PR Agency Industry

2010 Best Practices Benchmarking

Report:

By Agency Size, Region and Specialty

(Based on 2009 Results)

June 2010

©StevensGouldPincus, LLC
©StevensGouldPincus, LLC June 2010 2

PR Agency Industry

2010 Best Practices Benchmarking Report:

By Agency Size, Region and Specialty

(Based on 2009 Results)

June 2010

©StevensGouldPincus, LLC

CONTENTS

Introduction and Overview Page 3

Executive Summary, Scope and Participant Profiles Page 4

Chart – The 21 Top Benchmarks by Agency Size Page 7

Chart – The 21 Top Benchmarks by Agency Region Page 8

Chart – The 21 Top Benchmarks by Agency Specialties Page 9

Endnotes: Analyses and Insights Page 10

Ongoing Goal of our Spot Surveys and Reports Page 14

©StevensGouldPincus, LLC June 2010 3

Introduction and Overview

StevensGouldPincus conducts an ongoing series of surveys throughout the year. We design

the reports to be simple, effective and easy to interpret. These surveys and results zero in on
metrics critical to PR agency growth, management and operations. The methodology is
sound, and the meaningful results are initially fully reported only to participants.

Rick Gould, CPA, J.D. created the concept of benchmarking for the public relations industry
in 1987. After 23 years of surveys and analyses, one thing stands out:

Firms that implement changes based on current benchmarks

ultimately realize increased profitability and success.

Benchmarking data, especially the year-end figures as outlined in this report, shows how
firms are evolving based on changing market forces. Business practices that have proven to
be successful, including during the current recessionary period, are identified.

StevensGouldPincus regularly advises merger and management consulting clients how to

interpret and apply this data in detail, tailoring it to each particular firm. Our clients
increase profitability and improve operational effectiveness.

CEO’s of leading PR firms have honored us with the feedback that SGP’s benchmarks are an
invaluable resource in successfully managing their firms.
©StevensGouldPincus, LLC June 2010 4

Executive Summary, Scope and

Participant Profiles

This 2010 Best Practices Benchmarking Report by Agency Size, Region and Specialty
includes what we see as the 21 most critical benchmarks for a firm to track. They are the
ones an agency principal must manage closely to successfully grow a firm and maximize
profitability.

Overall, 111 firms from a broad spectrum of sizes and specialties are represented in
the survey results reported herein. Profiles of the responses by size, region and specialty are
illustrated in the following charts.

We have also tracked the most frequently requested benchmark, billing rates and utilization
percents, to each section. These informative benchmarks, including productivity statistics,
will now be a permanent part of our annual study and presented in a separate expanded
report.

On Wednesday, June 23, 2010 you will receive this expanded report - The 2010
StevensGouldPincus Billing Rates and Utilization Report. This report will be presented in
the same format as the Best Practices Benchmarking Report - by size, region and specialty.
The most current billing rates by position and averages/benchmarks for expected
productivity will be outlined. This report will provide the most current stats of leading
model firms. As is our standard practice, no names of firms will be disclosed; only averages
will be revealed.
©StevensGouldPincus, LLC June 2010 5

Executive Summary
Operating
Total Expenses/ Operating
Labor Overhead Profit

Size #
<$3 Mill 40 59.3% 30.3% 10.4%
>$3 Million to $10 Million 49 56.6% 28.6% 14.8%
>$10 Million to $25 Million 14 53.6% 29.4% 17.0%
> $25 Million 8 59.1% 35.9% 15.0%
All 111 57.4% 29.1% 13.5%

Regions
1. NY & NJ 38 56.5% 27.8% 15.7%
2. D.C.& Suburbs 6 59.5% 27.3% 13.3%
3. NE 7 58.6% 25.9% 15.5%
4. SE 7 54.6% 27.9% 17.5%
5. Midwest 13 56.6% 29.6% 13.9%
6. SW 13 56.8% 31.1% 12.2%
7. Southern CA 7 51.8% 37.3% 9.2%
8. Northern CA 11 62.0% 27.6% 10.4%
9. NW 3 72.1% 22.7% 5.2%
10. Canada 6 56.3% 30.6% 13.1%
All 111 57.4% 29.1% 13.5%
©StevensGouldPincus, LLC June 2010 6

