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Tips for increasing agency profits, by Agency People’s Richard Houghton

21st May 2013


I rarely, if ever, come across an agency director that does not want to grow their fee and margin. But in a sector where every penny of client fees are hard earned, competition is huge and the day-to-day pressures of running an agency can be considerable, this can be easier said than done.

A great place to start is by finding time to take a step back, look at your business in the round and identify the business drivers that are central to your agency’s growth. It is these drivers that make up your agency’s “Engine for Growth“.

Keeping a close eye on these business drivers; making sure that each is owned by senior member of the agency team and given equal weight in terms of time and financial investment, is the key to getting the Engine for Growth running smoothly and consistently.

While each agency has its own distinct drivers, my experience is that there are some that are common to many PR consultancies.

Having a High Performing Senior Team (HPST) seems like a sensible starting point to grow fee and margin. The team needs to be balanced in terms of personalities and skills and be working towards a clear vision – that stretches, but is also achievable – along with a motivating mission. They need to be running a practical operational plan that provides a road map to growth, with measurable milestones.

Second, working to the HPST needs to be the right people in the right jobs. This sounds obvious, but understanding an individual’s strengths and playing to them makes for happier staff and clients, with much reduced employee churn and associated costs. Linking the individual’s success to the business’s means that individual reward for success is funded by a profitable and growing business.

Third, all the evidence supports the belief that winning new clients is far more expensive than growing existing clients. We estimate about five times more expensive. On top of that, loyal clients will spend more, can help with service development and will even provide new client leads through referrals. All in all, making sure your client relationships are partnerships rather than transactional is one of the key drivers to sustained commercial success.

The next driver, standing out, is probably the one driver that PR consultancies handle the least effectively. This is ironic as our core expertise is differentiating companies, services and products. A quick scan of a representative sample of consultancy web sites will show how few have any form of clear differentiation. Understanding the market trends, responding to them and even second guessing them at times, gives agencies a chance to start grabbing the attention of prospects through new propositions and services.

Combine this innovation with a professional and relentless sales process and you have the underpinnings of solid fee growth. The final driver is robust commercial systems that ensure that the senior management team have actionable information and no surprises.

So while I am not recommending that you ignore the historical numbers, take a look at the leading indicators such as percentage of clients in partnership or staff churn. These give you a handle on the drivers for your business and let you tune your Engine for Growth.

Richard Houghton is associate partner at Agency People



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