The 3D Challenge of Covid Faced by PR Agencies
The 3D Challenge of Covid Faced by PR Agencies
Agencies have been thrown into a game of 3D chess where three challenges; of Time, of Nature and of Space threaten the basics of agency economics.
For a sector that is more conservative than many would first admit, juggling all three together requires some radical re-thinking to succeed.
The PR world talks a good job of being dynamic and fluid but in many ways it is remarkably static.
A PR agency MD from the 1990s would have no problem recognising the strengths and weaknesses in the financial performance of agency of 2020. The tech has changed but the fundamental business ratios are constant.
Revenue per head, pitch win rate, client churn, gross profit as a percentage of income are all pretty much as important as measures of success as they were 10 or even 50 years ago.
What has been changing in the last few years is the underlying pattern of revenues driven by changes in the nature of what clients want from their PR agencies and that was increasingly problematic even before Covid.
Agencies have become fairly used to there being two big and growing sources of change and volatility in the last 10 or so years, both of which have challenged PR agency practice and now, thanks to Covid there is a third, meaning that agencies are now playing 3D chess.
Dimension One: Volatility in Time
The shift in the last few years from retainers to project fees has meant that forecasting when revenues will occur is harder it ever was. Forecasting your fixed and most of your variable costs meanwhile remains relatively easy and of course the biggest line on your costs forecast is the people number and its direct dependencies, like IT cost per head, management time per head and so forth. The closer you get to the start of Q4 and the end of the runway, the bigger the knot in your stomach gets.
You start with column A on the forecast, list your clients, then those mystery clients A,B,C,D etc ‘to be won’ and then you begin the informed guesswork of populating the 12 columns to the right.
Which month the revenues drop into has been increasingly variable with the ebb & flow of projects and the potential for mismatch with your main cost, people, has grown with it, stressing your key revenue per head ratio and cash flow profile more than ever.
Covid has only accelerated this and it’s a brave MD who sees that volatility falling back to pre-Covid levels in 2021.
Being able to vary your people overhead line more in sync with your revenue flows is now far more possible than it ever was thanks to talent platforms.
The need to consider flexible talent pipelines as a strategy not a tactic is no longer a ‘may be’ decision, it’s a question how much you will embed freelance PR talent in your approach to business planning.
Dimension Two: Volatility in Scope
As well as moving in time, the figures on the forecast are changing in terms of what kind of work lies behind them.
10 years ago, the agenda for most PR agency meetings would be dominated by media relations – reporting on last month’s coverage and planning what activities will generate most positive media coverage in the coming weeks and months.
That remains a huge component of most agencies’ work for clients but far from the only one.
Now, the work that generates the revenues for agencies will just as likely range across areas like paid social campaigns, SEO, image and video content creation, influencer marketing and a number of other activities where earned media is only part of the picture.
What is as important as the timing and of the income is the spread of activities here. A £10000 fee of a few years ago may still be £10000 but made up of for our five distinct activities with four or five skillsets required to deliver them.
Look beyond the invoice value and multiply that spectrum of skills across say ten clients and a six month period and the mismatch between fixed skillsets in your team and the volatility in the nature of the tasks is clear.
Do you recruit for skills that may not be in such demand in six months or a year or do you ask your team to add new skills which will inevitably require them to the skills you hired them for less and less?
Again, flexibility of skillset is the strategic solution and increasingly so.
Dimension Three: Volatility in Space
The other key ratio for agencies is premises costs per person, generally an agency’s second biggest overhead after people.
Covid has really thrown that one into the air.
Remote working is a huge opportunity for agencies to reduce their fixed overheads, but of course everyone would have done that years ago if it was that simple.
The question of how you ensure that your staff are physically and mentally equipped to work effectively without supervision is one that agencies are experimenting with in real time.
It’s improbable that staff you hired to come in and work alongside other colleagues in the office would automatically be the same that you’d hire if much of the work you knew would be done remotely, a setting which has very different characteristics and plays to different strengths of personality.
The ability to be truly self-starting, work without supervision, be as effective and creative when staring alone at a screen as when they are in a big team meeting, able to cope alone with the little frictions of tech not working or the home office being inadequate. All of these qualities are in the freelance PR DNA
Covid is putting everyone through a painful R&D experiment where the ability to be flexible, agile, resourceful and entrepreneurial has a higher value than ever.
These are the skills and behaviours that drive the freelance PR mindset and this, coupled with the financial advantages of accessing talent on demand makes freelance PR talent the solution ready and waiting to be deployed.
For simple guidance how to make the most of hiring a freelance PR see the blog linked