Executive Summary
Operating
Total Expenses/ Operating
Labor Overhead Profit

Specialties #

1. Healthcare 55 56.0% 29.8% 14.2%

2. Tech 54 57.4% 29.3% 13.3%
3. Financial/Investor Relations 33 56.2% 29.3% 14.6%
4. Consumer 56 57.3% 28.2% 14.5%
5. Crisis 42 57.0% 29.5% 13.5%
6. Sports/Entertainment 15 52.3% 31.3% 16.3%
7. Beauty/Fashion 22 54.2% 31.5% 14.3%
8. Economic Development 12 59.3% 34.3% 6.9%
9. Professional Services 44 56.7% 28.8% 14.5%
10. Food & Beverage 33 55.6% 28.5% 15.9%
11. Public Affairs 36 57.3% 31.0% 11.7%
12. Travel 28 53.7% 29.4% 16.9%
13. Real Estate 21 54.4% 29.3% 16.3%
All 57.4% 29.1% 13.5%

Comparative Last Year 56.4% 28.0% 15.6%

Increase (Decrease) +1.0% +1.1% -(2.1)%

Result on the Bottom Line (Operating Profit)

(2.1)% ÷ 15.6%= 13.5% Decrease in profitability from last year (2008 Results)

2007 19.7% to 2009 13.5%= 31.5% Decrease in profitability in the last 2 years
©StevensGouldPincus, LLC June 2010 7

2010 Best Practices Benchmarking Report: By Agency Size

Refer to A B C D All All Comparative
Benchmark #
on Insights
Page 10 < $3M $3M - >$10M - >$25 Mill 2009 2008 2007
$10M $25M
# Respondees 40 49 14 8 111 106 105
1. Revenue Per Staff 1 $ 150,990 $ 175,334 $ 177,794 $ 190,192 $166,460 $176,671 $ 171,764
2. Revenue Per Professional 2 $ 177,938 $ 209,235 $ 209,478 $ 233,473 $197,714 $210,742 $ 221,388
As a % of Revenues
3. Account Salaries 3 46.4% 42.2% 40.8% 45.1% 43.7% 42.2% 40.3%
4. Bonuses 4 2.3% 3.1% 1.5% 1.7% 2.4% 3.2% 3.3%
5. Freelance Labor 5 5.9% 4.9% 2.1% 1.7% 4.4% 4.2% 4.1%
6. Total AE Labor Cost 6 59.3% 56.6% 53.6% 59.1% 57.4% 56.4% 54.5%
7. Admin. Salaries 7 6.7% 6.7% 8.2% 8.7% 7.0% 6.4% 6.3%
8. Rent & Utilities 8 8.3% 7.6% 8.4% 8.2% 7.9% 7.1% 6.6%
9. New Biz/Marketing 9 2.8% 1.9% 1.7% 2.3% 2.2% 2.3% 2.5%
10. Professional Fees 10 2.2% 2.2% 1.5% 1.3% 2.0% 2.2% 1.9%
11. New Biz Referral Commissions 11 0.6% 2.5% 1.6% 0.9% 1.8% 1.5% 2.0%
12. Total Overhead/ Op. Expenses 12 30.3% 28.6% 29.4% 25.9% 29.1% 28.0% 25.8%
13. Operating Profit 13 10.4% 14.8% 17.0% 15.0% 13.5% 15.6% 19.7%
14. Billing Methods Used (Weighted) 14
Time Based 53.2% 38.9% 38.1% 49.5% 43.5% 47.4% 47.2%
Fixed Fees/Retainers 63.6% 57.3% 57.0% 25.4% 56.6% 51.7% 53.1%
Retainer/Overages 20.0% 27.0% 11.7% 27.8% 23.5% 12.3% 30.4%
Project Based 18.5% 20.1% 16.3% 23.6% 19.6% 15.2% 17.8%
Value Billing --- --- --- --- --- 1.4% 2.4%

