Profitability was up last year for North American PR agencies, according to an annual industry survey conducted by PR merger and acquisition advisory firm Gould+Partners.

Gould+Partners’ latest Benchmarking report, which analyzes key factors affecting PR firm profitability, found that North American PR agencies witnessed operating profits averaging 19.7 percent of net revenues (calculated as fee billings plus markups) in 2021, up from 18.2 percent in 2020 and a 2.3 percent increase from pre-COVID 2019’s 17.4 percent.

“19.7 percent average operating profit is an incredible comeback for the PR industry,” Gould+Partners’ Managing Partner Rick Gould told O’Dwyer’s.

Gould+Partners’ latest Benchmarking report, which analyzes key factors affecting PR firm profitability

The survey’s findings discovered that profitability was especially high at the largest firms: PR agencies with revenues in excess of $25 million netted average operating profits of 21.3 percent in 2021—up from 20.2 percent in 2020—indicating both increased organic growth as well as growth via acquisition. Firms with between $10 million and $25 million in revenues netted 20.1 percent profitability last year, up from 17 percent in 2020. Firms accounting for between $3 million and $10 million in revenues netted profitability of 19.5 percent profitability, up from 18.1 percent, while the smallest firms—those with under $3 million in revenues—netted the smallest profitability, 15.8 percent, flat from 2020.

When broken out by region, the report found that PR firms located in the U.S. Southeast boasted the highest average operating profits in 2021 (25.3 percent), followed by firms in Canada (25 percent), California (24.8 percent), the Wash. D.C. metro area (21.4 percent) and the Midwest (19 percent). Among the least profitable were firms located in the Southwest (15.9 percent), firms located in the Northeast (15.4 percent) and the New York City metro area (14.4 percent).

Gould additionally said that staff turnover for the year averaged 25.4 percent in 2021—up from 18 percent in 2020—with some firms experiencing turnover of more than 50 percent.

“Turnover equates to increased costs for search firms, training, bonuses, raises, all impacting the bottom line,” Gould told O’Dwyer’s.

On the other hand, the report also found that revenue per professional staff member averaged $257,732 last year, slightly up from $255,409 in 2020. Total overhead, meanwhile, was virtually flat, averaging 23.4 percent of net revenues, compared to 23.6 percent in 2020.

Gould+Partners’ 2022 Gould+Partners Benchmarking Survey Report was based on responses from 40 participating “best of class” North American PR agencies. Responses were collected in May.