Calculating the cost of a PR agency with Jason Mudd | On Top of PR podcastBy On Top of PR
November 17, 2020
Learn the true cost of employing PR professionals inside of your organization with our host Jason Mudd. Jason is the managing partner of Axia Public Relations.
Jason Mudd, On Top of PR host, helps companies get on Undercover Boss. He is a trusted adviser and dynamic strategist for some of America’s most admired brands. Since 1994, he’s worked with American Airlines, Budweiser, Dave & Buster’s, H&R Block, Hilton, HP, Miller Lite, New York Life, Pizza Hut, Southern Comfort, and Verizon. He founded Axia Public Relations in July 2002.
The one with Jason Mudd on how hiring an in-house PR professional compares to hiring a PR agency.
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Five things you’ll learn from this episode:
What’s the true cost of employing PR professionals inside your organization?
How does hiring an in-house PR professional compare to hiring a PR agency?
What tool can I use to figure out these costs?
Why does hiring a PR professional for their contacts doesn’t work?
If I hire a PR professional on my team, will I end up outsourcing anyway?
“Whether you choose to take a risk of employing or operating an effective PR department or attempt to go buy cheap by only hiring one person, the expenses and risks really add up quickly.” — @jasonmudd9
“For most companies, an effective PR campaign will require the efforts of the team.” — @jasonmudd9
“The more PR staff a company has on payroll, the more that company depends on outside PR firms.” — @jasonmudd9
“Your PR firm is providing an external team of proven PR professionals who are eager to immediately drive PR outcomes for you and your company.” — @jasonmudd9
“If you’re growing your in-house team, there’s going to be a higher proclivity to outsource more work to an outside agency anyway.” — @jasonmudd9
If you enjoyed the episode, would you please leave us a review?
Presented by: ReviewMaxer, the platform for monitoring, improving, and promoting online customer reviews.
- Hello, and welcome to another episode of On Top of PR. I'm your host Jason Mudd, and today we're doing a solo cast and we're talking about a little secret formula that I have for you, and it has to do with what's the true cost of employing PR pros inside your organization. And how does that compare to hiring a PR firm or a PR agency? This is gonna be an interesting episode and I'm looking forward to sharing this with you. Stay tuned.
- [Announcer] Welcome to On Top of PR with Jason Mudd, presented by ReviewMaxer.
- Hello and welcome to another episode of On Top of PR, I'm your host Jason Mudd. I'm so glad you're here. Thank you for joining me. Today we're doing a solo cast where it's just you and me. And we're talking about PR topics, trends, and techniques that you can use in your company to leverage the power of PR. And today we're talking about the cost of hiring a PR department. Some companies decide to have a PR department. Some companies decide to outsource to a PR agency and some companies and really the companies with the biggest budgets do both. And so I wanna walk you through the pros and cons and the real cost of doing this. This is something that we worked on significantly at our agency over the course of many years and we have really come up with a very nice calculator. And I wanna share this with you as a tool or resource on our website that you could be using. So, if you're following along here, if you go to axiapr.com/resources you will find a cost calculator there. And we're gonna share that with you on the screen right now. And so it's labeled as cost calculator and you see PR department cost calculator but really it's asking the question of what's the cost to staff PR? We have an app for that. And so I wanna walk you through this app a little bit. And so if you're in front of a computer pull it up. If you're watching the podcast the screen is being shared with you. And if you listening to our podcast just stay with us because I will do my best to walk you through what each step is.