15. Billing for Travel Time 15

Full Rate 54% 64% 60% 75% 55% 55% 62%
Half Rate 46% 36% 40% 25% 45% 45% 38%
16. Average Minimum Monthly Fee 16 $ 7,147 $ 8,638 $ 14,333 $ 9,677 $ 9,808 $ 10,332 $ 14,048
17. Largest Client % of Revenues 17 23.5% 19.6% 18.4% 6.2% 20.0% 20.0% 17.9%
Top 20% Clients % of Revenues 57.3% 55.9% 56.1% 60.5% 56.8% 57.5% 58.8%
18. Baseline Hours 18 1,673 1,664 1,698 1,694 1,679 1,690 1,694
19. Utilization - Account Execs* 19 87.6% 92.9% 95.2% 93.3% 91.5% 87.7% 90.2%
20. Turnover 20 24.2% 21.6% 16.5% 28.7% 23.3% 25.0% 24.2%
21. Average Markup 21 16.6% 14.7% 16.2% 13.8% 15.5% 16.8% 17.6%
(Range 15-20%)

* Separate Billing Rates & Utilization Report will be released end of June.
©StevensGouldPincus, LLC June 2010 8

2010 Best Practices Benchmarking Report: By Agency Region

Regions Refer to 1 2 3 4 5 6 7 8 9 10 All

Benchmark #
on Insights
Page 10
NY Metro DC & NE SE Midwest SW Southern Northern NW Canada 2009 2008 2007
Suburbs CA CA
# Respondees 38 6 7 7 13 13 7 11 3 6 111 106 105
1. Revenue Per Staff 1 $ 181,983 $186,842 $142,396 $ 162,775 $ 160,767 $ 137,158 $160,940 $169,257 $ 160,684 $ 163,036 $166,460 $176,670 $171,764
2. Revenue Per Professional 2 $ 211,928 $223,206 $173,640 $ 194,972 $ 197,366 $ 170,306 $195,971 $188,884 $ 186,659 $ 195,696 197,714 210,746 221,388
As a % of Revenues
3. Account Salaries 3 42.1% 42.6% 45.5% 39.9% 43.4% 44.9% 41.7% 48.0% 48.5% 46.9% 43.7% 42.2% 40.3%
4. Bonuses 4 2.8% 5.7% 2.7% 2.4% 2.6% 1.2% 0.8% 1.1% 2.9% 2.4% 2.4% 3.2% 3.3%
5. Freelance Labor 5 4.1% 4.9% 4.2% 3.9% 4.9% 2.9% 2.7% 6.3% 17.5% 2.0% 4.4% 4.2% 4.2%
6. Total AE Labor Cost 6 56.5% 59.5% 58.6% 54.6% 56.6% 56.8% 51.8% 62.0% 72.1% 56.3% 57.4% 56.4% 54.0%
7. Admin Salaries 7 7.3% 4.8% 4.8% 5.5% 6.3% 8.4% 11.1% 6.8% 5.9% 6.2% 7.0% 6.4% 6.3%
8. Rent & Utilities 8 7.7% 7.9% 5.2% 6.5% 8.3% 8.1% 8.1% 8.4% 5.5% 11.7% 7.9% 7.1% 6.6%
9. New Biz/Marketing 9 2.3% 3.9% 2.2% 1.2% 2.0% 2.2% 2.6% 1.6% 1.5% 3.6% 2.2% 2.3% 2.5%
10. Professional Fees 10 1.7% 1.0% 1.9% 1.1% 1.9% 3.5% 3.2% 2.1% 1.9% 1.6% 2.0% 2.2% 1.9%
11. New Biz Referral Commissions 11 2.4% 2.1% 1.3% 0.3% 1.2% --- 1.0% --- 1.4% --- 1.8% 1.5% 2.0%
12. Total Overhead 12 27.8% 27.3% 25.9% 27.9% 29.6% 31.1% 37.3% 27.6% 22.7% 30.6% 29.1% 28.0% 25.8%
13. Operating Profit 13 15.7% 13.3% 15.5% 17.5% 13.9% 12.2% 9.2% 10.4% 5.2% 13.1% 13.5% 15.6% 19.7%
14. Billing Methods (Weighted) 14
Time Based 38.7% 25.0% 37.5% 14.2% 48.1% 25.9% 44.0% 59.0% 55.0% 69.0% 43.5% 47.4% 47.3%
Fixed Fees/Retainers 70.0% 39.0% 43.2% 50.3% 33.7% 61.2% 68.0% 64.0% 45.0% 31.0% 56.6% 51.7% 52.7%
15. Billing for Travel Time 15
Full Rate 74% 0% 67% 67% 30% 57% 50% 67% 50% 67% 55% 55% 65%
Half Rate 26% 100% 33% 33% 70% 43% 50% 33% 50% 33% 45% 45% 35%
16. Average Minimum Monthly Fee 16 $ 9,610 $ 12,506 $ 7,261 $ 9,050 $ 6,755 $ 5,955 $ 7,493 $ 11,325 $ 8,750 $ 9,227 $ 9,808 $ 10,330 $ 14,048
17. Largest Client % of Revenues 17 17.0% 14.1% 11.5% 17.0% 22.6% 20.9% 20.7% 20.1% 66.0% 21.6% 20.0% 20.0% 17.6%
Top 20% Clients % of Rev. 49.7% 63.4% 44.6% 58.1% 64.0% 65.2% 61.2% 53.6% 75.3% 64.5% 56.8% 57.5% 58.5%
18. Baseline Hours 18 1,722 1,647 1,702 1,591 1,659 1,647 1,647 1,721 1,516 1,544 1,679 1,690 1,694
19. Utilization - Account Execs 19 88.8% 86.1% 88.1% 99.4% 90.1% 89.9% 93.0% 94.3% 74.8% 90.0% 91.5% 87.7% 90.2%
20. Turnover 20 19.7% 23.6% 24.8% 24.5% 16.4% 23.0% 24.7% 25.9% 27.3% 32.1% 23.3% 25.0% 24.2%
21. Average Markup 21 14.50% 17.70% 16.30% 15.40% 17.30% 17.10% 16.50% 14.90% 17.60% 9.50% 15.50% 16.80% 17.65%
(Range 15-20%)
©StevensGouldPincus, LLC June 2010 9

