Five Telltale Signs: It’s Time to Fire Your Marketing/PR Firm

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I recently heard that, at any given time, 40 percent of companies represented by marketing and PR firms are looking to replace the incumbent.

If you’re already a member of the 40 percent club, then here’s further validation of your decision to terminate. If you’re not, here are the issues to pay attention to…you may already be in the 40 percent club, but just don’t realize it.

I’m intimately familiar with the reasons for making a switch. As a high-tech marketing and PR professional for 30 years, I’ve been one of those two out of five clients who had to replace a firm. Likewise, as president of my own firm, I’ll candidly admit that I’ve replaced incumbents.

While there may be other “good causes,” invariably, decisions to terminate a firm come down to budget concerns. If you’re experiencing any of the following budget-related issues, it’s time to cut the cord.

So that you can better track the five telltale signs, it will be useful to have your firm’s invoices, its original proposal, the contract, and any action plans, schedules, reports, etc. Examine your invoices to see if more than half of your monthly invoices exceed the agreed-upon monthly PR budget amount by more than 10%.

In most states, independent contractors are allowed to exceed budget quotes by an identified amount. We’re using 10% here.

Possible Causes

1. It may be the old bid-low, get the contract, then bill-high game that is very prevalent in the marketing/PR industry.

2. At the beginning of each billing cycle, your firm did not provide you with an action plan for your approval that itemized:

  • Each task to be performed
  • The number of hours required to perform each task
  • Who would perform each task, and
  • His/her hourly billing rate

 3. Your monthly invoices include “Trash Bin” charges. Here are some insider tips on line items that don’t result in work productivity, but can add up to as much as 23% of your monthly invoice:

  • “Executive management fee” — Allegedly, the time the firm’s top exec(s) spent getting briefed on your account
  • “Account management fee” — Some firms bill for time spent on internal communications (e.g., to update each other, synchronize schedules, mentor a new team member, etc.).
  • “Administrative charges” — Supposedly, time collecting/managing timesheets, creating the end-of-month billing, writing and editing status reports, etc.
  • “Research” — One firm I know actually bills for time spent researching and writing the firm’s newsletter. The amount was 10 to 20 percent of a clients’ monthly bill
  • “Communications charges” — Many firms bill clients a pro-rated amount of each month’s phone and data communications charges
  • “Miscellaneous” – Great catch-all bucket for just about anything

In reality, most of these trash bin items really represent the firm’s costs of doing business, and they shouldn’t be line items on your invoices. Also, your agency contract should have specifically identified any of the above items for which you are now being billed.

If your reasons for firing the firm include a lack of productivity, perhaps it’s that trash bin’s 23% of each month’s budget that’s keeping your company from achieving its marketing and PR objectives.

4. Markups are another gray area. Some firms clearly state what their pass-through fee is for work performed by sub-contractors. Other firms never indicate these fees, hiding their markup charges in their invoices…maybe a few extra hours are tacked on here and there.

Markups can involve serious money. In my industry research, I’ve found outsourcing margins run anywhere from 40 to as high as 500 percent. A colleague of mine was recently hired by a firm to write a technical feature article. She invoiced the PR agency $1,200. The agency marked it up and charged the client $6,000.

5. Your firm led you into the fixed monthly budget trap. Of all the outsourced resources a company retains, many marketing/PR firms seem quite happy to accept your fixed monthly budget as the basis for an independent contractor’s agreement. They like it because:

  • It guarantees the firm a known monthly income
  • The amount usually becomes a monthly “retainer,” and in months when there might be a shortfall of work to be performed, the firm still has your money

 Compare the fixed budget approach to business realities, such as:

  • Your company’s need for services will fluctuate. Marketing/PR support prior to and during the months of a trade show, or a new product launch, is bound to exceed the firm’s fixed monthly budget. It’s just poor planning on the firm’s part not to have made those kinds of adjustments well in advance
  • The firm is setting you up to be limited by a fixed monthly budget later in the contract period, when the benefits of its services produce results. Good marketing and PR achieve results that cause your business to grow. So, over the course of a year, how is it possible for the same budget of month #1 to be adequate in month #12?  Budget growth (or reductions) should always track with the growth (or lack thereof) of your business

 Now that you better understand the reasons why you are terminating your current firm, the next step is to search for a replacement. Click here, and I’ll send you a list of ToDo’s that will make your search easier and remove risk of making another wrong choice.

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