So we talk about how an in house PR department is much more expensive than hiring an outside PR firm and we'll show you why and how. And so I think the big thing is, let's just talk anecdotally for a minute. And so moving away from the calculator on the website let's think about we have a lot of opportunities to talk to a lot of companies. And the one thing they come to us is that we might ask us for a proposal. And typically speaking we come to them with three options. And so you know, option one is kind of the big expansive thinking program. Option two is kind of, you know, right about what they need. And then option one is kind of a smaller option and it might even be kind of a do it yourself and we'll help you kind of option. And I bring that up to say that a lot of times, one response we get from people who, you know, are comparing hiring an agency to hiring staff is they say gosh, for that investment, I could hire somebody in house or I could hire multiple people in house to do the work. And the truth is sort of, right. That's the right answer is sort of you can do that because what you're not considering is the additional cost beyond base salary. And so we often think about base salary is kind of the equivalency. So let me put a hypothetical in front of you, if we put a option one of our three options, let's say option two, you know, required an investment of $150,000 a year. They might say, well gosh, for $150,000 a year I could hire an executive to do that. Or I could hire two a mid level employees and they could just do the work and I'd have two people working for me full time. And that makes a lot of sense until you consider the total cost of employment that we have in our calculator here. So on the calculator, we talk about the total cost of employment is at least 40% higher and likely two times the cost of the base salary.
Now, before you say Whoa, what are you talking about? That's crazy. You have to think about the salary and the benefits. You know, the recruiting costs, the retention costs the training costs and the cost to manage those employees. And then you've got insurance and taxes. So the benefits and payroll taxes that you're paying, you also need to provide your employees and all your department with rent, office space to use, furniture, technology. And so, you know that might be hardware, but then you've got the tools and technologies like their devices. You know, maybe you're providing them with cell phones. You're providing them with iPads, laptops, desktops. You're providing them with software, maybe even also a desk phone. But they're gonna need some sort of PR software, they're gonna need desktop publishing software possibly. They're definitely gonna need word processing software. They're also gonna need service bureaus like media monitoring and media database support. And so there's a lot more cost behind the scenes than the average person realizes. And so we've ran this calculator by accountants and CPAs and staffing companies and payroll companies and economist and other people who really understand how all these things work. And they've given our calculator like the gold seal of approval. And so as I scroll down a little bit more in our calculator you'll see, you know, whether you choose to take a risk of employing or operating an effective PR department or attempt to go buy cheap by only hiring one person the expenses and risks really add up quickly. And so you add those expenses together and you may find that you would be spending the same or oftentimes more than if you were to hire a PR agency. But the first thing you've got to figure out is how much PR staff do you need. And so for most companies especially for medium to large companies.
An effective PR campaign will require the efforts of the team. I'm thinking at least three people and not just one lone ranger because one person is never gonna be an expert in everything. And so you know, you're gonna need somebody who can think like a strategist. You need somebody who can do the implementation and you need somebody who can do the busy work. And so in our model here we're thinking of a senior PR leader who will develop and implement the planning strategies and evaluation, approve the corporate communications program. And present the PR strategy to the leadership team. And then also obviously manage the staff and ultimately be accountable for the work. Whereas a junior PR professional, they will develop the deliverables. They will copy it at news releases. They will pitch the media they'll coordinate personal appearances and speaking opportunities. And is that person also gonna be doing some of the social media and website content generation? Are they gonna be keeping the newsroom up to date on the website, or will you put that, give that to the PR assistant and who they will also, you know, they'll be writing news releases and other deliverables, scheduling meetings, making phone calls, route incoming communications, pull media lists, monitor clip and measure PR coverage and handle other administrative duties. So, that's a lot to be done. And you know, that's kind of how you could split that up among three people. In our experience large corporations will require an even larger PR staff to manage their multi-industry verticals and geographic locations. And according to the University of Southern California Annenberg, the more PR staff accompany company has on payroll. The more that company depends on outside PR firms. So think about it. If you're growing your in house team, there's gonna be a higher proclivity to outsource more work to an outside agency anyway. So, that's another reason why you might wanna reconsider an internal PR department is that the more people you have on staff the more they start thinking about referring the work and delegating the work to third parties. So you know, it reminds me of the quote by bill Gates, "do what you do best and outsource the rest". So you know, if you're a tech company focus on being a tech company don't focus on trying to be a PR department inside a tech company or a PR agency within a tech company. You know, for our clients we typically work in teams of three or more anyway. So they're gonna have an account strategist and account manager, PR writer, a blogger, a social media manager, an expert at media pitching, who's booking interviews and who's doing media relations all day long. We've got three copy editors on our team.