2010 Best Practices Benchmarking Report: By Agency Specialty

Specialties Refer to Healthcare Tech. Financial/ Consumer Crisis Sports/ Beauty/ Economic Prof. Food & Public Travel Real All 2008 2007
Benchmark #
Investor Entert. Fashion Devel. Services Beverage Affairs Estate 2009
on Insights
Page 10 Relations

# Of Respondees 55 54 33 56 42 15 22 12 44 33 36 28 21 111 105 106

1. Revenues Per Staff 1 $ 176,408 $ 164,987 $ 170,973 $ 172,281 $ 170,143 $ 185,853 $ 169,353 $ 169,760 $ 165,205 $ 173,274 $ 163,198 $ 178,323 $ 168,572 $ 166,460 $ 176,670 $ 171,764
2. Revenues Per Professional 2 $ 212,759 $ 194,445 $ 204,351 $ 203,896 $ 204,113 $ 224,843 $ 201,889 $ 213,113 $ 197,731 $ 212,867 $ 196,845 $ 212,830 $ 202,734 $ 197,714 $ 210,746 $ 221,388

As a % of Revenues

3. Account Salaries 3 42.5% 43.7% 43.0% 43.5% 43.3% 41.4% 42.5% 46.9% 43.9% 42.8% 45.7% 41.6% 43.1% 43.7% 42.2% 40.3%

4. Bonuses 4 2.4% 1.9% 2.2% 2.2% 2.0% 1.6% 2.1% 1.5% 2.0% 1.7% 1.8% 1.4% 1.4% 2.4% 3.2% 3.3%
5. Freelance Labor 5 4.2% 5.1% 3.8% 4.6% 3.8% 2.5% 2.2% 4.0% 4.4% 3.7% 2.2% 3.6% 3.3% 4.4% 4.2% 4.1%
6. Total AE Labor Cost 6 56.0% 57.4% 56.2% 57.3% 57.0% 52.3% 54.2% 59.3% 56.7% 55.6% 57.3% 53.7% 54.4% 57.4% 56.4% 54.5%
7. Administrative Assistant 7 7.5% 6.4% 7.2% 7.1% 7.2% 8.4% 6.6% 8.7% 6.5% 6.8% 7.8% 6.8% 7.1% 7.0% 6.4% 6.3%

