Gini Dietrich

Starting a Public Relations Firm: The Business Side of Things

By: Gini Dietrich | June 27, 2013 | 
51

Starting a Public Relations Firm- The Business Side of ThingsI remember when I started Arment Dietrich. I was way too young to be starting a public relations firm. I had no idea how little I knew and how much growing up I had to do.

But not one to do things the easy way, I figured the school of trial and error would show me the way (plus that whole problem with authority thing that kept getting me in trouble with employers).

And show me the way it did. Not only did I have NO idea about the business side of things, we went through the Great Recession while I was learning and it nearly put us out of business.

I remember reading things about running a business. I even joined Vistage to help me learn how to do it.

But nothing quite hit me smack in the face like good old experience and failing so badly I almost had to go back to work for someone.

I also didn’t have a mentor or the foresight to ask someone in the business for help. Call it pride or stubbornness or plain, old I didn’t think anyone would take the time.

So last week, when I wrote about the importance of tracking time and my dear friend Kate Finley asked some additional questions about running the business of a PR firm, I decided I would share some of the answers with you.

Retainer Too Low

We’ve all been there. We propose a program for a new client, we budget it out, and then we get to work and find a ton of things we didn’t expect that are creating more work or putting obstacles in the way of getting things done.

There are a few things you can do upfront to protect you if that happens:

  • Be extremely clear about the work you’re doing and detail it in your proposal.
  • Put in writing what is included and what is not.
  • Explain what a scope of work change is and what will trigger one.
  • You can even detail how many hours each week the client gets from you. This is important if you’re doing a retainer or flat rate. Some people think retainer means you’ll do as much work as it takes.

Then be very diligent about not overservicing on projects not included in the scope of work and coach your team on how to politely, but firmly, tell the client they’re asking for something not included.

We had a situation where, after working with a client for two years, we knew exactly how much time things would take to accomplish. Going into year three, we budgeted based on our experience with them the previous two years.

But they hired someone new and she created three times more work for us. About four months in, I had to have a conversation with the CEO about how this new person was eating away at our budgets by requiring nearly daily meetings, constant phone calls in between, and urgent emails late at night (midnight our time).

I handled it in this way: I explained how much we enjoyed working with them and that year three’s budget had been created based on our past experience with them. I explained why things had changed, but also that we were super happy to work with this person.

In order to do that, though, we’d have to increase our budget to include all of this extra meeting time and hand-holding she needed.

About a week later, they brought back our old day-to-day person and things went back to normal.

Letting a Client Go

When you are starting a business, this is the hardest thing in the world to do. You don’t want to give up the revenue, but you also know they’re not a good fit.

When you let a client go who is toxic or isn’t a good fit, it rewards you in double the revenue later.

I know. I know. Easier said than done. But I’ve seen it over and over again in our business.

Every year (it’s happening here in about a month), we sit down and determine which clients are profitable and which are not. Then we also discuss the pros and cons of working with that client.

Are they high-maintenance? Do they have unrealistic expectations? Do they refuse to work with anyone but me? Are they toxic or mean or rude?

If the answer is yes to any of those questions, we then discuss whether or not we think it’s worth trying to save the relationship or if we should fire them.

Typically, we fire the bottom 10 percent of our clients every year. Which means two or three good clients are let go. Every year.

It’s really scary and, as the business owner, I have to take a deep breath and show no fear.

But I have truly found, once you do that, it frees up your time to work with the already existing good clients or to find the ones you want to work with, who appreciate you.

None of us go into a client relationship thinking it’s going to turn sour, but it happens.

We’ve let three clients go already this year and the collective sighs I’ve heard from my team are pretty incredible.

It’s hard to do, but it’s very well worth it.

Starting a Public Relations Firm

It’s not easy – this whole business side of things.

Most of us go out on our own because we think we have a better way of doing things. Some of us are extremely good PR professionals and the logical next step is starting a public relations firm.

What we quickly realize, though, is running a business takes us away from our craft.

We have to keep a clean balance sheet, we have to understand and manage a profit and loss statement, we have to budget to profitability, we have to know when it’s time to hire new employees and how to attract – and retain – them, we have to create process and procedure, we have to worry about things such as paid time off and holidays and covering for someone when they’re sick, and we lay in bed at night wondering how we’re going to make payroll.

