Best Practices in Charging for PR Services

Bulldog Reporter Agency Management ’07 Summit | New York | 9.28.07

1© 2007 THE CATEVO GROUP CONFIDENTIAL NOT FOR DUPLICATION OR DISTRIBUTION

The Catevo Group

Best Practices in Charging for PR Services

(or, how to get what you want without calling in the lawyers)

Roger M. Friedensen, APRVice President

The Catevo GroupSeptember 28, 2007



Consider this . . .

“Armageddon is upon us: The PR industry has been commoditized in the years following the turn of the millennium economic downturn. Many organizations’ senior-most people . . . have been replaced by junior employees . . . who can’t provide the high-level counseling required to keep the industry afloat. Thus, the counseling services that could and should be provided by PR agencies have been cannibalized by the likes of McKinsey, where executives can command higher prices without question.” (PR News, Aug. 13, 2007)



So I Was Thinking . . .

“Best Practices in Charging for PR Services”

“Best Practices in Collecting for PR Services”

“Best Practices in Making PR Profitable”



Square One

Competition, confusion and credibility (as always) “Thanks a lot, Sam . . .” Procurement and purchasing rule today (and for the

foreseeable future) A cautionary tale



What Are Some Folks Doing?

Ninety percent of firms:– Have some or all clients on retainer

– Bill a flat rate for some services (at least sometimes) Media training, crisis plan development, message

development sessions, simple news releases and “bundled services” are most frequently billed at a flat rate

When billing by project, 63% bill the quoted fee rather than actual hours worked

Source: WORLDCOM Billing and Finances Survey 2007



Percent markups for out-of-pocket expenses most likely for print and audiovisual services

One-third bill internal account team meetings While six percent had profits of 25% or more, 23% had

profits of 10% or less Over 80% spend 40–69% of gross income on salaries Two-thirds spend 20–39% of gross income on operating

expenses Although a third of firms do not raise rates annually,

half plan to do so in 2007Source: WORLDCOM Billing and Finances Survey 2007

What Are Some Folks Doing?



59%

47%

65%

80%

73%

21%

36%

23%

17%

10%

0% 20% 40% 60% 80% 100%

Give clients/prospects awritten/published rate sheet

Have a minimum project fee

Bill for travel time

Bill flat rates for some services

Bill all/some clients using a retainer

Sometimes Always

Billing Practices




Billing Practices

32%

27%

51%

48%

43%

54%

15%

23%

27%

25%

5%

5%

0% 20% 40% 60% 80% 100%

Mark up out-of-pocket expenses using aflat fee

Bill a flat rate for operating expenses(added to invoice)

Value bill for work over and above actualhours worked

Do proposals on speculation

Mark up out-of-pocket expenses by aspecific percent of cost

Discount billing rates for non-profit clients

Sometimes Always





So What Can We Do?

Redefine our focus – emphasize our margins (read: profitability) no matter the billing model

Fight fire with fire – become one with procurement– Increase efficiency – Enforce quality (it’s not just about control)– Learn the language – Employ financial planning tools



CLIENT DATE

PROJECT Catevo Revenue

REVENUE

Monthly Rate # of Months

Retainer Revenue -$

FIXED FEE REVENUE Amount

Fixed Project Fee

Creative Service Fee

Market Research Fee

Total Flat Fee Revenue -$

HOURLY RATE REVENUE Billing Rates Total Hours

Project Lead - -$

- -$

- -$

Sr. Associate - -$

Jr. Associate - -$

- -$

- -$

- -$ Total Hourly Rate Revenue - -$

Ave Bill Rate #DIV/0!

TOTAL FEE REVENUE -$

Reimbursable Revenue (e.g Media Placement)

Reimbursable Revenue (e.g Marked Up Items)

Reimbursable Expense (e.g Media Costs)

Reimbursable Expense (e.g. Items to be Marked Up)

NET REIMBURSABLE REVENUE -$

TOTAL REVENUE -$ Total Income



PROJECT COSTS

BILLABLE PERSONNEL COSTS Billable NBD Proposal/Contract Prep Project Delivery Total Cost Rates Total Cost

Project Lead - - - $65.00 $0

- - - $0

- - $0

Sr. Associate - $55.00 $0

Jr. Associate - $45.00 $0

Management (Supervision) - $65.00 $0

- $0

- $0Total Personnel Costs - - - - -$ Catevo People Costs

Ave. Cost #DIV/0!

NON-BILLABLE PERSONNEL COSTS Non-Billable NBD Proposal/Contract Prep Project Delivery Total Cost Rates Total Cost

Project Lead - $65.00 $0

- $0

- $0

Sr. Associate - $55.00 $0

Jr. Associate - $45.00 $0

Management (Supervision) - $65.00 $0

- $0

- $0Total Personnel Costs - - - - -$ Catevo People Costs

Ave. Cost #DIV/0!

OUTSOURCE & OTHER COSTS Total Cost

Total Outsource & Other Costs -$ Outsource & Other Costs

GROSS PROFIT #DIV/0! -$ Gross Profit



So What Can We Do?

Redefine “PR services”– Make room for new friends (and billing codes)– Hiring, training, acquisition, mergers, alliances, etc.– Explore interplay between PR and other disciplines

Supply chain optimization Logistics Interactive Business development



So What Can We Do?

Focus on the Five C’s: – C-suite– Capabilities– Creativity – Comprehensive financial planning– Client relationships



The Catevo Group

Thank You!

Roger M. Friedensen, APRVice President, Integrated [email protected]

Best Practices in Charging for PR Services

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