Posted by Amanda Chapel
Thursday, November 2, 2006
According to a survey released yesterday, "A flood of public relations firms will be up for sale within the next decade as their owners bow out of the business." Conducted by the Registered Consultancies Group (RCG), which represents consultancy owners who belong to the Public Relations Institute of Australia, the survey found more than 30 percent of consultancy owners expected to leave their agencies in the next five years, and 80 percent within 10 years."
You know what that means: EVERYTHING MUST GO! ITEMS STILL IN THEIR WATERMARKED BOXES! IT'S THE PR INDUSTRY'S FIRST EVER FIRESALE!
RGC chairman Adam Benson attributed the forecast to two key factors: 1) most current owners are baby boomers heading towards retirement; and 2) the industry is suffering from sharply declining profit margins due to increased staffing costs.
With regard to staffing, the study found that 71 percent of PR agencies were looking to hire staff in the next six months. This, coupled with a staff churn rate averaging more than 35 percent, is making the business particularly tough going. Benson said, "The fact is, it's a pretty brutal market and it's not going to get much better."
English Translation: if costs outstrip revenues, forget what the glue-sniffing industry cheerleaders are telling ya. "Boom times"? Forgetaboutit. You'd be better off getting a job at Starbuck's. I am getting too old for this shit.
So what's going to happen? Some expect that as in the past the BIG congloms, Interpublic, Omnicom, WPP, etc., are going to cherry pick. However, other experts disagree. According to Stan Havington of Omega Research, "They won't have to. As it gets harder for the small and mid-sized agencies to make a living, their service will invariably suffer. All the big boys will need to do is what they're best at, i.e. smile and make promises. That leaves the small agencies with two basic alternatives: merge with other small firms; or sell their assets and get the hell out!"
1) That 80-percent-in-10-years figure is totally blue sky as we probably won't be here give the world situation.
2) Only approximately 500 firms make over $100,000 in revenues annually, i.e. few firms are more than freelancers posing as firms. We assume that the freelancers leaving the business will just reconvert the den back into the TV room.
3) Only about 45 firms make more than $10 million. As such the volatility will really be felt in the remaining 455 firms.
4) We gestimate that the size of these shops is approximately 3-5 people.
5) Other than what may or may not be in the typical PR practitioners head, there is NO purchasable intellectual capital in a PR firm of any size.
That said, we've done some extrapolation using the 30-percent figure. Thirty percent of 455 gives you 137 firms on the bubble. Based on the 5-person liberal estimate above... that means that there will be approximately:
- 685 used desks and chairs for sale (approximate resale value $205,500);
- 736 home computers and phones (approximate resale value $257,600);
- 17,125 pens (approximate resale value $8.65);
- 355 brand new unused English dictionaries (approximate resale value $8,875);
- 433 pieces of innocuous office art (approximate resale value $4,330);
- 142 Bella Maternity Anytime Nursing Camis (approximate resale value $39);
- 53 Nurf basketball sets (approximate resale value $166).
Total, that is if someone wanted to purchase 30 percent of the PR industry worldwide today, $476,518.65.