2023 was a flat year for many PR agencies, with revenue growth down, agency profitability remaining mostly steady and revenues per PR staffer up, suggesting that PR firms are doing more with less, according to results from an annual survey conducted by PR merger and acquisition consultancy Gould+Partners.

The Gould+Partners’ report, which tracked North American PR firms across 21 critical benchmarks, found that, on average, PR firms of all sizes saw much lower net revenue growth in 2023 than the year before (3.1 percent, compared to 9.4 percent in 2022).

Gould+Partners’ 2024 Best Practices Benchmarking Report: Net Revenue Growth of Respondent Firms

According to the survey, net revenue growth—calculated as fees plus mark-ups—was highest among firms with net revenues between $3–$10 million (9 percent, compared to 2022’s 21.7 percent). Firms accounting for between $10–$25 million saw net revenue growth of 3.3 percent (compared to 2022’s 17.2 percent). The largest PR shops—or agencies boasting more than $25 million annually—saw net revenue growth of 2.6 percent (compared to 2022’s 8.8 percent). The smallest firms surveyed—those with under $3 million in net revenues—grew at an average of 1.7 percent (compared to 2022’s 2.3 percent).

While revenues were down last year, agency profitability on the other hand—defined by average operating profits, the key metric by which Gould valuates PR firms—stood at 18.6 percent in 2023, roughly on par with 2022’s 18.7 percent. Operating profits were especially high at agencies with more than $25 million in revenues (21.9 percent), followed by agencies with between $3 million and $10 million in revenues (19.5 percent), the $10 million to $25 million agencies (14.5 percent) and the agencies with less than $3 million in revenues (8.2 percent).

Operating profits were highest among PR firms stationed in the Midwest (23.7 percent), followed by firms located in the Washington D.C. area (22.7 percent), firms in Canada (21.6 percent), the Northeast (17.2 percent), the Southeast (16.9 percent), the NYC metro area (16.5 percent), the Southwest (16.4 percent) and California (13.9 percent).

The report also found that net revenues per PR professional—calculated as fees plus mark-ups on rebillables—increased to an average of $273,000 at agencies, an increase of almost 6 percent from 2022’s $257,000. Gould+Partners Managing Partner Rick Gould told O’Dwyer’s that this suggests PR agencies increased fees in 2023 while avoiding any equivalent hiring.

“What some firms indicated was they increased their billing without significantly increasing number of staff,” Gould told O’Dwyer’s.

Interestingly, the smallest firms polled—those with under $3 million in net revenues—saw the highest revenues per professional, at $306,122. This suggests that the owners and executives at those firms did an especially higher percentage of billable work in 2023 despite their fewer staff.

“Many of the smaller firms don’t have admin staff,” Gould said. “They do their own typing and use outside accountants as part-time CFOs. Same with legal, HR, etc. So, all they have is professional PR people, which increases the revenue stats.”

Base account salaries across agencies accounted for 42.4 percent of agency revenues in 2023, virtually unchanged from 42.3 percent in 2022.

Finally, the report discovered that PR firms’ largest clients averaged 17.8 percent of their revenues in 2023, up from 17.5 percent in 2022, 16.4 percent in 2021 and 13.6 percent in 2020.

Gould suggested this trend threatens a “critical” benchmark for agencies, especially if an agency owner is considering selling their firm, as prospective buyers frown upon an agency’s largest client exceeding 20 percent of its total book of business.

“It is a major deal breaker in M&A transactions, even if the largest client has been a client for 20-plus years,” Gould told O’Dwyer’s. “It may be an exception if it can be shown that the major client has multiple brands with individual brand managers, who report to different chief marketing officers. But it is always a challenge. It is great if a major client keeps giving the PR agency more projects and increases retainer business, but the downside is it increases the percentage of total business, which is a negative when selling. It needs to be dealt with, with full transparency, on a case-by-case basis.”

Gould+Partners’ “2024 Best Practices Benchmarking Report” was based on responses from 35 “model" PR firms based in the U.S. and Canada. Responses were collected between mid-March and May and were based on 2023 results.