Small clients, big potential?

Too many PR agencies ignore the revenue opportunities of SME clients, claim some. Steve Hemsley investigates.

Weber Shandwick Technology will not take on a client that pays less than £5,000 a month (though it does make exceptions). Harrison Cowley, part of the Huntsworth group, rarely pitches for clients whose monthly budget is worth less than three or four days' work. For other agencies, the threshold is even higher.

At first, the reasoning is imminently sensible. The most profitable agencies are not necessarily the ones that take on the most work, and could include those that know when to refuse it. Take Harrison Cowley, which came 29th in PRWeek's Top 150 Consultancies report (21 April) on fee income of £6.3m. Associate director Justin McKeown says anything below his cut-off would not give the agency enough resources to provide an effective service.

According to the Department of Trade and Industry, 99.8 per cent of the UK's 4.3 million businesses are small (those with fewer than 50 employees and a turnover of less than £10m). Armed with such a statistic, some, most vocally The Federation of Small Businesses, are urging PR agencies to be less dismissive of SMEs.

‘These companies rarely benefit from the long-term PR support that large agencies offer to big clients, because there is the perception that SMEs do not offer the same fee potential,' says the federation's head of parliamentary affairs, Stephen Alambritis. ‘But the situation is not so black and white.'

With new business growth in the consumer sector slow (see PRWeek's Top 50 Consumer Consultancies report, 5 May), some are indeed taking on smaller accounts to boost their income.

Hill & Knowlton UK CEO Sally Costerton says the time is ripe for PR agencies to look more favourably at SMEs, because big clients - in both the private and public sectors - are scrutinising their marketing budgets like never before. ‘We're not a charity and would never run an account at a loss, but we are looking, with SMEs, to see how we can all get value,' she adds.

Costerton believes SMEs can be providers of lucrative accounts if agencies address their specific PR needs: ‘We are looking at projects where we just target one particular section of the media. SMEs are often open to having their whole PR budget spent on a single, specific campaign, rather than diluting funds over, say, 12 months.'

Educational value
The agency has found that working with SMEs can bring benefits other than financial rewards; chiefly in terms of staff development. ‘Working with SMEs teaches the teams new skills,' says Sam Clark, managing director of H&K's consumer technology and entertainment division. ‘They get much closer to the real business issues than they might on larger accounts, and often work directly with the CEO.

‘Staff learn the importance of adapting to different business styles.'

Jon Rivett, director of Paratus Communications, also looks beyond the bottom line when evaluating new-business prospects. ‘SMEs can offer enormous responsibility. The work can often be far more interesting and fulfilling,' he argues.

SMEs might be smaller companies now, but the low payer of today could become the lucrative budgetholder of tomorrow.

Book publisher Infinite Ideas had trouble finding a PR agency last year, with large agencies turning it down or insisting on retainers, which co-director David Grant could not afford. He ended up appointing freelance PR consultant Jo Sensini. She took the job on a project basis and is about to oversee her fifth book launch in a year, on an account now worth £10,000.

Sensini says she made the account work for both her and her client by charging on the basis of coverage achieved, which was substantial for the last launch. Thanks to this strategy the account has brought in a healthy revenue for Sensini and satisfied her client.

Grant believes larger agencies have been slow to see the potential of rapidly expanding SMEs. ‘Some are missing out by not being more flexible. Since we launched two years ago, we have grown considerably and are on course to reach our target of being an £8m business in five years,' he says.

‘The large agencies we spoke to initially didn't understand that we wanted to keep our costs down. We were also worried that our account would be handed to a junior account manager because we were a fairly small client.'

The same story is repeated by Anne Speak, who runs towel vendor After committing budget to a Top 150 agency, its fees were hiked following better-than-expected coverage. She dumped the agency, handing the account to another firm.

Wendy Richmond, former PRCA comms director, runs the Yellow Bicycle agency, representing small, ethical clients such as the Community Transport Association. She says big agencies can learn from smaller consultancies about working profitably with SMEs. ‘Itemise your bills so clients know exactly what they're buying,' she advises.

Bespoke services
Richmond adds: ‘It is worth asking the SME if some PR tasks could be done in-house, leaving the agency to solely leverage journalist contacts. This way, the SME pays for the agency's specific expertise, while the agency can work in a more focused way.'

Larger agencies can link up with smaller consultancies to service SMEs. 72point is one potential partner. It is part of the SWNS news agency, whose network of contacts is used by 100 PR firms in their quest for client coverage.

72point's service for SMEs sees them paying a flat fee of £3,000-£5,000 a month for access to the news agency.

Elsewhere, Bell Pottinger Group chairman Kevin Murray says his agency is increasingly working with SMEs. ‘As SMEs grow, so should our work with them,' he adds. ‘If we provide cost-effective work, they'll keep coming back.'

Even Harrison Cowley is reassessing the SME market. To facilitate SMEs - and meet its own strict fee requirements - it clusters small clients together to ensure resources and fee margins are maximised. ‘The majority of our revenue will still come from large clients, such as the Department for Culture, Media and Sport, and BT, but we will assess every business on its merits,' says McKeown.

And why not - an account of any size can pay its way if the client's expectations are well managed and needs are met. Successful small firms do not stay small for very long.

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