Behind every successful PR agency is a thorough and diligent chief financial officer (CFO). But what does it really take to ensure today’s agency model flourishes and is able to withstand the whims of an industry that’s historically been hard to measure? Influence caught up with Adrian Talbot, CFO of Hotwire, to understand the intricacies of running a borderless PR business and the key skills accountants can bring in 2019 to help PR staff think commercially.
Adrian joined Hotwire in 2016, having previously worked in finance roles at Instinctif, Burson Marsteller, ITV, UBM, and WPP. He trained as an accountant at the global firm BDO.
Adrian, what do you feel are the three biggest challenges for financial directors (FDs) working in PR consultancies?
There are three key challenges for FDs working in a PR consultancy business – revenue visibility, managing staff costs and understanding the business.
Taking revenue visibility first, one of the biggest challenges FDs have is they can only see three months ahead.
Many clients may not have decided what their plans are for the rest of the year and therefore do not know their definite spend. Obviously, this makes it harder for a PR agency FD to forecast expected revenues. Allied with this is deciding how to manage a permanent staff cost too.
Unlike in other industries, the product in a PR consultancy business is not tangible, it is in the room with the client. It is therefore quite hard to ‘see’ the ideas being charged for, as PR agencies are selling their people and their time. That can be quite hard for an FD to have visibility of.
Managing staff costs
The constant battle in agency life is balancing revenue and staff costs. The new business pipeline in PR agency work is constantly moving and an FD’s role is therefore to constantly judge what new business is going to be won and what is not. One thing heard about a possible new client on a Monday can change by the Wednesday. It is a dynamic and fast-moving environment.
A new client qualification process definitely helps this process. New information sought can help to decide whether a new business opportunity is likely to come through.
Understanding the business
It is essential for FDs to have a really good understanding of the businesses they serve, from the ground up. Being present at new business meetings and marketing events is part of this process. By doing this, FDs are intrinsically seen as a key part of any PR business and are not perceived as the ‘finance person in the dark corner with the spreadsheet’.
Meeting clients is important too – and that is true in the good times, as well as the bad. FDs could easily not see as many clients, but the diligent ones will, taking time to meet them and understanding what their priorities are. FDs within PR agencies are in charge of births (start of services), marriages (when everyone is happy) and deaths (negotiating terminations). Therefore, building relationships is crucial in the agency and client life-cycle. Clients need to know who the finance person is and this helps everyone.
What do PR agencies get wrong when it comes to managing their finances?
Managing the pipeline and weekly revenue forecasting is an important process. Monitoring your business forensically is part of this. There has to be methodology and rigour, getting the day-to-day basics spot on.
Over servicing clients is an issue too. PR people as a breed will always want to service the client. When it happens, PR practitioners need to be brave and endeavour to explain to the client when they are being over serviced. Having those tough conversations early enough and with impact, helps to protect the agency and the client. Being open and transparent is essential, even if it is a difficult conversation around budget and service. Clients appreciate it.
When a PR agency professional meets an in house communications professional – the idea is the most important concept, not the budget. On both sides the budget can be quite low down in the stack and therefore will be left to the end of a meeting, or not discussed early enough. All the excitement around the campaign and ideas is what drives the conversation. This is natural. In a creative environment where people are being paid for creative ideas, money can seem less interesting.
Therefore, PR agency staff and their prospective clients should sort the money out before ‘completely falling in love’. Commercial negotiation training, run by FDs for PR agency staff, can help to raise this important competency when these tricky situations arise.
How does a successful PR consultancy change its business model effectively to cope with expansion?
PR businesses grow in stages – and there are different inflection points at each stage. There is one when an agency hits ten people and then one when it hits thirty. There is a good reason for this. The next stage of growth will be about investing in a bigger office to accommodate more people.
Systems too need to be updated at these inflection points, including pay roll tools, HR tools and various intranet systems. To quote Tim Ferriss’ Tools of Titans, the CEO of Rakuten – Hiroshi Mikitani – explained ‘things break in multiples of three and ten,’ and therefore FDs need to be aware of their PR agencies’ inflection points and plan appropriately.
Hotwire is now approaching 300 people and as a business is now implementing new systems which allow staff the agility to keep innovating. Innovation is invariably a necessary part of growth, and you need to keep doing it.
What is your opinion of timesheets and how else can PR agencies charge for their time?
Timesheets are an emotive topic, but they are necessary. A PR agency FD cannot recognise profit and loss unless his or her people have done their timesheets.
In the past, wooden spoon awards have been presented publicly to colleagues with the worst excuses for not doing them. The teams that do them on time, get lunch bought for them. It is a crucial part of any PR business, as it is a barometer by which the volume of work being done can be measured.
Ultimately, however, they are an internal tool rather than external – as these days there are various different ways PR agencies can charge for their services. We are moving to value-based pricing – and thinking, what is the value we are delivering? Many clients are not interested in the time spent on a project. They are interested in outputs. Timesheets only come up when there is a problem – if the coverage has not been good enough, or the client is not meeting their own internal targets. Mutually agreeable targets are therefore a good benchmark to set.
Finally, what are Hotwire’s financial challenges in expanding as a business?
We are fast approaching 300 people across 15 offices in 12 countries, with a myriad number of affiliates. Therefore, you have to be agile as a business and systems like Zoom and Slack are part of Hotwire’s fabric, allowing us to interact seamlessly with colleagues around the world.
In addition, our own staff now have flexible working, and can work from any location they wish. We encourage them to view work as a thing to do, rather than a place to go.
Clients want to know that we are a global team and that we work together. If you are trying to operate globally and give a borderless, clean service, then you have to invest in the necessary parts of your business to do that.
Hotwire’s philosophy is to work without borders, and therefore we always invest money in flying our colleagues to international offices, in order to spend time with other Hotwire staff. As a result of this investment, 60 percent of Hotwire’s clients are worked on across all of our offices. We like to think of ourselves as acting locally whilst thinking globally.