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How to build accurate PR agency project budgets

Updated December 10, 2021

Successful public relations executives understand the need to focus on project profitability, but how exactly do you do that?

It starts with building out an accurate budget.

And it’s easy to overlook hidden expenses, so this process needs to be completed thoroughly to ensure a comprehensive picture of the financial aspects of any project.

So what should be included?

STAFF COSTS

Public relations represents a human-intensive endeavor. Relationships are built one person to another, so you can’t avoid labor hours.

Unfortunately, calculating anticipated labor costs can be a real challenge. You must start by building a list of everyone who will work on a project. That means the direct project team, but also all of the support teams in your agency. Think about what design help might be needed. Or writing support. Or anything not handled directly by those assigned to service the account on a day-to-day basis.

Of course, you also need to factor in time spent by management on the account. It is not uncommon for senior agency executives to participate in monthly account reviews, quarterly client check-ins, and other similar meetings. That all needs to be factored in to the total cost — and don’t forget the time it takes to prep these execs for the meetings.

The trickiest part of developing a staff cost budget is determining what hourly rates to use. For a budget to be effective, it needs to be known to the project manager — but that may mean that they need to factor in the salary cost of more senior agency employees. To avoid sticky issues, it may be better to develop banded hourly costs. What you sacrifice in accuracy may be made up for in improved employee relations.

Oh, and remember to use hourly rates that more accurately represent cost, not what you would bill to the client.

OUTSOURCING AND FREELANCERS

In addition to the internal human costs, many PR projects require the services of outside firms and individuals.

This could be in the form of freelance writers, graphic design firms, marketing service partners, researchers, or even other PR consultants with specialties.

MEDIA MONITORING

This area is, of course, near and dear to my heart as the founder of CustomScoop and North American CEO for CARMA.

But the fact of the matter is that every public relations professional uses media monitoring in some form or fashion.

If you have a monitoring account dedicated to the specific client or project, accurately accounting for this cost will be simple.

But many PR firms share a single monitoring account — within the bounds of the vendor’s license, naturally — across several projects. In those cases, you will need to attribute a percentage of the cost on a per-project basis. Alternatively, you may opt to include this in your G&A expenses (described below).

Don’t forget: if you share the cost of a monitoring account among multiple projects, you will need to update all of the budgets when you add new projects to the account since the allocation percentages will change.

MEDIA ANALYSIS AND PR MEASUREMENT

While all PR projects use monitoring, not all take the next step to analyze media coverage to garner insights and measure results.

But if you do — and you should — you need to bake those costs in to your budgets.

Unlike monitoring, this is not likely to be a shared expense, so it will be easier to calculate the specific cost.

Be sure to factor in time for your own team to consume, digest, and utilize the insights provided by your chosen provider (which will usually be external, but some large PR firms have in-house research shops).

MEDIA DATABASES & PR DISTRIBUTION

Since media outreach remains part of most public relations campaigns, media databases and press release distribution will continue to be an important part of the budgeting process.

While the contacts database may be a fixed cost, distribution of press releases incurs a new charge each time.

This means that your budget will need to attempt to gauge the press release cadence. It’s not going to be 100% accurate all the time — but very few budgets are.

PRIMARY RESEARCH

Increasingly, public relations firms leverage primary research — polling/surveys, focus groups, and in-depth interviews — to craft messages and improve targeting.

This sort of insight can be invaluable to the success of a communications campaign, so you should certainly consider it for your budget.

If you do incorporate primary research, be sure to account for all of the costs associated with the activity beyond what your vendor charges you directly.

For example, it is not uncommon for PR agency staff to attend focus groups — but that usually requires travel. There may also be distribution costs once you receive the results if the research is intended not just for internal use but also public consumption.

TRAVEL

In my years in public relations, travel budgets seem to be the area that gets budgeted least accurately.

Here are some reasons why travel budgets lack accuracy:

  • Routine travel often gets overlooked. Your regular trips to see a client — by cab, car, train, or plane — should all be factored in to the budget. It’s an important part of the client relationship, but it isn’t free.
  • Travel budgets usually focus on big ticket items like hotels and airline tickets and may miss accounting for things like meals, mileage, taxis, and tolls.
  • Prices for things like lodging and airfare change regularly, so the trip that cost $300 in March might cost $600 in July.

Start by figuring out what trips will be required, then do your best to estimate the real costs. If you use a template for building out the costs that includes all categories of travel expenses, you will be less likely to overlook items.