8. Rent & Utilities 8 7.8% 8.3% 8.3% 7.6% 8.5% 8.6% 8.4% 10.9% 8.3% 7.7% 8.6% 8.2% 7.6% 7.9% 7.1% 6.6%
9. New Biz/Marketing 9 2.7% 2.4% 2.1% 2.1% 2.2% 1.4% 2.0% 1.6% 2.3% 2.1% 1.9% 1.8% 2.5% 2.2% 2.3% 2.5%

10. Professional Fees 10 1.8% 2.0% 1.9% 1.8% 1.7% 1.9% 2.1% 1.9% 2.0% 1.8% 1.8% 1.4% 1.5% 2.0% 2.2% 1.9%
11. New Biz/Referral Comm. 11 1.3% 2.5% 4.1% 2.0% 1.1% 2.8% 1.3% 1.2% 2.9% 1.2% 2.5% 1.5% 3.1% 1.8% 1.5% 2.0%

12. Total Overhead/Op. Exp. 12 29.8% 29.3% 29.3% 28.2% 29.5% 31.3% 31.5% 34.3% 28.8% 28.5% 31.0% 29.4% 29.3% 29.1% 28.0% 25.8%
13. Operating Profit 13 14.2% 13.3% 14.6% 14.5% 13.5% 16.3% 14.3% 6.9% 14.5% 15.9% 11.7% 16.9% 16.3% 13.5% 15.6% 19.7%

14. Billing Methods (Weighted) 14

Time Based 39.2% 43.6% 38.6% 41.7% 36.6% 36.1% 52.3% 49.1% 33.7% 45.2% 34.7% 35.4% 38.0% 43.5% 47.4% 47.2%
Fixed Fees/Retainers 53.9% 53.6% 54.5% 50.7% 55.3% 55.3% 53.6% 46.4% 56.9% 52.5% 51.2% 64.7% 61.2% 56.6% 51.7% 53.1%

15. Billing for Travel Time 15

Full Rate 69% 63% 69% 55% 60% 75% 53% 40% 52% 61% 60% 50% 40% 55% 55% 62%
Half Rate 31% 37% 31% 45% 40% 25% 47% 60% 48% 39% 40% 50% 60% 45% 45% 38%

16. Average Min. Monthly Fee 16 $ 8,687 $ 8,591 $ 8,808 $ 9,059 $ 9,297 $ 7,745 $ 7,879 $ 5,740 $ 8,509 $ 8,375 $ 8,456 $ 8,698 $ 8,584 $ 9,808 $ 10,330 $ 14,048

17. Largest Client % of Rev. 17 21.0% 20.0% 14.7% 21.4% 17.2% 15.2% 16.5% 12.6% 19.1% 17.2% 15.5% 17.1% 15.9% 20.0% 20.0% 17.6%
Top 20% Clients % of Rev. 60.2% 57.9% 55.5% 56.3% 54.3% 60.4% 59.5% 61.3% 57.6% 53.7% 58.1% 54.4% 49.5% 57.5% 57.5% 58.5%

18. Baseline Hours 18 1,671 1,666 1,655 1,654 1,682 1,642 1,662 1,629 1,658 1,675 1,645 1,640 1,670 1,690 1,690 1,694

19. Utilization - Account Execs 19 92.2% 90.0% 93.0% 90.5% 90.7% 97.2% 91.2% 94.4% 92.6% 92.1% 91.4% 94.4% 88.8% 91.5% 87.7% 90.2%

20. Turnover 20 23.5% 24.7% 21.8% 22.7% 21.8% 25.8% 21.1% 24.2% 23.5% 22.5% 24.7% 24.0% 22.2% 25.0% 25.0% 24.2%
20. Average Markup 21 18.9% 15.2% 14.9% 15.9% 15.0% 15.1% 15.1% 14.1% 15.6% 16.3% 16.3% 14.9% 14.9% 16.8% 16.8% 17.65%
©StevensGouldPincus, LLC June 2010 10

Endnotes: Analyses and Insights

The 21 most critical benchmarks are analyzed by agency size, or revenue category,
by region and by agency specialty. (The benchmarks marked with an asterisk*
represent the most critical elements to track.)

1. Revenue Per Staff ($166,460) This is the revenue per total number of staff,
regardless of whether they are account or administrative personnel. At all
revenue categories the average was consistent with last year. Last year it was
$176,671.

