How badly has the virus hit the PR sector? This piece here from America is not encouraging. Based on a report by Gould+Partners, it tells us that 85% of firms have been forced to suspend some client work, and 57% say clients have terminated contracts.
Almost all of the firms surveyed have applied for the Payroll Protection Plan.
It’s hard to see that the position here will be any better.
Industry insiders say too many PR firms run themselves on an overdraft.
These firms will only survive if the owners put back in money they have already taken out, and they might decide that’s a bad bet, even if they haven’t already spent that money on a speedboat they can’t use. (ha ha).
I’ve heard several different versions of how the maths works, and a rough consensus seems to be this: bread and butter PR firms live on a margin of 10%. That’s thin even when things are going well.
A big City agency might make a 50% margin in a good year and nothing in a bad one — like an investment bank, it is reliant on deal flow.
Again, this firm might be asking partners to pay themselves nothing. The partners may not like this idea very much.
Most vulnerable are those new wave “Experiential PR” firms, the ones who specialise in floating giant David Bowie inflatables down the River Thames.
There’s not going to be much demand for that sort of caper.
I asked a fairly gloomy boss the other day, aren’t clients desperate for good advice just now?
They are, but they aren’t necessarily asking their PR firms, is the answer. For this boss, whether he gets invited into the virtual board meeting or not has at least clarified some things.
“I know for sure which clients think I’m important or clever and which don’t”, he sighs.