It’s not the easiest job in the world, but it’s one of the most rewarding.

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

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51 Comments on "Starting a Public Relations Firm: The Business Side of Things"

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VincentHazleton
VincentHazleton
2 years 10 months ago

Nice.

ginidietrich
2 years 10 months ago

VincentHazleton Thank you, sir!

KateFinley
2 years 10 months ago

This is such SOUND advice. It’s hard thinking of all you’ve gone through to get to where you are but I know you are reaping the benefits now. I’m very blessed to have you as my friend.

KateFinley
2 years 10 months ago

Also, you really drop 10% a year just because?

belllindsay
2 years 10 months ago

KateFinley NOT just because. Because they are toxic, or time-stealers, or rude and demoralizing, or expect too much, and in so doing, are creating an environment of stress and unhappiness. 😀

KateFinley
2 years 10 months ago

belllindsay Why wouldn’t you keep those clients?! :) It sounded like 10 percent were dropped even if they were good clients though … that’s what I was curious about.

ginidietrich
2 years 10 months ago

KateFinley belllindsay It’s the Jack Welch model of firing your bottom 10 percent of employees. Except we do it with clients. They’re always the ones who suck you dry, don’t pay on time, and expect too much.

MichaelBowers
MichaelBowers
2 years 10 months ago
You are wise Gini. Another Super Post! This is valuable to most business operations especially those that bill by the hour. Agree, most people get into business for themselves because they are passionate about what they do not because they like accounting and billing and collections (all of the business stuff). However, you won’t be in business long if you don’t master these things. I have seen both points, controlling hours and firing clients, come up with people I work with. These are huge and are a must handle.  I have a friend that is struggling with the client firing… Read more »
blfarris
2 years 10 months ago

MichaelBowers The best thing about firing toxic clients is that they make room for (and give you energy to find) really terrific clients.

GraceFagbohun
GraceFagbohun
2 years 10 months ago

I

RebeccaTodd
2 years 10 months ago

Sounds advice for any industry G.

aimeelwest
2 years 10 months ago

Very interesting.  I love your 4 questions that you ask about clients each year and really they should be asked if they make an unhappy team or cause more stress/work they are just not worth it. 
Plus I’m sure the cost of letting them go is less than having a therapist on retainer for the employees.

jolynndeal
2 years 10 months ago

Gini, your posts are so very real.  Thanks for sharing the good with the bad, without SPIN.  PR is like cosmetology to me, complete with swapping stories just like at the salon. Practioners get together and share stories of failure and success. We are very supportive of each other.  My focus is the small business owner and I love being able to help people who are working so hard to succeed. They’ve given everything they have to their business and it’s a pleasure to be a behind-the-scenes part of the success.

GraceFagbohun
GraceFagbohun
2 years 10 months ago

This is a great post. I studied public relations. I graduated 8yrs ago & focused on family. I would like to start a public relations firm, but I don’t know how to go about it. I’ve been applying for jobs for the past 3yrs without any success. I would like you to advice me on steps to take.

blfarris
2 years 10 months ago

GraceFagbohun My advice — go find a client — just one. That first client will be more help to you than you know.

MichaelBowers
MichaelBowers
2 years 10 months ago

blfarris GraceFagbohun I agree with this. Many people I deal with project their business to where they want to be rather than where they are. If your goal is to have 10 clients and you currently have one then getting your first client is the most critical thing you have to have one before you can have two and two before three, etc.

Joshua Wilner/A Writer Writes
2 years 10 months ago
Toxic relationships are bad everywhere. Sometimes people think that money makes them better but I have rarely found that to be the case. When a business relationship goes south you have to ask some very hard questions about what sort of return you are getting from it.  Some years back I let a client go because their expectations were unrealistic and they refused to work with us to develop a reasonable compromise. The money wasn’t worth the frustration and negative feelings that came with it. Although I will concede that had they quadrupled what they were paying my tolerance might… Read more »
MohitPawar
MohitPawar
2 years 10 months ago

