How to Start a Public Relations Agency

Part 1 - How to start a Public Relations Agency business - Background

According to Forbes Magazine, “PR is the Persuasion Business. You are trying to convince an audience, inside your building or town, and outside your usual sphere of influence, to promote your idea, purchase your product, support your position, or recognize your accomplishments.”

Public relations professionals are responsible for enhancing the image and promoting the viewpoint of their clients. They do this through what is called “earned media.” Unlike paid advertisements, this type of media, such as news or journal articles, carry much more weight among consumers.

As a public relations professional it’s your job to interest the media in subscribing to your clients’ viewpoint, interviewing them and writing stories that will positively impact your client organizations or individuals in the eyes of their target audiences.

Public relations agencies also act as advisors in establishing or improving the relationships between clients and their clients’ various audiences and influencers. In this regard, they might suggest changing practices or embracing new policies that will enhance reputations. If that effort fails or comes too late, some PR firms specialize in crisis communications, which involves salvaging client reputations when events take place that put them in a negative light.

Our guide is in 3 parts:

• Part 1 - How to start a Public Relations business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a public relations agency?

Most of the “equity” is in your head, so out-of-pocket costs can be small at first. You could operate out of your house or apartment and use many of the tools you already have, including phone, computer and Internet service. But certain expenditures are critical.

• Graphic design services for the development of your logo, fonts, colors and the overall look of your communications

• Printing of business cards, letterheads, envelopes and other collateral sales and marketing materials

• Website development, which you should only handle yourself if you have a sophisticated understanding of digital production

• Copywriting of sales and marketing materials if writing isn’t a strength

• Membership fees for relevant trade associations and networking organizations, starting with your local chapter of Public Relations Society of America (PRSA)

These expenses might not exceed $1,000. But keep in mind that it could be a long time before you start developing a client roster and generating enough income to survive. Can you go six months without a paycheck? Your day-to-day costs while building your business are your real startup costs, so try to have savings to weather at least several months without income.

Your financial reserves can perhaps be smaller if you can start part-time (while keeping your day job), or if you will have one or more clients signed up from day one.

What are the ongoing expenses for a public relations agency?

• Client attainment – This can include everything from ads in industry publications to the cost of taking prospective clients to lunch.

• Client relations – This might involve entertainment, holiday cards, gifts and other direct costs of maintaining relationships.

• Employees – Perhaps not among your first expenses, but your goal might well be to get big enough that you need additional help or expertise in fields where you have little skill or experience

• Memberships – This can include fees for joining PRSA as well as trade associations that reflect the interests and involvement of your clients

• Typical offices expenses, including rent, phone, utilities, taxes, etc.

Who is the target market?

Try to develop a clientele that matches your background, skills, specializations or preferences. For instance, if your background is in the film industry it would make sense to make this your specialty. Contact industry peers and make sure they know how long you worked in the business and how thoroughly you understand it. If you wish to specialize in businesses in your hometown, promote your familiarity with local media and the competitive landscape confronting your clients.

Your prospective clients should be established enough to be able to afford your services or have the need to improve their image. Companies about to introduce new products or services, or who have bought other companies or are undergoing changes to leadership or business model are also good candidates.

How does a public relations agency make money?

You’ll be paid by your clients on either an hourly, project or monthly retainer basis for the effort you put into achieving their goals.

How much can you charge customers?

This sounds simplistic, but what you should charge is what you can get. That’s going to vary depending on your background and reputation, region of the country, what your clients are used to paying for similar services and what your competitors charge.

There are basically three ways for public relations firms to charge customers: at an hourly rate, per project and via monthly retainer. Let’s take a closer look at each method.

• Hourly rate – Think of this as your basis for setting prices even if you don’t charge hourly. In other words, if you charge on a per-project basis and the project is to write a news release and your best estimate is that it will take you four hours from start to finish, charge your hourly rate times four hours. That rate might range from $75 for a newcomer operating solo out of a home office to $500 or more per an hour for larger firms working in a specialized area with Fortune 1000 clients.

• Per project – Again, use your hourly rate and expectation of how long you figure the project will take. This is the least desirable way of working, especially if you’re dealing with a new client and aren’t familiar with their approval process or expectations. If you think a video production will take 40 hours from the initial client meeting to completion and approval and it actually takes 80 hours because of client changes or negative feedback, you’ve effectively made half your hourly rate. However, it’s a good way for both parties to learn whether you can work together with the investment of only a single project or two.

• Monthly retainer – Only use this method if both parties thoroughly understand the scope of responsibilities. That’s because you’ll agree to a set amount every month. Some months you might work more than your hourly expectation while other months you’ll work less, but it should roughly even out. If not, you can renegotiate the retainer down the road. PR firms and their clients typically sign six-month commitments, with a review period after three months to make sure both parties are satisfied with the arrangement. One big benefit for your firm is the predictability. You know how much you’ll make every month from that client, which can help with long-term planning and forecasting.

Whichever payment method you select, don’t forget to let your client know that you’ll add your out-of-pocket costs. For instance, you’ll seek reimbursement for travel costs, including gas mileage, meals if you have lunch meetings with media, the third-party costs of photographers, videographers, writers or other vendors, and other costs consumed on their behalf.

How much profit can a public relations agency make?

Gould+Partners, a consulting firm for the industry, conducts an annual survey of profitability for public relations firms doing at least $10 million in net revenue. For the 2015 report, Gould+Partners found that this group earned a 19.5 return on investment in 2015. That’s derived from revenue remaining after all expenses are paid.

How can you make your business more profitable?

As you gain experience and expertise and your reputation grows, you can raise your hourly rate. You can also take on more work by hiring account people who already have or can quickly attain a clientele. And, finally, explore such closely associated side businesses as media training, in which you show clients how to properly conduct interviews and otherwise interact with the media.

Day-to-Day and Growth

What happens during a typical day at a public relations agency?

Your day will likely be filled with some or all of the following activities:

• Generating client business through phone calls, written communication and attendance at events

• Networking with industry peers to explore partnership opportunities and stay abreast of industry trends and gossip

• Nurturing working relationships with members of the media that affect your clients, pitching story ideas and serving as spokesperson on behalf of your clients

• Creating communications materials

• Conducting the everyday activities of business owners, including billing clients and paying bills, overseeing employees and interviewing prospective new hires

• Advising your clients on how they interact with their audiences

What are some skills and experiences that will help you build a successful public relations agency?

You might not consider yourself a salesperson, but you must become one fast. You’ll need this skill to attract clients, nurture media relationships and convince reporters that you have client stories that should be told. You should be a persuasive people-person who genuinely likes interacting with others.

Writing skills and versatility are also critical. Your business could be enlisted to create news releases, press kits, sales and marketing materials, speeches, video scripts, websites and web content, feature articles, white papers and countless other pieces.

What is the growth potential for a public relations agency?

Public relations firms range in size from sole proprietors working from home offices or kitchen tables to global public enterprises. Focus on delivering exceptional service and results and growth will come organically.

How and when to build a team

Unless you launch with significant client activity or buy an existing business, you’ll probably start solo. As you gain clients and win new business, you might feel a pressing need to add staff. Your first hire might be an experienced account person with a following who can quickly usher in new business. Perhaps you’ll seek less experienced—and less costly—help just to get the work done. Or maybe you need expertise beyond your capabilities. For instance, if you wanted to branch out into media training, you might wish to hire someone with a media background or an experienced educator.

Part 2 - Is a Public Relations Agency business the right fit for you?

Part 3 - Action plan to launch your Public Relations Agency business in 90 days