group already active in that field. Fuscus says expansion is what has allowed the small agency to show big revenue gains over the past two years, jumping 153% last year to just over $2 million. While acknowledging that it's much easier for a smaller firm to realize such dramatic numbers, Fuscus nevertheless points to his expansion strategy as a key factor. "The reason we've been able to achieve those growth levels is because we keep adding practices," he says, adding that he expects the firms billings will rise 50%-60% this year over last. But expanding one's offerings can be risky if not carefully managed. In the midst of the technology decline, there was a scramble to diversify among many of the specialty tech firms that had mushroomed during the dot-com boom. Suddenly, it seemed like technology firms all over were talking about expanding into biotechnology, as if it were a natural extension of tech. That clamor has since died down. The reality many of these firms faced is that traditional healthcare practices and long-established biotechnology PR shops have a hard-enough time attracting the kind of talent it takes to run a healthcare account. Upstarts in the sector faced significant challenges trying to get a foothold in that market. There are exceptions, of course. Waggener Edstrom, one of the iconic technology agencies, with its deep relationship with Microsoft, has diversified into bioscience, and now touts that discipline in tandem with the traditional tech work it still does. Maura FitzGerald, CEO of FitzGerald Communications, diversified her technology-focused firm into life sciences about four years ago, though she first expanded into IR. Now, she says, ongoing client work in IR accounts for 20%-25% of business, and two clients exclusively tap the firm's IR services. The firm's life-sciences activity accounts for 10% of the firm's billings, and it is now launching a new opposition-research offering. FitzGerald says firms have to back their words with action. That means being ready to do the work as soon as clients ask for it, not gearing up if and when there is interest. Too many firms, she says, test the water only for their ideas to fade away. "The most common mistake is to announce an initiative with no clients, and then no one hears about it again," she says. "It hurts your credibility if you're making announcements and not backing them up." A successful diversification demands patience. Financial Dynamics North America, freshly emerged from its FD Morgan-Walke days following a management buyout from former parent Cordiant, had been for the past few years expanding beyond its traditional roots in IR to broader financial and business communications, and media and public affairs. Declan Kelly, US CEO, says the firm turned down business rather than accept accounts it was not yet ready to handle. "You have to take your time and be patient," he says. "Sometimes firms think because they see a market opportunity they should run after it. When they get there, they find out they don't know how to service the business." Fuscus also turned away a lucrative retail account, because the account did not match the firm's fundamental skills, and would not become a sustainable area for diversification. "You have to have discipline when you diversify," he says, "and not go out chasing every client that comes along. You have to look very carefully at your business and say, 'Does this lie within our core capabilities?'" ----- Common 'diversifying' mistakes Launching a new practice or diversifying offerings can be risky. Following are some of the more obvious mistakes some firms make when doing this:
  • Floating a "trial balloon." Announcing a new practice or offering just to see if any clients will sign up for it.
  • Overemphasis on one account. Launching a new practice area only to win one particular client.
  • Straying from your strengths. Choosing a discipline that is too far removed from the firm's core business.
  • Jumping the gun. Announcing a new practice before the firm is ready to effectively service the clients.

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