Hi Gini,
Your post conveys the message really well – because it is written by someone who has been there and done that – much better than advice dispensed by a prof. It is like reading a good manifesto. Started my first business project as a teenager, later went to b-school before starting again. Truth is a b-school teaches you to polish stuff and life teaches you what works and what does not.
Thanks for sharing your story :)

kristathomas01
2 years 10 months ago

Helpful to service providers of all kinds – thank you! Always so nice to wake up to your insightful words.

lauraclick
2 years 10 months ago
Um, how did you know I needed to hear this advice today?! I need to make some tough decisions like the ones you’ve mentioned. I know it needs to be done, but it’s still hard to do. I didn’t renew a contract with a very large client last year because of the toxicity and constant shifting of priorities, goals and ideas. It was hard, but ultimately, the right thing to do. I need to be more willing to do that! And, do a better job of screening clients on the front end. That will help prevent the need to fire… Read more »
RobBiesenbach
2 years 10 months ago
“Running a business takes us away from our craft.” So true. That is one of the biggest considerations people need to think about before starting a business. What really motivates you? In PR, do you enjoy the creative aspect of the client work — the writing, the messaging, the content, etc. — or would you be excited to build an organization, to manage people and resources and client relationships and make it grow? Two very different things with very different skill sets. And I think the same principle holds when you’re working for someone else. The higher up you go… Read more »
belllindsay
2 years 10 months ago

RobBiesenbach Made up statistics are my favourite. 😉

RobBiesenbach
2 years 10 months ago

belllindsay 97% of experts agree!

belllindsay
2 years 10 months ago

RobBiesenbach And doctors!

suzemuse
2 years 10 months ago
Firing clients is at once the scariest and most stress-releasing thing you can do as a business owner. It’s amazing how even one toxic client can overpower everything.  I agree that running your own business is the most rewarding thing in the world. But it’s definitely not easy, and it’s definitely the hardest work you’ll ever, ever do.  Thanks for being so honest in this post – these are things a lot of entrepreneurs don’t talk about, and it makes us feel very alone sometimes. It’s good to know that these are challenges we all face – and that we… Read more »
Mark_Harai
2 years 10 months ago

Hi, Gini – the experience you’re gaining on the business side of things is invaluable. You just can’t learn these things in a classroom. 
There are some very talented, competent in their field, hard-working, inspired, positive, new business owners out there that will fail; not because they couldn’t deliver the goods and/or services, but because they don’t have a clue as to how to build and run a business profitably. 
Once you have that experience under your belt, you can run any business profitably.
Business building is a skill all unto itself. 
Cheers, miss! : )

yvettepistorio
2 years 10 months ago

One thing I love about you is how honest and transparent you are about the company. You share everything with the team and we really get to know the business – I’ve never encountered that before. It’s scary and a bummer to lose clients, but like you said – it frees up our time to work with good clients and find others that appreciate the work we do for them.

anitahovey
anitahovey
2 years 10 months ago

Going through all of these questions now as I think about how to bring on staff to my vision of a “firm”. Glad to hear I’m not alone… and I’m heading in the right direction :)

RegisDudley
RegisDudley
2 years 10 months ago

anitahovey Go Anita!

anitahovey
2 years 10 months ago

RegisDudley anitahovey Thanks Regis… you looking? LOL

RegisDudley
RegisDudley
2 years 10 months ago

I’m interested in picking up extra work, anitahovey.  Got anything in mind? 😛

Kato42
2 years 10 months ago

anitahovey You’ll rock it, Anita :)

ClayMorgan
2 years 10 months ago

When I was freelancing, retainer too low was a biggie for me, but sort of in reverse. I was very poor at controlling “job creep.” You know, “hey, while you are at it could you do blah blah blah?

barrettrossie
2 years 10 months ago

I know a lot of people who need to read this. :)

belllindsay
2 years 10 months ago

Another beaut! Great job ginidietrich

susancellura
susancellura
2 years 10 months ago

belllindsay  – What do you think? Should we find a way to bottle ginidietrich up and mass produce her genius?  LOL!  😉

belllindsay
2 years 10 months ago

susancellura ginidietrich HA! Without revealing state secrets, I’m already alllll over that idea. 😉

faybiz
2 years 10 months ago

Gert- you should get paid for this- just sayin’

