For as long as I’ve been in the PR business, the format of just about every proposal I’ve created and every proposal I’ve read features the budget page at the end. There’s a purpose for this. It’s important to talk about what you’re going to do before talking about how much it will cost. This is logical and it’s very important to both the sales and purchasing process.
You wouldn’t walk into a car dealership and ask how much a car costs before discussing which car you might want.
Sometimes the prospective client or the current client will think the consultant is being coy when the subject turns to money and it seems to be very difficult to nail the consultant down on dollars and cents.
While I can’t speak for all consultants, I think I can shed light on this so that whether you’re a consultant or a client, at least you have a better idea of the dynamics at play.
Rates are Set According to an Hourly Unit
Most agency and consulting rates are set according to an hourly price-point. This doesn’t mean you’ll pay by the hour, and it doesn’t mean that agencies only strive to make what they can according to a 40-hour week. They strive to make more than that, and they do so in a number of ways, from billing clients for services, by marking up out-of-pocket expenses as commissions, by receiving commissions as part of paid advertising buys and through other means. But at the end of the day, the consulting firm’s hourly rates are the units by which all staffing and productivity performance is measured.
The firm’s costs and profits are factored into that hourly rate. No matter how you are being charged as the client, the agency can’t afford to provide service to you unless it can achieve a certain balance between cost and productivity. The measuring unit for that is the hourly rate.
Types of Arrangements
The three basic types of arrangements for serving clients at PR firms is: hourly; project; and retainer.
Progressive Billing/Hourly – The straight hourly rate is the most pure arrangement. It’s most commonly used when it’s not completely clear how the assignment will unfold, how long it will last and what the work will entail from a staffing perspective. One day you may only need one staff member for a couple of hours. The next you may need a whole team doing various things. While you can try to budget these activities, the hourly rate can be challenging for budget-minded clients. In my experience, it’s most commonly preferred in crisis or issues management situations, or when the assignment has an undetermined but seemingly temporary timeline.
That said, I have seen very large and long-term assignments budgeted according to hourly rates, relying heavily on the account manager and the point person on the client side to closely monitor and manage the budget as they go.
Project Rates – The project rate can be applied even if the client relationship is long-term and multiple projects are happening at the same time. While the name may imply a one-off project, that’s often not the case. Project rates are best when you have a clearly defined beginning, middle and end to the assignment with clear roles and duties. For me, project rates are often used for: brand and communications audits; media coaching and training; writing and content development projects, like a brochure or annual report; a planning or research project; a press conference or media briefing; etc.
To arrive at a good estimate for a project, the PR consultant will usually rely on past experience with similar projects of a similar size. The agency may factor in expected items that could contribute to increases or reductions in the time investments it will need to make. At that point, the hourly rate as a price-point will be used to gauge how many staff members can or should be involved, and how much time they can devote to the work. The good news for the client and the agency is that once both parties agree on an acceptable project rate, neither has to be too overly concerned with watching every hour spent on the assignment.
This frees the consultant to do the absolute best possible work without “clock watching,” and it enables the client to do its part to achieve the best possible outcome without “budget watching.” If, for some reason, the demands of the project are too great, however, it will still be the responsibility of the PR firm’s account manager to monitor and speak up as necessary.
Retainer Arrangements – Retainer arrangements can come in many forms, but the most common one is the flat monthly retainer. This is where the client retains the agency on a monthly basis and pays a flat fee for clearly specified services. It’s essentially like paying your PR consultant a monthly salary, not including expenses. Retainer arrangements are well suited for ongoing public relations activities that don’t have a clearly defined beginning, middle and end. One of the most common services I provide on a retainer basis is media relations. This is because the process for building and maintaining client visibility through the media is a long-term one. Even if you get good results early on, media relations is only effective if it’s sustained over time to give the client the presence it needs among its stakeholders.
Deviations from the flat monthly retainer could include a retainer-plus arrangement. In a retainer-plus arrangement, the client pays a base retainer to the PR consultant, but if the consultant finds itself spending more time than is covered by the retainer, the overage is calculated on an hourly basis and is then billed to the client in addition to that retainer.
Managing Expectations
When it comes to budgets, a whole lot of managing is going on. The PR consultant must constantly work to manage client expectations, personnel, budgets and above all, get the client the results it wants. The client needs to manage the consulting firm, the budget and its own internal expectations. In the end, both should be working to achieve the best possible outcomes at the highest value. To do so, the key is for there to be open lines of communication and constant vigilance on budgetary items. Do you have any questions about this? I’d be happy to talk. Just get in touch.