ITL #242 The ruthless application of common sense: how to run a PR company (part one)

5 years, 3 months ago


A seasoned agency head pulls no punches when offering advice on what it takes to make a PR business successful. By David Brain.

No great books on business management have been written by PR people. We are traditionally crap at it.

We rise to the top or ownership of PR agencies by being good at PR not management. Then we find we have an office, with people, clients and a budget. And that’s when the wheels come off.  

Which is a shame, because running a PR business is just about the ruthless application of common sense and is a far simpler thing (intellectually at least) than formulating advice for a client in a crisis or finding a creative way of giving a tired brand some interest and competitive differentiation.

I have run practices, offices and regions for three of the biggest global PR firms and two small independent companies in both EMEA and Asia Pacific and the wheels have indeed come off once or twice. They probably will again, but if they do it will not be because I made the mistake of thinking PR firms have a complicated business model.

PR agencies are simple businesses. They have inside them often-difficult people doing some (occasionally) clever things, but they are simple businesses.

Here are my top tips for running one.

Save clever strategising for your clients

Our basic business model is very simple and has not changed that much for many years.  And yet the amount of time devoted by managers of PR businesses as small as 20 people to their ‘business strategy’ would make you think they were running Google.

If you have done an MBA or studied business at school, then keep that learning for understanding your clients’ business and don’t torture your colleagues with it or worse, bore your clients.   

It is now harder than ever to be a ‘full-service agency’. For example, can you cover health and within that can you handle health professional, consumer wellness, nutrition, hospital marketing, digital health and market access communications?  And you might have media relations and generalist PR people, but can you offer planning, search, analytic and creative services?  

Sometimes your best definition (for planning purposes at least) is to be clear about what your agency is not going to do.  And usually ‘less is more’.

Ideas that work for an office of hundreds of people will often not work for an agency of 30

Those working in the ‘far-flung’ offices of global networks know that there are few things in this world quite so parochial as a Londoner or a New Yorker.  Most have lived in one city or country all their life and are fluent in just English.  

But many are equipped with a ‘G’ (global) in their title, which means that you are probably paying for part of their salary though they will often feel you owe them tribute.  At the very least, they will have developed global products and services (many that work in just UK or US) that they will send you in the form of a 70-page corporate colours PowerPoint.

If you are running a small network office then part of your long-term career success will be predicated on your ability to filter the nuggets and gems from this tide of slides and quietly ignore the crap.

When you are looking to extend your businesses offer, follow what your clients want and your employees like to do and are good at.  It’s expensive, time consuming and risky trying to create demand for a service clients have not asked for and then expensive and time consuming again trying to staff it with new people.  Occasionally, you have to take a bigger leap, but mostly grow quietly and insidiously like a deadly virus!  

Don’t buy a dog and then bark yourself – hire the best people you can; train, mentor and support them, but never micromanage

Everyone knows you have to hire the best people.  Many then forget that the best people want to grow and get on themselves.  What they don’t want is to be double-guessed or undermined or kept back.  

If you can’t trust your people to do the right thing or you constantly check on them, then you either hired the wrong people or you are that terrible boss you read about on BuzzFeed and your business won’t grow, your people already hate you and you may be heading for a heart attack.

Salary benchmarking is the work of the devil; hire, promote and pay people on talent and value.  If you adopt benchmarking and banding, your best will leave and the dull lazy and feckless will see you out.

HR people can be wonderful, but in their rush to make your business fair and consistent, beware they don’t make it dull and comfortable.

Darwin was right: the fittest do survive

Over-hire at intake level and be honest that not all will make it.  The survivors will be the best, they will be digital natives and they will raise the standards of those above and around them.

Every year refresh your business with as many new intakes as you can.  As you put pressure on from the top, they will create pressure from below.  

Oh, and try and make sure that not all of them are middle class media studies graduates. Please pay them properly too.

Always know your future revenue; you must be able to value your pipeline

When it comes to the business of your business, this is rule number one, two and three.  No one can run a business if they have no visibility of future revenues.

You should be able to predict revenue to within 5% a month out and to within 10% three months out.  Six months is guesswork, so be a good guesser too.

Keep track of your predictions versus actuals on both the one-month and three-month horizons.  Best to know if you are a financial optimist or pessimist.

Optimists tend not to make a profit because they let costs rise to meet their mythical revenues; pessimists tend not to grow as fast as they could because they don’t invest quickly enough against opportunity.

Keep total staff costs to 55% of net revenue or below

In every market in every region I have worked in, no matter what the size of business, over a period of time and putting in all real staff costs and owner dividends, this is the median and appropriate ratio.  

It is the key one to manage because it is the biggest and it is the one that relates most directly to the quality of your offer and your ability to make a profit.

Watch your cash! If you are making a P&L profit over time there should be cash in the bank.  If not, you have a problem.

Zero base your cost budget every year

Your clients do it to you.  Do it to your suppliers. Incentivise your finance team; with the right motivation they will save you thousands in this area.  Whatever you do, don’t just add 2% or 10% or the rate of inflation to each cost line from the previous year.  

If you have steady or increasing revenues, making appropriate margin is only a matter of will power

Not every month, not when you start up, not after you lose your biggest client, but if your business is stable and growing you should be making an appropriate margin.  If you are not; then you are an NGO.

Making an appropriate margin is a matter of self-respect

What we do has value.  And most of us work ridiculously hard. Clients should pay for that and we have every right to earn an appropriate profit from it.  Get better at asking for it.

Be the best at at least one thing. Excellence in one offer or specialism will rub off on the rest of the business

Don’t be just OK at everything.

Part two of this essay will appear next week.

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The Author

David Brain

David Brain was CEO & President Asia Pacific, Middle East and Africa at Edelman from January 2011 to May 2017. Prior to that he was Edelman’s CEO & President EMEA from 2003. He has also served as Joint CEO of Weber Shandwick in the UK, CEO at BSMG Worldwide and Manging Director at Burson-Marsteller.

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