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REVIEW SUMMARY
Industry. Marketing
Trend. Rising costs, greater competition
Key. Solo marketing practitioners may not have the cost advantage they once had over larger agencies.
After nearly a decade building her public relations business, Melinda Isley is giving up her successful solo career.
Isley's challenge: She's getting so much business that her work could double. “I was consistently turning down clients,” says Isley, whose clients now include Barbara B. Mann Performing Arts Hall and the Rib City barbecue chain.
But instead of hiring staff and leasing office space of her own, Isley joined the Fort Myers public relations firm of Gravina, Smith, Matte & Arnold as a partner.
As the economy slowly begins to recover, solo marketing professionals may find it difficult to manage growth. Some, such as Isley, are joining established firms while others plan to hire their own staff. Still others plan to stick to the solo track by focusing on niche clients and limiting their scope of work to those of their choosing.
But unemployed corporate communications professionals, laid-off journalists and recent university graduates also are hanging up shingles and competing for business.
“Suddenly, in the last year, there are a bunch of new solo practitioners,” says Heidi Smith, whose Bradenton-based firm Heidi Smith Communications works with clients such as Florida Power & Light.
While Smith says she hasn't been impacted by the new competition, she worries that many are discounting their services way below market rates. “Many potential clients think of what we do as a commodity,” she worries.
Paul Abercrombie, a former journalist in Tampa and president of Abercrombie Communications, says media people have approached him about starting their own public-relations firms. “I've become an informal counselor for journalists who have been laid off or fearful about getting laid off,” says Abercrombie, whose clients include the law firms of Fowler, White and The Yerrid Law Firm.
Abercrombie takes the prospect of new competition in stride and says none has poached a client.
“If you help them out, it generally comes back to you,” he says. “I look at it as a collegial kind of game.” Anyhow, most solo practitioners often refer work to one another. For example, they might do so if a project involves specialized work such as Web-page design or if the client is in a complex industry such as banking.
Besides managing growth, the expenses of running a solo practice are becoming more onerous. Longtime Tampa solo practitioner Bill Frederick joined St. Petersburg College as the media relations director in March 2007 because health-care insurance was too costly to buy on his own.
“As I got close to age 60, I had to buy a private policy and it was costing me $1,500 a month with a $5,000 deductible,” Frederick says. “I had to make an awful lot of money to get past the expenses.”
The overhead difference
One distinct advantage that solo practitioners have long had is lower overhead expenses than their agency counterparts, especially if they work out of their homes. That has given them more flexibility to undercut the competition.
For example, Bill Frederick says he billed clients $165 an hour when he worked for Tampa-based agency Public Communications Inc. before he left in 2001 to open Bill Frederick Communications. When he opened his own one-man firm, Frederick charged $100 an hour and never raised his rates. “I made more money at $100 an hour because of the overhead,” he says.
But overhead became a problem for Frederick when the economic downturn hit and health-insurance costs soared, forcing him to find an employer with more-reasonable health-insurance benefits. “I'd still be self-employed if it weren't for that,” he says. Frederick still does public relations projects for some clients in his spare time.
When Abercrombie started his solo public-relations practice in Tampa in 1999, he charged $90 an hour. Now he charges $120 an hour, substantially less than executives at many large agencies. He was able to purchase health insurance because he's healthy and relatively young, but knows that cost could rise. “God help you if you have a pre-existing condition,” he says.
Agencies counter that solo practitioners aren't necessarily going to cost less, even if they have lower overhead. While Isley says her own rates increased when she joined Gravina, Smith because she has to share in the overhead expenses, she says lower-paid staff can now handle routine matters, such as proofreading press releases and mailing them. “When I was by myself, I charged the same rate for everything I did because I didn't have support staff,” she says, declining to quote her rates.
“Our rate is pretty comparable to people working out of their home,” says Teri Hansen, president of Fort Myers-based Priority Marketing. Although she declines to say how much she charges, she says some solo practitioners in the Fort Myers area charge the same rates as Priority Marketing.
Hansen, who started as a solo practitioner, says she's always watched expenses as she's grown her firm to 12 employees with 30 clients. “The overhead was not that great because I didn't go into lavish space,” she says. She hired employees because she couldn't control the quality of those with whom she outsourced certain tasks.
In any case, agencies and solo practitioners say they don't compete on price alone. Most often, clients come by way of referrals and surprisingly few seek multiple bids based on price.
“In the five years I've been on my own, I can only count on one hand the number of clients who have actually put it out for bid,” says Clay Cone, president of Naples-based Cone Communications. Cone says he hasn't raised his fees in three years, though he too declines to say how much he charges.
Always on
There is a certain amount of freedom associated with running a solo public relations and marketing firm. For example, Bonita Springs solo practitioner Phyllis Ershowsky teaches public relations at Florida Gulf Coast University and is writing a book about mother-daughter relationships.
Abercrombie also is an author, having recently traveled around the country to promote a book he wrote about cocktails called Organic, Shaken and Stirred. “It's given me the freedom to pursue these kinds of side projects,” Abercrombie says.
But Abercrombie knows his clients are just a phone call away. “You can't flake out and go on a two-week vacation,” he says. “I've gone for a week, but I do not go without being tethered to a laptop or a Blackberry.”
Solo practitioners pride themselves on being personally involved in every project, but that means they're solely responsible for their own success. “I'm always on,” says Cone. “It's my neck that's on the line.”
While the flexibility of his own practice allowed Cone to coach his son's Little League baseball team to a championship season this year, he says he's often working nights and weekends. “I keep getting interrupted during American Idol,” he jokes.
When the economy recovers, Ershowsky says she plans to hire employees for her firm, PKE Marketing & PR Solutions. “I believe there's enough business to go around,” she says.
Unlike larger agencies, individual practices have little value to potential acquirers. “The downside is you don't have a clear exit strategy because you don't have assets to sell,” says Smith.
While Smith declines to be specific about her own business model, she says there are ways for solo practitioners to get around this challenge. For example, some solo practitioners develop a following on the lecture circuit. Others seek revenue from the businesses they develop for clients or try to earn some ownership in the client's business.
And Smith, like most other solo practitioners, says she prefers working alone. “There are some very fine agencies, but it can be very challenging in an economic downturn to maintain staff levels when business is going away.”
Click here for a list of Gulf Coast-based winners of the Addy Award.
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