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| Rich Gould |
Changing marketing forces continued to push back against both growth and profitability for PR agencies in 2025, according to a recently released report from Gould+Partners. The report was based on the annual survey that the firm has conducted for the past thirty years.
This year’s study tracked participating firms across 21 critical financial benchmarks. It found that North American PR agencies generated average operating profit (the key benchmark for firm valuation) of 15.3 percent in 2025, down from 16.6 percent in 2024 and 18.6 percent in 2023.
But the bigger players are doing decidedly better than their smaller colleagues as far as operating profits are concerned. The largest PR agencies (those over $25 Million in net revenues annually) racked up operating profits of 20.2 percent, while firms between $10M and $25M were at 14 percent, those between $3M and $10M had 13.4 percent, and those under $3M were at a weak 8.5 percent.
While there are several factors that can account for the overall sluggish numbers in operating profits, the price agencies paid for labor is either at or close to the top. Total labor costs sat at 62.5 percent, just about the same as 2024’s 62.7 percent—but a marked increase from the 59.2 percent seen in 2023.
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Plus, the bite that labor costs take from agency budgets rises as agency sizes fall. While those costs were 60 percent for the $25M+ firms, they rose to 62.2 percent for those between $10M and $25M, 62.3 percent for those in the $3M to $10M range, and 71.3 percent for firms with less than $3M in net revenues.
When it comes to the amount of revenue generated by an agency’s staffers, the study found an average of $248,504, up from $232,294 last year. For professional staff members (those working with clients) that number is $274,638, slightly up from $264,404 last year.
The role played by operating expenses/overhead stayed pretty much the same, averaging 22.2 percent as opposed to 21.2 percent in 2024.
Consolidation and budget cuts were also cited as a cause for the drop in profitability. However, many over $25M firms said they added acquired-firm revenues and leveraged economies of scale to achieve increased growth and profitability.
The over $25M firms also bucked the general trend when it came to decreases in net revenue (and consequently operating profit). The below $3M firms were at zero growth, and those from $10M to $25M sunk into negative territory at -5.88 percent. But the over $25M group increased 5.58 percent, mostly due to increasing their top line via acquisition.
The survey also found that in the ten regions that were tracked, the most profitable was New York (16.8 percent growth), taking the top spot from DC, which grew 20.4 percent in 2024, mainly attributable to the election year. DC slipped to the middle of the pack at 15.2 percent for 2025.
“Flat or declining growth and less than 20 percent target profitability has also impacted the M&A marketplace, with buyers justifying lower valuations for firms not showing top line growth and producing just mid-teens profitability,” said Gould+Partners managing partner Rick Gould. “Even if we can justify why a firm’s revenues have decreased, which resulted in declining profitability, the buyers still use that as the reason for not moving forward with a prospective seller, or negotiating a lower multiple, in valuation of the firm.”
To see the full report, go to the Gould+Partners website and click on the link to the report, or email Rick Gould directly ([email protected]).
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