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As Salaries Rise, PR Firm Fees Per Billable Hour Fall

As PR Firm Salaries Rise Fees per Billable Hour Fall

“I haven’t raised my prices in 20 years,” she said.

“She” was the featured speaker on a PR industry vendor webinar for small businesses – PR on shoestring.  Her answer was in response to an audience question on how small business owners, with small budgets, could drive effective PR programs.

I remember flailing momentarily in my chair with astonishment, before unmuting the line and quickly shepherding the Q&A session to a speedy close.  Our “thought leader” had made it to the end of the webinar, with a couple thousand customers and prospects logged on, only to tactlessly pitch her services in response to a routine question.

While that event was roughly eight years ago, I remember both the faux pas, and also the fact that she hadn’t raised prices in two decades.  Neither seems especially business savvy in hindsight.

Closing Delta of PR Pricing and Pay

Lucy Siegel of Bridge Global Strategies, a NY-based PR firm, recently published the results of a billing survey given to roughly 24 boutique PR firms with revenues of $3 million or less.

It’s a small sample, but given the paucity of data in area, it merits a look.

While there is some billable hour data in the survey (see the link to a presentation in Ms. Siegel’s post) for those trying to benchmark pricing, what caught my attention was Rick Gould’s commentary in the post:

“Average PR billing rates have remained flat over the past 10 years, while salaries keep going up. PR agencies’ average rate of profitability has suffered as a result. The most profitable firms raise their rates each year, and the firms with less than $3 million in revenues are the least likely to raise rates. Salary increases are therefore not covered in their rates. Not increasing rates goes right against the bottom line.”

Mr. Gould is an M&A matchmaker of sorts, who is dedicated to the PR industry.  His company has previously conducted PR firm billable hour survey research based on larger agencies.

We know he’s right about compensation – PR salaries have gone up.  There’s reliable data indicating the median PR salary in an agency rose to $84,500 in 2015.  There’s a delta between PR pricing and pay that’s been closing for a decade.

PR Firms Eat the Flat Fee Difference

Ms. Siegel’s survey – the canvas of a couple dozen boutique firms – suggests about half of small PR firms charge on a flat fee model.  In a flat fee, “even if the work takes more or less time than estimated, the fee is the same.”

I’m fairly confident, having lived on both sides of the table, that even the most efficient PR firms come out behind on that deal.  As a young account executive, a sense of duty and a desire to drive results, often prompted me to put in hours for a client account that never even made it into the timekeeping system (the enthusiasm is invaluable, but young AE passion for clients needs to be channeled; PR is a business).

If PR firms tracked time and billing along these comparative lines – hours worked vs. hours billed vs. hours realized – I suspect there would be subtle change year-over-year, but dramatic downward trend over a decade. It still wouldn’t capture what never makes it into the system.

While I fully recognize the danger of drawing conclusions from one little survey, it’s the aggregate of anecdotal evidence, experience and data that tells me this is an emerging trend. I don’t think it’s a leap to say it fits the proverbial metaphor of a slowly boiled frog.

As PR Firm Salaries Rise Fees per Billable Hour Fall-junior

4 Key Trends Facing PR Firms of the Future

Three factors will be the catalysts for client-agency trends:  client behavior, technology and competition.

First, clients are taking more PR work in-house – a trend that swings back and forth with the ages. It’s the classical sway of a mile wide and an inch deep vs. a mile deep and an inch wide.

Whatever agency the CMO had at his or her last gig is a shoe in…for the first 12 months anyway. Relationships still matter.

Second, even the ages are affected by automation, threatening to replace some jobs, the way bots writes news reports for the likes of the AP.  I believe the truly right brained, are by nature, partially protected from logic-base algorithms, but “good enough” is replaceable.

Third, and finally, there is more competition, and from a blend of competitors from SEO agencies to digital marketing. The lines of PR have become so blurred as to be indistinguishable. 

To that end, in the next five years, the following will be key trends facing PR firms:

1. A Trend in Client Service

Credit to those PR firms that put client service first today, because you’ll be ahead tomorrow.  Exceptional client service will be a subject of key note speeches in PR circles and rendered in the form of process, systems, consistency and overall experience.

Critical to exceptional client service, is the Achilles heel of employee turnover. The loss of valued account team member can easily be the final straw that makes the high cost of switching PR firms a worthwhile endeavor.

2. The Rise of Agency New Business Development

With the exception of the boutique firm pumping itself up in the industry trades in the search for a buyer, PR firms do a notoriously poor job of PR for themselves. Moreover, a shift towards precision business development will begin to be a defining difference between the best and under-performing PR firms.

This means strengthening relationships with existing clients while also engineering systematic programs for attracting new clients that look a lot like the most profitable clients now.

3. Profitability and PR Pricing Evolution

The forward thinking agency is going to be promoting new fee concepts to clients in order to remain profitable.  Time sheets will remain in play, but as Richard Goldstein wrote for O’Dwyer’s, billable hours are a “true cost accounting system, rather than a pricing model.”  Expect that clients will readily accept this proposition with few questions.

4. Technology Adoption and New Services

Technology is a competitive advantage until everyone else has it – and PR doesn’t have a reputation as an industry of early adopters.  On the other hand, innovation in PR technology isn’t exactly on the vanguard. The recent industry vendor consolidation doesn’t bode well either.

Sentiment analysis, for example, looks mighty interesting in a dashboard, but with a few outliers, it’s hard to find a pragmatic business application.  While it might pique interest from the keeper of a corporate reputation, it doesn’t answer the CMO question…so what?  We all know who has the purse strings.

Still there are opportunities, PR reluctantly plunged into social media only after the threat of a marketing turf battle emerged. The savvy agency, boutique or otherwise, will eagerly experiment with new tools and platforms with the goal of answering one key question:  How can we wrap services around this to deliver client value?

Marketing (Still) looks more like PR

I often say there’s never been a better time for the PR industry, because no matter the marketing specialty, they all look increasingly like PR.

Marketers think in terms of findability, sharability and virality. The advertising pitch today has transitioned to a talk about storytelling.  Content teams speak of editorial calendars, one that is owned instead of earned. SEOs still want links, the sort of links that only PR can muster.

These are all tactics, techniques and procedures, that in one form or another, have been in the PR professional’s toolkit at least since the last time a boutique agency increased its rates.

There’s risk in the course of reading this post that one concludes I’m advocating PR agency raise rates. In that case, I’ve either missed my calling or I’m the competition. PR pros already know there’s usually a third option despite a binary framework.

What’s more easy to ascertain is that PR salaries can rise, and rates can fall or remain flat, but both can’t happen together forever.

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2 Responses

  1. LouHoffman

    The flaw for a time + materials billing model for any professional services firm lies in tying it to:
    Available product (hours) X billing rates (variable based on experience = expected profitability. 
    There’s no correlation to the contribution (value) delivered to the client with a simplistic example being the senior guy who bills at $250 per hour being able to make a 15 minute call and secure an interview with the Journal. Obviously, this is worth more than $62.50.
    As our world increasingly tilts toward digital though, I think it’s easier to get creative in translating contribution into compensation. I also think it’s likely we’ll see hybrid billing models that combine T & M with “bonuses” based on meeting certain KPIs (that impact value).

  2. LouHoffman Great comment Lou.  Couldn’t agree more.  There’s definitely room for hybrid models.  I’m a big fan of flat fee, even for less structured functions like media relations; break it into phases.  The KPI is interesting, and it might work for the mid-market, but I venture the chance are low among larger companies. The accounting processes are just too complex. It would take a lot of inertia to get over that hurdle.

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