JoeCardillo
2 years 10 months ago

You know what’s cool, pretty much everything you mentioned can be applied to being successful in your personal life too. Great advice.

giesencreative
giesencreative
2 years 10 months ago
I’ve hesitated to comment on both this post and your http://spinsucks.com/communication/the-pr-firm-of-the-future/ post earlier this month. The first time, it was because the “hybrid PR professional” of the future is what I’m building myself towards—because integrating online and offline, marketing and communications seems like the only measurable, effective way to go forward. This time it’s because your first two paragraphs sound a lot like me. I’m in a position right now where it seems like striking out on my own might be my best option (as it’s been my “five-year goal” for what seems like a long time now). Still, it’s… Read more »
RegisDudley
RegisDudley
2 years 10 months ago

giesencreative Good luck :). It must be an exciting time for you!

bhas
2 years 10 months ago
There is good, solid advice in here.  Here is a question, though. Picture this scenario. You have a good opening conversation with the client, have a pretty decent feel for what they want and are confident that you can deliver it. You two also seem to gel and the project is exciting.   You draw up the plan, the client okays it and you work your ass off to hit the deliverables. And then the inevitable happens. The client seems to have a sudden change of mind and decides that they don’t really want that, and could you redo the whole… Read more »
RegisDudley
RegisDudley
2 years 10 months ago

bhas Perhaps more check-ins are in order. If you stated from the get-go that you’d have check-ins every ___ weeks and/or every project milestone, and you are clear that you won’t move forward until after approval, you could have those approvals to prove that the client accepted the work at each time point. Then you have proof that they must pay you for everything they’ve approved. You can negotiate doing the work over if they don’t like the final project, but they must pay you for everything they’ve approved. Thoughts?

Kato42
2 years 10 months ago
RegisDudley bhas Hmm. I’ve run into situations like this one as an employee (because a lot of my work has been in large organizations that threat “communications” as an internal firm that has to “bill out” for its hours). It’s a horrible situation to be in, and I agree that regular check-ins and sign-offs can help… but in my experience, there are still people/clients who just don’t get it. Plus, you want to be careful – there’s a risk of moving from being a company that helps business owners to one that throws so much “red tape” in their way that they… Read more »
bhas
2 years 10 months ago
RegisDudley bhas This is a situation that especially bedevil designers where clients seem to know what they want, until they see what they were talking about and then realize that they didn’t want that. There are forums filled with horror stories like these, and I think there is even a website selling posters and T-shirts with slogans excerpted from client emails. I agree that constant check-ins is absolutely necessary, but what do you do when the client changes their opinions as frequently as a weather vane in a tempest? This situation will be exacerbated when it’s an agency situation because it’s… Read more »
RegisDudley
RegisDudley
2 years 10 months ago

I LOVE these. They’re clear and concise points! I’ve shared with a few independent consultant friends :). 
There is also the pressure to base pay on performance for some new PR agencies. This really grinds my gears because so many factors can influence performance of activities (esp. when it comes to media relations). Don’t give in to this, friends!

Lilian Raji
Lilian Raji
2 years 10 months ago
Reading this, I thought it was something I’d written and forgot I put out there.  Then I noticed it wasn’t my name on the bi-line.  😉 Everything here resonates with me – from “problems with authority” to starting an agency without the adequate prior knowledge (my only agency experience was as an intern before deciding to go out on my own – the decision being one made out of necessity when the recession of the early aughts kept me from getting hired by any agency as they cut budgets and trimmed staff).  I also took the road of trial by… Read more »
Kato42
2 years 10 months ago

Gini, I think it’s wonderful that you’re sharing such an honest look at the business side of things. I watched my mom build a business (not in PR), and it’s a rocky road. Articles like this are a great thing for anyone considering following their entrepreneurial dream of starting their own firm.

marcelam
marcelam
2 years 9 months ago
Thank you for this article! As a PR student, this story shows me that it is not easy to start a company, but it is possible. My dream is to find a mentor from whom I can learn, for example, how to handle a crisis or how to reach the audience. With a mentor, I would have the opportunity to improve my skills and learn new ones, gain valuable knowledge, and further my professional development on a one-on-one basis. This year, I have discovered how interesting PR is and how much I enjoy analyzing different PR scenarios. I hope to… Read more »
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