2. *Revenue Per Professional Account Personnel ($197,714) The trend

was down by an average of about $10,000 but still respectable. Last year the
average for all firms was $210,742 and in 2007 was $221,388.

This is a key indicator of productivity for professional staff. If professional

staff salaries % of revenues and total overhead % of revenues are also
effectively managed, this benchmark should be an indicator of profitability.

If the revenue per professional amount is high, in excess of $200,000, but

professional account salary % is also high, it is possible to have high revenue
per professional amount with “moderate” profitability.

By analyzing this key benchmark, you will get terrific insight as to the “why”
behind the profitability %.

AS A % OF REVENUES (FEE BILLING PLUS MARKUP ON REBILLABLES)

3. *Account Salaries (43.7%) This % has increased 1 ½%-2% each year for the
past few years. It does not include bonuses. The goal should be 35%. The
most profitable firms, what we call “model firms”, consistently keep their base
account salaries at this level. It was consistent for every region.

4. Bonuses (2.4%) This metric is down almost a % from last year (3.2%) This
equates to about 5.5% of salaries.
©StevensGouldPincus, LLC June 2010 11

5. Freelance Labor (4.4%) Consistent with last year, at 4.2%. This represents
temporary personnel and specialists to fill staffing gaps.

6. *Total Labor Cost (57.4%) Up from 56.4% last year. This is an indication
if salaries, bonuses and freelance labor need to be managed tighter. Model
firms keep it as low as 50% and never in excess of 55%.

7. Administrative Salaries (7.0%) Consistent with 6.4% the previous year.

There was no specific trend in the various regions and specialties.

8. *Rent & Utilities (7.9%) Up from 7.1% in 2008 & 6.6% in 2007. It is
generally the largest overhead item for all firms. In all regions & specialties
the average was between very consistent with prior years.

9. New Biz/Marketing (2.2%) This remained right around the traditional 2-

3%.

10. Professional Fees (2.0%) This was slightly down from last year’s 2.2%. It
has increased in the last 5 years, a sign that CEO’s & CFO’s are utilizing the
services of outside coaches, consultants, CPA firms and law firms on a more
regular basis. They are listening, learning and implementing financial, legal
and strategic controls.

11. New Business Referral Commissions (1.1%) Down from last year of 1.5%.
There may be a correlation between the utilization of outside referrers and
superior profitability. In less profitable and recessionary years commissions
may be higher in the drive to get new business.

12. *Total Operating Expenses/Overhead (29.1%) This went up slightly, 1.1%

from the previous year’s average (28.0%). At every revenue category it was
around 29.1%. Our advice is always to consistently monitor these costs. It is
very difficult to change courses and cut back quickly during less prosperous
times. Model firms will be sure it is below 25%.

13. *Operating Profit (13.5%) This was down from 15.6% 2008 & 19.7% in 2007.
This metric closely parallels industry growth in revenues and profits, and is
consistent with the model firms we track in detail regularly throughout the
year. The downward trend is consistent with the economic downturn.
©StevensGouldPincus, LLC June 2010 12

14. Billing Methods This benchmark varies the most and is the most difficult to
measure and track. The best way to approach a comparison with this
benchmark is to focus on your revenue group & region. The ideal method is to
charge a minimum fixed-fee as a retainer and then an hourly rate for
productive, pre-approved time charges that exceeds budgeted hours. This
assures steady cash flow and provides assurance that you will get paid for your
time. This topic will be addressed again in our soon to be released Billing Rate
& Utilization Report.

15. *Billing for Travel Time (55% Full Rate and 45% Half Rate) Exactly the
same as last year. This shows a more aggressive trend to bill travel time at
full rate versus half rate. This is a practical and sound approach, especially
since most travel is done during the workday. Based on our interviews with
many CEO’s and CFO’s, we found that the staff person is doing work for only
that client they are traveling to, whether it be preparation, presentation,
writing or follow-up reporting. We recommend all firms charge full rate for
travel time. Just about all firms over $10 Million revenue bill full rates.

