PR agency profitability inched up to 16.2% last year, a marginal climb from 2013 but still below pre-recession levels of nearly 20%, according to an annual survey by Gould+Partners.
The largest firms in the survey of 104 agencies, those with revenus of $25M+, saw profitability plunge from 17.9% in 2013 to 15.8% last year.
G+P managing partner Rick Gould said declines in operating profits are completely attributable to increases in labor costs without a corresponding boost in fees.
He said only about a dozen firms consistently meet or exceed model performance targets through slow-downs and recessions due to an ability to hold salaries to under 40% of net revenues. Total labor cost should be about 50% and operating expenses.
After strong increases in 2011-12 to 18.8%, the profitability of PR firms slipped to 15.8% in 2013. Gould said firms in the $10-$25M range were the most profitable, but declined from 18.6% in 2013 to 17% last year. Smaller firms (up to $3M, and $3M-$10M) posted increases to 16.6% and 16.1%, respectively.
Gould is slated to release full results in August.
DJE Holdings, parent of Edelman and Zeno, launches RUTH as an independent shop named after Ruth Edelman, mental health advocate, wife and longtime business partner of Dan Edelman.
New York City PR firms make up the largest slice of O'Dwyer's 147 firm overall ranking with 33 of 40 in the New York/New Jersey area either calling Manhattan their home or having a presence there.
Subject Matter+Kivvit, which joined forces in May, has rebranded as Avoq, an integrated shop with more than 200 professionals in Washington, New York, Asbury Park (NJ), Miami and Chicago.
While PR pros stationed at in-house comms. teams and those working for agencies share many of the same objectives, they also have markedly different top priorities, according to a recent report.
Edelman is cutting 240 employees or about four percent of its workforce to cope with the cooling down of the PR sector, according to a memo from CEO Richard Edelman.
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