Best Practices in Charging for PR Services

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, APR
Vice President
The Catevo Group
September 28, 2007

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

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

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 have been replaced by junior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



What Are Some Folks Doing?
 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 2007



Billing Practices
Bill all/some clients using a retainer 73% 17%

Bill flat rates for some services 80% 10%

Bill for travel time 65% 23%

Have a minimum project fee 47% 36%

Give clients/prospects a
59% 21%
written/published rate sheet

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

Sometimes Always



Billing Practices

Discount billing rates for non-profit clients 54% 25%
Mark up out-of-pocket expenses by a
specific percent of cost 43% 27%

Do proposals on speculation 48% 23%
Value bill for work over and above actual
hours worked
51% 5%
Bill a flat rate for operating expenses
(added to invoice) 27% 15%
Mark up out-of-pocket expenses using a
flat fee
32% 5%

Source: WORLDCOM Billing and Finances Survey 2007 0% 20% 40% 60% 80% 100%

Source: WORLDCOM Billing and Finances Survey 2007 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
- $0
Total 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
- $0
Total 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, APR
Vice President, Integrated Communications
rfriedensen@catevo.com



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