Ultimately, though, you should also build in a “fudge factor” or cushion into your travel budget. Add an extra 10% or 15% (or more) to cover unexpected trips or higher-than-anticipated room rates or airfares.

CLIENT ENTERTAINING

You do take your clients out for coffee, drinks, or dinner, right?

Then that needs to be a part of the budget.

PRINTING

Yes, we live in a digital age.

Yes, most of us prefer to receive documents electronically.

But that doesn’t mean that printing is completely dead.

PR agencies continue to use print shops for collateral for events, meetings, press conferences, pitches, and other activities.

Those expenses must be accounted for because they’re often not cheap.

Look at your project calendar to anticipate when you will need printed materials and then estimate the costs.

Pro tip: keep printed collateral more generic so that you can do larger runs and reuse them. You can always provide event- or pitch-specific items on separate handouts or emails.

EVENTS

Even if your agency doesn’t consider itself to be in the event business, it is likely that you will end up managing events for clients from time-to-time.

Now, much of these costs will likely be billed back to the client for reimbursement.

Those expenses should be in a separate client-ready budget that outlines the costs clearly.

However, you will almost certainly incur expenses that don’t get billed back — either for the preparation or implementation.

Budgeting for events is a fairly involved process, so I’ll leave the details for another post.

INTERNAL TOOLS AND SOFTWARE

Most of the tools that you use internally to work on client campaigns will likely be project agnostic.

If you have a Hootsuite account and use it for all of your projects, it’s probably easiest to allocate that expense through G&A rather than on a per-client basis.

But if you purchase or subscribe to software only because of a specific client project, that should go on the project budget itself.

Similarly, if you need a new license (or an expanded one) for a tool you already use, that should be factored in — especially if it is an expense that would go away if the client project does.

MANAGEMENT OF SOCIAL ADVERTISING

Yes, I know this post is focused on public relations, not marketing/advertising, but we all know those lines continue to blur.

Just about every PR agency I have encountered in recent years manages social media activity to one degree or another.

A critical part of social media management includes social advertising to grow traffic and draw attention to your client’s posts.

Whether, when, and how to mark up these expenses could fill an entire separate post (and just might), but for those that will be billed back to the client, they should be built out in a separate budget.

The project budget should, however, include the cost of managing the advertising — both in terms of staff cost as well as any third party vendors or tools used to implement the campaigns.

OTHER VENDORS & EXPENSES

Even with the many categories I have outlined above, I’m certain that I have overlooked things. Probably even some very important things (feel free to chime in with that feedback in the comments).

You can avoid such oversights yourself by having an effective accounting strategy that properly tracks all expenses and assigns them to client projects so you get periodic reports from your finance team on the actual (not just budgeted) profitability of accounts.

As you get more data, you will become more accurate in your budgeting.

Plus, if you review a list of your current vendors, you will likely jog your memory about expenses you are likely to incur on new projects.

SHARE OF G&A EXPENSES

Up to this point, we have reviewed project-specific expenses.

In other words, they show up when the project begins and disappear when the project ends.

Those are the numbers that should be used for project management purposes.

However, when assessing overall profitability, you will also need to account for a share of General & Administrative expenses.

These are the costs that the agency incurs regardless of changes to the client base.

Things like rent, office supplies, support staff, computers, furniture, and cleaning services all fall into this bucket.

But there are also other things like business development that can’t be allocated to specific clients, so get lumped in to the G&A charge.

Each project should be charged a representative percentage of the total G&A.

As you get more clients, the percentage charged to each project should decline.

How you determine the appropriate percentage should be consistent, but may vary from one agency to another.

Common methods include allocating based on headcount or revenue. In other words, if 3 FTE’s in an agency of 15 people work on a project, it would be charged 20% of G&A using a headcount model. If that same project had revenue of $100,000 on total annual firm revenue of $1,000,000, it would be charged 10% of G&A using a revenue model.

ADDING IT ALL UP

Once you add up all of the expenses — including the G&A share — you will have a budget that represents your anticipated profitability.

Effective budgeting will help you manage existing projects better while also improving pricing for future engagements, and represents a vital part of the PR agency management process.

A version of this post originally appeared at ChipGriffin.com.

Chip Griffin

Chip Griffin

Chip is the Founder of the Small Agency Growth Alliance and a longtime agency leader and entrepreneur. He helps PR and marketing agency owners build businesses they want to own.
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