According to Companies House data, more than 250 people have set up new PR agencies since September 2006. The nature of the business – low overheads, minimal capital outlay, entreprenurial staff – means PROs with a certain level of experience are not daunted by the idea of branching out on their own once they tire of working for someone else.
But starting an agency is not without its challenges.
Caroline Kinsey and Paul Davison, directors of Cirkle and Proteus PR respectively, started up their own agencies ten years ago, and have put together a start-up checklist for PRWeek.
What are the things you should do, and importantly, what should you not do? How can those about to take the leap reduce the risk of becoming one of the 20 per cent of start-up MDs who see their business go under in the first year?
Get the right team in place
The importance of having the right team cannot be overstated. When you are establishing and growing a business it is one of the most important things to do, but one of the hardest things to achieve. That is why we are rigorous and meticulous in our recruitment procedures, reward our staff well, and always look for a good cultural fit with our companies and our existing staff.
Be frugal and sensible
Being frugal with money is important whatever stage of business development you are at, but it is critical when you are trying to establish yourself. Always shop around for the best deals and never pay for anything you do not absolutely need. This is no time for extravagance.
Negotiate monthly VAT payments
Quarterly VAT bills can hit hard when you are a small business and have not budgeted for them. But you don’t need to quake with fear of them arriving. Get in touch with your VAT office and see if you can negotiate monthly payments. There are a number of schemes available to help start-up and small businesses, so VAT doesn’t have to equal pain.
Network, network, network
Networking should become second nature to you if you are going to succeed in business. We have both found building a wide network of business contacts has reaped dividends, not only in bringing in new business but also in providing us with useful information from peers. Remember also that starting your own business can at times be a very lonely place. A good network of colleages can give you morale-boosting support.
Get involved with your trade bodies
Joining PR trade bodies such as the PRCA or CIPR offers numerous opportunities to help you build an important network, as well as helping you to keep abreast of all the latest developments in the industry. What’s more, a CIPR membership will give you discounts on a range of services, access to a wide-ranging programme of continuous professional development and credibility with your customers.
Be clear what you are selling
If you are not clear about what you are selling, it is unlikely that you will have many takers for your services. Always understand your customers in the sectors you operate in, and pitch your offering accordingly. This is where your networks and trade body memberships start to pay their way again, as you can often get a lot of useful information, including pricing strategies, from peers in non-competitive agencies.
Dedicate regular time for business development
If you are going to be successful on your own, you need to make business development an integral part of what you do. As a general rule of thumb, spending 20 per cent of your time each week looking for, and following up, new business should ensure the leads, and cash, keep flowing.
Ensure you have the buy-in of partners and/or close family
It may not sound vital, but make sure you have the buy-in of your partner and/or close family before you start. Launching your own business will probably be the toughest challenge you’ve ever faced, and their support, through the highs as well as the lows, can be the difference between success and failure.
Let your ego drive your business
Any bank manager will tell you it is cashflow that drives a business – everything else is just ‘ego and delusion’. When starting out on your own remember ‘turnover is vanity, profit is sanity’. Never take your eye off what you have coming in and out, and don’t bite off more than you can chew by booking work with suppliers you cannot reasonably pay for. Remember, the faster you invoice, the quicker you get paid.
Take on bad business
Customers who do not pay can play havoc with your cashflow. When you are starting out, that havoc can become a knockout blow. Improve your chances by doing credit checks on all prospects before commencing work, and if necessary negotiating favourable payment terms or part payment upfront.
Ignore your work-life balance
There is no doubt that starting your own business is hard work. In fact, it is probably harder than you ever imagined. It can be tempting to work 24/7 in a bid to ensure your business flies, but remember working more than ten hours a day can be counterproductive. You need to pace yourself and keep energy levels high, not to mention retain your sanity. The best way to do this is by taking regular breaks, following a good diet and taking regular exercise. And don’t lose touch with your hobbies and friends, as they will be important in helping you maintain a sense of fulfilment, fun and perspective.