We've got junior level employees or assistants who are, you know, helping to coordinate and organize a lot of the work. And then in addition, other members of our PR agency jump in as needed on special projects or bringing their connections and previous experience. So they kind of come in, help out with a particular need and they hop right back off to work on their other clients. So might be bringing in unique expertise or experiences and contacts, making valuable introductions among their business and media relationships. And then they go back to the other clients they're working on. So even though you might have a team of three people or eight people, it's really our whole agency that is available to you on as needed basis. So getting into this calculator that I've been sharing about, you know, what we did is we took some salaries based on averages across the nation. And obviously it's a lot more expensive to hire a PR executive in San Francisco and Silicon Valley than it is in New York. But it's also gonna be similarly expensive to have that person be in, you know, San Diego, Chicago and Dallas. And then you've got smaller markets, you know, like Tulsa and, you know, maybe Kansas city or you know, Detroit for example, where the market is maybe not as expensive to employ those people. And so what we've done here is we've put in the average for each position based on salary, but you can put that number in or any number that you want to put in. So you know, maybe, you know, the base salary you could expect to pay for a top PR executive is 150 in your market or maybe it's just a 100,000 in your market. But maybe you're somewhere else where, you know, you're gonna be spending 350,000 in your market for that person. So if you start spending $350,000 a year, man that adds up quick cause then you're gonna need a PR manager, a PR specialist, a PR assistant et cetera. So whatever you want numbers to be whatever is reality just put those numbers in here in our little calculator. And you'll be able to kind of see you know, what you're looking at, but just based on the recommended numbers based on the research that we've done. We've pulled this from salary.com and other credible websites. But you know, just looking at this, you're gonna spend about $360,000 a year just on base salary. So we're just getting started. This is just the base salary. So $360,000 would be the handsome PR retainer for you to explore. But each time and let's talk about hiring costs. Each employee turnover costs an average of $40,000 according to several staffing firm, research reports that we pull. And so you know, hiring costs is gonna be about 20% to recruit and train that person. And then you're gonna add on a 15% of their taxes for a payroll and then about 30% for benefits.
So if you just start thinking about that right there that's 55% in addition to their base salary is simply going to hiring, training, providing your share of taxes and benefits to that employee. We haven't even gotten to now bonuses, raises and COLA, so cost of living adjustments. You know, so depending on your organization or where you work for or your company's policies, you might bonus, you know, five, 10, 15, 20% of their base salary if they hit certain KPIs. You're probably gonna give them some sort of annual raise and possibly promotions, but then also the cost of living adjustment. Which I've seen be anywhere from zero to 6% and often three. So as a placeholder we just kind of put in the 6% here. You can certainly change that to be, you know, whatever number you think is appropriate at your company. But ultimately all of this is gonna calculate at the bottom. So we come up with a real number for you to keep in mind. And then, you know, for total PR employees, you know, then you've got to think, you know, depending on how many pick that's gonna impact the the office space, the leasing and furniture and supplies. As is the technology cost as I mentioned earlier from hardware, to operating system, to basic office software, mobile devices and don't forget those data plans also and the license plans that you're gonna need. Then you're also gonna have to think about PR software. Again, the research, the media databases, media monitoring, media measurement, social media tools, the CMS, the CRM, the marketing automation and so much more. And so here what we've done is we break this into a year one total for you. We break it down by the month also for you. Then we break it down by year two and year three total. Now I bet you're surprised. I know I was surprised the first time that I saw this data but I'm telling you this calculation and the calculator came from close collaboration and validation with economists, CFOs, CPAs, HR and staffing pros. And while the data is surprising it's also true and highly validated. So when you're thinking about hiring a PR agency or staffing in house, kind of think about again, how many people do you need? What does that look like? Can one person do it and can they do it well? And at the level that you're looking for or do you need two or three or more people to do it. And suddenly that starts adding up and then you add in the 40 to 65% increase on top of their base salary. And all of a sudden you're talking about a lot of money. And I know why people prefer to do it in house cause they feel like they're gonna get their undivided attention and their undivided resource. And I'm gonna have this person focused on our brand for 40 hours a week.
