Rick GouldRick Gould

Contrary to the belief of many prospective sellers, firms are not valued at a “multiple of net revenues.”

I’ve been valuing PR firms for more than twenty-five years, initially as the CPA firm for many seller firms, and then since I started my own M&A advisory firm, Gould+Partners, in 2001. Valuing PR agencies is a complex process. It takes financial expertise, knowledge of the M&A marketplace, and an understanding of how buyers create offers/term sheets.

There’s no exact science in valuing a PR firm. Every valuation is different. PR is a business in which both actual financial performance, recast for many adjustments, and several intangibles, will determine value. Items such as relationships with clients, depth of the second tier of management, specialties and fee levels may also impact value.

A couple of years back, I was called by a prospective seller who asked me for advice on the value of her firm. She was told by a competitor of my firm that she should simply double the annual fees, assuming her bottom line was at least 20 percent. What he did not ask her were a series of questions needing answers and detail in order to fairly and accurately value her firm. There are at least nine different items needed to value a firm. He asked for none of these, only shared his illusionary model for valuation.

This article is featured in O'Dwyer's Jan. '23 Crisis Communications & PR Buyer's Guide Magazine
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There’s generally an element of subjectivity in valuing a firm, but there certainly are objective rules and guidelines that a professional who values PR firms should use. In addition, there is extensive review work performed prior to doing the actual valuation report. Every PR firm has its unique components. There’s no cut-and-dried formula for valuing a firm.

While having a thorough understanding of your firm’s value is a good idea, there are several specific circumstances when it is particularly beneficial to get an accurate PR firm valuation.

  1. Potential sale. When contemplating putting your PR firm on the market, knowing how much your firm is worth can help you tremendously in understanding the offer made by a buyer for your firm. It also will assist in your negotiation strategy.
  2. Potential merger of two or more firms. A firm valuation is a valuable resource to have on hand when considering the merger of multiple firms. Again, knowing the value of the firm will help to ensure that a fair and reasonable transaction takes place should the firm merge with another firm. It will save time and cost if the valuation is already in place.
  3. Partner split-up. When firm partners split up and potentially divide firm assets, understanding the value of the firm is imperative, especially if a contentious split-up, which is often the case.
  4. Partner buy-in. When adding new partners to the firm, knowing your company’s worth is necessary in order to ensure that your new partners understand the value they are receiving.
  5. Partner buy-out. Knowing a firm’s value is key, especially if the partner is retiring or moving on to her/his next chapter of their career. Their equity value represents the monetization of their years of sweat equity.
  6. Borrowing power. Any substantial loan request may require an independent valuation.
  7. Estate planning. When organizing your estate and creating a succession plan for your business it’s important to have an accurate business valuation on hand. This will help you with tax planning and assist you in determining who should ultimately inherit your financial interest in the firm. Valuation for an estate plan is very different than valuation for a sale of the firm.
  8. Divorce. Whether a divorce is amicable or not, knowing the worth of your organization is a safe bet when you go into negotiations. Understanding how much the business you worked hard to build is worth can help ensure that a fair divorce settlement is reached, especially if the two owners splitting up are married.
  9. Growth plan. Having a comprehensive firm valuation can greatly help in making beneficial business decisions on a day-to-day basis. It can also provide valuable information and insight when large and small opportunities for growth come along.

There is no general rule of thumb. There are many moving parts, many factors and some factors carry more weight than others. There are items, when evaluated, may add or subtract value from the calculated value. These intangibles are critical in the ultimate determination of value. For example, the death of the main rainmaker, the loss of a major client, the hiring of a well-established PR pro to build a new and growing division.

My recommendations are as follows:

  • Reach out to the professional who has been referred to do the valuation.
  • Discuss their credentials, their expertise and experience in doing valuations for PR firms.
  • Ask about their education including certification in doing valuations or teaching valuations at the collegiate level.
  • What is the cost?
  • What is the timeline for completion?
  • Who will be doing the actual work?

Do your homework on what it takes to do an accurate valuation. Be assured that the individual doing the work is qualified, respected and trusted in the PR industry and will provide the highest quality of service and a reliable and professionally prepared report.

I believe establishing a “Build to Sell” strategy for your firm now will have a huge payback in the future. Today’s valuation is your starting point. You, ultimately, will assess whether your investment in a valuation was worth it.


Rick Gould, CPA, M.S., J.D., is Managing Partner of Gould+Partners.