Forget to keep abreast of the industry developments
When you’ve got your head down, it is easy to lose sight of what is going on around you. But with the media in which we operate changing rapidly, and new channels being invented almost daily, not keeping up with the latest developments can mean you become totally out of touch, therefore losing an edge to rival agencies.
Start a business without some capital
While you can start a PR business without much in the way of capital, it is preferable to have some money in the bank, particularly to help you through the first few months (which can be extremely testing). You may have to wait several months to get your first pay cheque from a client, and having a start-up stash will ease the early pain.
Start without establishing a network
We mentioned earlier the importance of establishing a good network to running a successful PR agency. But this process takes months and years rather than weeks, and it might be some time before your network starts to yield fruit. It makes sense to establish your network early, before you have set up your new agency. Those who are most successful normally have had a good network in their local area for three years before starting up on their own.
Become too dependent on one client
Many agencies have paid the price for becoming too dependent on the income from one client. PR is a very mobile business. Accounts regularly change hands as clients reorganise, and contacts move around. It is never advisable to get yourself in a position where one client accounts for more than 20 per cent of your fee income.
Take things too personally
The path to entrepreneurial success is never smooth, so it is important to ride the highs and lows without letting your confidence take too much of a knock. Remember, business is business.
TWO AND A HALF YEARS IN. WAS IT WORTH IT?
The rise of Unity...
On Bastille Day in 2005, Band & Brown CEO Gerry Hopkinson teamed up with the agency’s business division chief Nik Done to launch generalist agency Unity. PRWeek asked the pair how hard the past 30 months have been.
How daunting is starting an agency?
Nik Done It was just the two of us, around £1,000 of capital investment each, and no clients due to a strict covenant from Band & Brown. Saying that, I wasn’t daunted by the actual act of starting. It was the money – or lack of it – that scared me.
Then someone gave us a great piece of advice: assume that you will have no salary for a year. I used savings to assign myself a very basic salary, and the money we made went straight back into building up the business. Not having to pay directors’ salaries also meant company outgoings were massively reduced.
Gerry Hopkinson It is no more daunting that starting any new project. You have to be focused on what you want to achieve, you have to be patient and almost relentless in your determination to succeed on your own terms and to make decisions that allow you to be able to look yourself in the mirror and sleep at night.
What convinced you it was the right time to do it?
GH I just felt I’d achieved everything I wanted to working for someone else.
ND I found myself getting increasingly frustrated with the confines of the company we were in. We had our own ideas and ways of doing things that needed legs.
Was there one thing that helped you more than anything else?
GH Faith in our ability. In Nik, with whom I worked so closely at Band & Brown, I had a person who I knew well and who knew me. We both know how the other is going to react to a stressful situation, so in that sense we were prepared for challenges and obstacles that came our way.
Was there one thing you wish you’d known beforehand?
ND The inner workings of accountancy. That was the really tricky bit as it was totally outside of my comfort zone. Doing VAT returns and payroll used to make me cry!
GH There were about a million things. You should know that you can only really be financially successful by doing great work, and that you should choose your clients carefully. They define you and you are going to spend a lot of time with them.
There will be ambitious PROs reading this wondering whether starting an agency means kissing goodbye to a work/life balance for the next two years…
GH Yes and no. Sometimes you have to deal with things at odd hours and of course, the buck stops with you. Some people like to work all the time, but I’m not one of them. We work from 9:30am to 5:30pm and stop at 4pm on Fridays. We have an agency-wide lunch once a month and we all work flexibly when possible.
ND Believe it or not I work less hours now than I ever have done, which made me realise how time-consuming reporting to someone else is. I probably think about work more now, but I spend less time in the office.
GH Starting an agency is not for everyone – it can be incredibly scary and you feel the highs and lows a lot more. But it is more than a salary or a job; it is your baby. And it is incredibly rewarding. If you’re the sort of person who has a strong sense of how things should be done, then definitely give it a try.
Started trading: 14 July 2005
Staff at end of first year: 4
Fees in first year: £230,000
Staff now: 11
Fees now November 2006 – November 2007: £650,000, with an average fee income of £80,000 a month
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