Profitability, Strong Billing Rates & 90% Productivity

By Rick Gould, CPA, JD

Profitability, Strong Billing Rates & 90% Productivity.... How does your firm compare?

Our 2011 Benchmarking study clearly showed the U.S. PR agency profitability rebounded from a 2009 four year low of 13.5 per cent of revenues back to exactly what it was for 2008, 15.6 percent. This compares to a 13.5 percent in 2009, 15.6 percent in 2008 and a 19.7 percent profit margin in 2007.

The operating profit for the under $3 Million category was 13.1 percent, up from 10.4percent in 2009. The firms in excess of $3 Million up to $10 Million netted 16.2 percent and those in excess of $10 Million up to $25 Million netted a very respectable 17.8 percent and those in excess of $25 Million netted 16.5 percent, also respectable in challenging economic times. All four categories improved from the previous year.

One of the most significant findings of our survey was that the SGP “Model Firms”, the dozen agencies consistently meeting or exceeding the SGP model performance target criteria, continue to remain far above average during these recessionary times. In 2010, they averaged an operating profit margin in excess of 20 percent, partly due to their ability to hold professional staff salaries to under 40 percent of revenues, total labor cost at 50 percent and operating expenses at under 30 percent. This should be the goal for all firms.

A very noteworthy result was that Revenue per professional staff was up to $205,941 from $197,714 last year. Firms in excess of $10 million in net revenues averaged in excess of $230,000. Total overhead averaged 28.4 percent. Firms in excess of $25 million were at 25.0 percent.

For our full report please email me at rgould@stevensgouldpincus.com