But the truth is I've actually been hired. Our agency has been hired by former PR pros who went through the ranks and move companies and positions and transition their career to where they became CEO of a company. And one of the things they told me is that they said look, I'm never gonna hire an in house PR team because I know how important it is for PR agencies to be out there working for us because they're consuming all kinds of inputs and data from multiple geographic markets, multiple industries. And they're gonna be that connector in those industries and in that geography to the media and to the business contacts that we possibly couldn't have in our own silo and in our own world. And we all know what happens when you start working at a fast growing company or a big company, your network becomes the people that work within the company the people you're meeting with are your colleagues in house. And so you really don't have as big of a network to leverage when you're working at a big company. Cause you're so busy in meetings all the time that you don't get to get out and network and connect with others. So your network gets smaller as opposed to a PR agency that's working with a broad audience of media contacts, business leaders, clients, vendors et cetera. And so think about that as you move forward through the process. And honestly, whether you hire a PR agency or you do it in house, or you decide to do nothing I just thought it was important to have this conversation today and this session today to really think through how you might go about hiring either an in house team or not. But in this current climate that we're in economically, every dollar counts as it does always. And I think it's really important that we focus in on what is the true cost of hiring an internal PR team as opposed to outsourcing it. And my guess is suddenly, suddenly you're gonna realize that it's not as expensive as you once thought. In fact, it might even be less expensive to go about hiring a PR agency. By the way, some of the things we didn't even get into is hiring an internal team can be risky and often more expensive. We covered that because there's taxes, employment liabilities, training, holidays, bonuses, cost of living adjustments, snow days, hurricane days. Whereas when you hire a PR firm, the PR firm is providing an external team of proven PR professionals, who are eager to immediately drive PR outcomes for you and your company. And we talked earlier about turnover and how it costs on average $40,000 to replace an employee.
Well guess what, if your agency loses somebody they probably have somebody that can move right into that spot. And if they don't, they own the responsibility and the cost of recruiting, onboarding and training and bringing that person up to speed on your account. And so, you know, among their people, they probably have the contacts and connections to more quickly bring somebody in right away. So that you don't experience any downtime kind of thing. And you know what, you hire a PR agency and maybe somebody on that PR agency team, isn't a good fit for you. You can just express that. And again, they can shuffle people around and put somebody in that spot that is a good fit very quickly as well. So there are a lot of pros and cons here to really think about. And I just encourage you to think about them and certainly reach out to us if we can offer any guidance or answer any questions about this calculator that we're sharing here. But I wanted to spend this solo cast with you, just kind of walking you through this. Again, you can find it at axiapr.com/resources. We'll put a direct link in the show notes. And if you have any suggestions on how we can make this calculator work better for you or anything that we're either undervaluing, overvaluing or omitting. We'd like to hear that feedback too but we keep this calculator pretty well up to date because we know a lot of people are using it and they find value in it. And I hope you will too. So thanks again for watching. And if you have any topics or requests you'd like to hear on our podcast or vodcast, please submit those to us. Otherwise take a minute, share this episode with your colleagues, subscribe to our channels. And if you're feeling generous leave us a review, we would love the feedback. And we're just trying to get the word out about this program that we offer to you. And it's just one of the ways we wanna give back to the profession and enhance the profession. So thanks again for watching. It's been my pleasure Jason mudd, signing off.
- [Announcer] This is been On Top of PR with Jason mudd, presented by ReviewMaxer.
Topics: On Top of PR, solocast
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