RECOMMENDED: Find the perfect business for you with our Business Ideas Tool.
According to Forbes Magazine, "PR is the Persuasion Business. You are trying to convince an audience, inside your building or town, and outside your usual sphere of influence, to promote your idea, purchase your product, support your position, or recognize your accomplishments."
Public relations professionals are responsible for enhancing the image and promoting the viewpoint of their clients. They do this through what is called "earned media." Unlike paid advertisements, this type of media, such as news or journal articles, carry much more weight among consumers.
As a public relations professional it’s your job to interest the media in subscribing to your clients’ viewpoint, interviewing them and writing stories that will positively impact your client organizations or individuals in the eyes of their target audiences.
Public relations agencies also act as advisors in establishing or improving the relationships between clients and their clients' various audiences and influencers. In this regard, they might suggest changing practices or embracing new policies that will enhance reputations. If that effort fails or comes too late, some PR firms specialize in crisis communications, which involves salvaging client reputations when events take place that put them in a negative light.
Who is this business right for?
Public relations professionals are typically adept at communicating verbally and through various media. You should be a good writer and have a background in journalism or business. An instinct for sales is also important since you’ll need that tool to establish client relationships, bring your message to the attention of the media and create messaging that advances the viewpoint of your clients. Related to your sales skills, you should have a thorough understanding of how company practices, policies and culture impact customer relationships and be able to help your clients make positive change in this area.
Working in a public relations firm before starting your own business can help you gain better insight into the process, enhance your credibility and maybe put you in touch with future clients.
What happens during a typical day at a public relations agency?
Your day will likely be filled with some or all of the following activities:
- Generating client business through phone calls, written communication and attendance at events
- Networking with industry peers to explore partnership opportunities and stay abreast of industry trends and gossip
- Nurturing working relationships with members of the media that affect your clients, pitching story ideas and serving as spokesperson on behalf of your clients
- Creating communications materials
- Conducting the everyday activities of business owners, including billing clients and paying bills, overseeing employees and interviewing prospective new hires
- Advising your clients on how they interact with their audiences
What is the target market?
Try to develop a clientele that matches your background, skills, specializations or preferences. For instance, if your background is in the film industry it would make sense to make this your specialty. Contact industry peers and make sure they know how long you worked in the business and how thoroughly you understand it. If you wish to specialize in businesses in your hometown, promote your familiarity with local media and the competitive landscape confronting your clients.
Your prospective clients should be established enough to be able to afford your services or have the need to improve their image. Companies about to introduce new products or services, or who have bought other companies or are undergoing changes to leadership or business model are also good candidates.
How does a public relations agency make money?
You’ll be paid by your clients on either an hourly, project or monthly retainer basis for the effort you put into achieving their goals.
What is the growth potential for a public relations agency?
Public relations firms range in size from sole proprietors working from home offices or kitchen tables to global public enterprises. Focus on delivering exceptional service and results and growth will come organically.
What are some skills and experiences that will help you build a successful public relations agency?
You might not consider yourself a salesperson, but you must become one fast. You’ll need this skill to attract clients, nurture media relationships and convince reporters that you have client stories that should be told. You should be a persuasive people-person who genuinely likes interacting with others.
Writing skills and versatility are also critical. Your business could be enlisted to create news releases, press kits, sales and marketing materials, speeches, video scripts, websites and web content, feature articles, white papers and countless other pieces.
What are the costs involved in opening a public relations agency?
Most of the “equity” is in your head, so out-of-pocket costs can be small at first. You could operate out of your house or apartment and use many of the tools you already have, including phone, computer and Internet service. But certain expenditures are critical.
- Graphic design services for the development of your logo, fonts, colors and the overall look of your communications
- Printing of business cards, letterheads, envelopes and other collateral sales and marketing materials
- Website development, which you should only handle yourself if you have a sophisticated understanding of digital production
- Copywriting of sales and marketing materials if writing isn’t a strength
- Membership fees for relevant trade associations and networking organizations, starting with your local chapter of Public Relations Society of America (PRSA)
These expenses might not exceed $1,000. But keep in mind that it could be a long time before you start developing a client roster and generating enough income to survive. Can you go six months without a paycheck? Your day-to-day costs while building your business are your real startup costs, so try to have savings to weather at least several months without income.
Your financial reserves can perhaps be smaller if you can start part-time (while keeping your day job), or if you will have one or more clients signed up from day one.
What are the steps to start a public relations agency?
Once you're ready to start your public relations agency, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your public relations agency is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your public relations agency keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Recommended: Fizzle.co offers video courses and a supportive online community of like-minded entrepreneurs. Try one month membership for free.
How to promote & market a public relations agency
Can you describe your expertise in a dozen words or less? Try to distill what you do and who you do it for in as few words as possible, and use that theme or signature to justify everything you do to promote your business.
