The average operating profit for small and mid-size PR agencies was relatively flat in 2014, compared to 2013, and fell roughly 2 percent compared with 2012, according to Gould + Partners’ latest benchmarking study.

The study, which was released this week, took the pulse of 111 PR agencies. The agencies range from less than $3 million in annual revenue to more than $25 million in annual revenue.

Overall, agencies’ operating profit was 16.2 percent in 2014, compared to 15.8 percent in 2013 and 18.8 percent in 2012.

Regardless of the size of the agency, however, profitability remains sluggish.

2015 Best Practices Benchmarking Report

For example, for companies with revenue between $3 million and $10 million, operating profit in 2014 was 16.1 percent, while agencies that generate between $10 million and $25 million in revenue had operating profit of 17 percent (see chart).

“Not a lot firms are hitting 20 percent,” said Rick Gould, managing partner of the firm that bears his name. “They’re increasing their labor costs without commensurate higher fees.”

Gould stressed that if agencies raise their employees’ salaries they must raise rates for retainers (or however the agency charges its customers).

But many agencies fail to raise their rates because they fear blowback from clients, Gould said.

It’s a fundamental problem plaguing the PR field: Managers don’t pay enough attention to the hard numbers and shortchange the value of their services.

What is more, retainers—as opposed to an hourly rate—often slide into doing work that doesn’t get billed.

Gould partly blames colleges and universities that offer PR as a major. “They don’t teach the business of the business,” he said.

Another foreboding aspect of the study was the level of turnover: An average of nearly 20 percent, which is down slightly from the previous two years. But the churn in the PR field is a growing concern among agencies of all stripes.

“It’s getting worse,” Gould said, referring to the turnover and that the millennials who are increasingly populating the PR field have little to no sense of loyalty. “They want more stimulation and work that is more challenging. For millennials, you have to keep them excited.”

Among nearly two-dozen steps for the model PR firm, Gould said the following five elements are the most crucial:

  1. Lock in Second Tier; make those employees entrepreneurs
  2. Control Staff Turnover—25 percent max
  3. Retain a full-time or part-time CFO
  4. Know your net worth/book value/equity
  5. Commit that you are your number one client