16. *Average Minimum Monthly Fee ($9,808) The overall average for our 111
participating firms was slightly lower than a year ago. This is a trend and
shows that clients have been fee resistant with the effects of the economic
slowdown. Budgets have been cut and many clients have changed the fee
model. Be sure to look at the metric for both region and specialty. It varies
widely.

17. A. *Largest Client as a % of Revenues (20.0%) Exactly the same as last

year. This benchmark has remained very consistent year after year, and it is
currently right on target. The goal has always been for it to be around 20%.

B. Top 20% of Clients as a % of Total Revenues (56.8%) (i.e. if 25 clients,

the 5 largest would be 20%). The goal should be for the top 20% to represent
no more than 60% of total revenues. Last year this benchmark was 57.5%.

18. *Baseline Hours (1,679) Slightly down from 1,690 last year. This has been
the most consistent benchmark for the past several years. Baseline hours
represent the targeted client hours for an account staff person. It is net of
vacation, holidays, sick, personal, training, seminars etc. 1700 hours should
be the goal for each staff person not involved with new business pitching. We
recommend setting a realistic expectation for each level of staff. The baseline
for an account executive doing exclusively client work would be 1700. The
baseline for CEO may be 500; for
©StevensGouldPincus, LLC June 2010 13

a V.P that does substantial new business pitching and proposal writing it may
be 1,000 hours. The key here is to be very realistic. (i.e. 52 weeks @ 40 hours
= 2,080 as a starting point.) Start with the total hours, back out the non-
client time and get your baseline. You then can use this for budgeting billable
hours, revenues for the month and year-end productivity metrics.

19. *Account Staff/Utilization Targets (91.5%) This is another reality check.

It represents what % of the total hours will actually be billable. (i.e. IF 1700
hours are the baseline clients hours, 91.5% or 1,555 hours will actually be
billable. This benchmark is critical to watch in order to realistically budget
revenues. (The net utilization hours times the billing rate should equal the
dollars generated by that staff person.) This will be expanded in our Billing
Rates & Utilization Report, to be issued during June.

20. Turnover (23.3%) At every level, except firms in the $10M - $25M range,
staff turnover was in excess of 20%. This is fairly consistent with our
turnover study done last year (25.0%).

21. Average Mark-up (17.65%) We have done extensive studies on this for 20
years. In the PR industry, most firms mark-up a majority of rebillables to
cover the cost linked to administering and carrying the outlay for the out-of-
pocket. Those firms that do mark-up rebillables use the standard rate of
17.65%. We recommend this as a practical policy to adopt. Some firms have
slightly altered their mark-up model and may have different mark-up
percents for each rebillable.

COMING SOON *Billing Rates & Utilization Report This is the most often
requested information from clients and within the PR community. If your rate
structure is not adequate, whether you bill hourly or fixed fees based on budgets, you
will never attain the profitability levels as those of our Model firms. We will be
issuing a separate report on this to be released on June 23, 2010.

Keep Your Eye On The Overall Goal:

Labor under 50%; Overhead no more than 25%,

Operating Profit 25%+

My counsel to you is this: if your agency can strive to reach the 21 most critical
benchmarks, you will watch your profitability attain levels beyond what you
imagined were possible and continue to prosper in recessionary times.
©StevensGouldPincus, LLC June 2010 14

Ongoing Goal of our Spot Surveys and Reports

Our goal is to continually define the profile of a successful “model firm”, based on a
point in time each year, by each revenue category, region and specialty. Quantifying
model firms not only helps us to better support our clients’ goals and objectives, but
also helps the industry as a whole to successfully evolve and weather changing market
conditions.

We examine all types and sizes of PR firms in-depth, both those that are clients as
well as those that simply agree to share their confidential financial, management and
operational statistics with us.

Thank you for your support of our benchmarking efforts. Look for other relevant
surveys in the future. We welcome your suggestions for additional survey topics and
reports.

We also invite you to commit to being a long-term, ongoing participant in our surveys.
Everything you share with us is in complete confidence, and all resulting reports will be
sent directly to you.

StevensGouldPincus is the nation’s only Merger & Management Consulting firm

specializing in the PR industry.

Please contact me directly if you have any questions and/or comments. Best wishes
for a prosperous year, professionally and personally!

Rick Gould, CPA, J.D. rgould@stevensgouldpincus.com

Managing Partner