Once you’ve figured out your message, think like your prospective clients to find them. What do they read? Which associations have they joined, and what events do they attend? You want to be where they are. You want to have their eyes on content you wrote and to meet them where they hang out.
If able, advertise in their trade publications, buy booths at conventions and explore advertising opportunities in digital or offline publications that draw their interest.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Think of your firm as one of your clients. Your goal in working with your clientele is to bring them to the attention of their various publics with the communications they want to share. That’s exactly what you should be doing for your own firm on an ongoing basis.
Start a blog or e-newsletter and ask every potential customer if you can include them on your subscription list. (Never send anyone unsolicited content or it will be treated like spam.) Write content that’s informative and of value and interest to them—in other words, not sales pitches. Communicate in a way that will make you an industry thought leader and a valuable resource.
Much of this can be done at little cost except for a significant investment in time.
How and when to build a team
Unless you launch with significant client activity or buy an existing business, you’ll probably start solo. As you gain clients and win new business, you might feel a pressing need to add staff. Your first hire might be an experienced account person with a following who can quickly usher in new business. Perhaps you’ll seek less experienced—and less costly—help just to get the work done. Or maybe you need expertise beyond your capabilities. For instance, if you wanted to branch out into media training, you might wish to hire someone with a media background or an experienced educator.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a public relations agency. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
In addition, certain local licensing or regulatory requirements may apply. For more information:
- Check with your town, city or county clerk’s office for information about local permits and licenses
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, check out our informative guide, Sales Tax for Small Businesses.
PR firms should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership (who will ultimately own the app). Here is an example of one such services agreement.
How much can you charge customers?
This sounds simplistic, but what you should charge is what you can get. That’s going to vary depending on your background and reputation, region of the country, what your clients are used to paying for similar services and what your competitors charge.
There are basically three ways for public relations firms to charge customers: at an hourly rate, per project and via monthly retainer. Let’s take a closer look at each method.
- Hourly rate – Think of this as your basis for setting prices even if you don’t charge hourly. In other words, if you charge on a per-project basis and the project is to write a news release and your best estimate is that it will take you four hours from start to finish, charge your hourly rate times four hours. That rate might range from $75 for a newcomer operating solo out of a home office to $500 or more per an hour for larger firms working in a specialized area with Fortune 1000 clients.
- Per project – Again, use your hourly rate and expectation of how long you figure the project will take. This is the least desirable way of working, especially if you’re dealing with a new client and aren’t familiar with their approval process or expectations. If you think a video production will take 40 hours from the initial client meeting to completion and approval and it actually takes 80 hours because of client changes or negative feedback, you’ve effectively made half your hourly rate. However, it’s a good way for both parties to learn whether you can work together with the investment of only a single project or two.
- Monthly retainer – Only use this method if both parties thoroughly understand the scope of responsibilities. That’s because you’ll agree to a set amount every month. Some months you might work more than your hourly expectation while other months you’ll work less, but it should roughly even out. If not, you can renegotiate the retainer down the road. PR firms and their clients typically sign six-month commitments, with a review period after three months to make sure both parties are satisfied with the arrangement. One big benefit for your firm is the predictability. You know how much you’ll make every month from that client, which can help with long-term planning and forecasting.
Whichever payment method you select, don’t forget to let your client know that you’ll add your out-of-pocket costs. For instance, you’ll seek reimbursement for travel costs, including gas mileage, meals if you have lunch meetings with media, the third-party costs of photographers, videographers, writers or other vendors, and other costs consumed on their behalf.
What are the ongoing expenses for a public relations agency?
- Client attainment – This can include everything from ads in industry publications to the cost of taking prospective clients to lunch.
- Client relations – This might involve entertainment, holiday cards, gifts and other direct costs of maintaining relationships.
- Employees – Perhaps not among your first expenses, but your goal might well be to get big enough that you need additional help or expertise in fields where you have little skill or experience
- Memberships – This can include fees for joining PRSA as well as trade associations that reflect the interests and involvement of your clients
- Typical offices expenses, including rent, phone, utilities, taxes, etc.
How much profit can a public relations agency make?
Gould+Partners, a consulting firm for the industry, conducts an annual survey of profitability for public relations firms doing at least $10 million in net revenue. For the 2015 report, Gould+Partners found that this group earned a 19.5 return on investment in 2015. That’s derived from revenue remaining after all expenses are paid.
How can you make your business more profitable?
As you gain experience and expertise and your reputation grows, you can raise your hourly rate. You can also take on more work by hiring account people who already have or can quickly attain a clientele. And, finally, explore such closely associated side businesses as media training, in which you show clients how to properly conduct interviews and otherwise interact with the media.