CIPR finances – surgeon heal thyself

PR Week’s front page story on the CIPR finances is a little disturbing. The statement on the CIPR web-site is not much more reassuring. I have been critical in the past of some of the stances the organisation has taken, but it is one of the two bodies that is supposed to represent our industry and does a lot of good in terms of basic training. According to PR Week it is scheduled to make a loss of £700,000 this year of which £500,000 is a one-off charge related to moving headquarters. The problem for the CIPR is that many of its members will be very good managers of small businesses and will be looking at this development with some surprise and little sympathy. Having a good view of revenues and keeping costs in line are the first two financial skills of anyone in the PR agency world. I bet most agency owner CIPR members can tell you to within pennies what their revenues will be for the next few months and probably sign all the cheques that go out of the business themselves. And these people will be asking:

* What scale of revenue drop could see the organisation plunge into a £200,000 trading loss (netting out the one-off move costs from what sounds like
an extraordinary sequence of events with their landlord)?
* How frequent and how accurate is the revenue forecasting? “At no point did we forsee a loss of that magnitude”, said Kevin Taylor. Why not?
* How quickly did the organisation go into cost cutting and containment mode?
* How many people (surely the highest cost with PRCA) have had pay cuts and how many have already been made redundant?
* When will the CIPR return to profit and if this is not within the next couple of months, please see above point. “We would hope that next year we
would return to profit”, said Kevin Taylor. Hope! How many CIPR members running offices of multinationals would dare tell their bosses they “hoped”
to be in profit next year?

If this seems a harsh post it is because this industry’s ability to manage itself well is a necessary basis for its credibility. We have to be able to run our own businesses to be taken seriously by our clients and colleagues if we want a place at the table where they manage theirs. And we have done so much better this recession than last. The PR companies in the listed advertising agency groups are often the sparkling financial performers (look at exceptionally well-run Weber Shandwick in the dreadful mess that is IPG). The UK listed firms Chime and Huntsworth have produced good results in the downturn and we all benefit when their experienced and eloquent business leaders talk about how they manage for growth and for profit on a grown-up financial stage. This news seems a throwback to the eighties when the industry had much less business acumen and agencies would pop up and then go bust hurting clients, employees and business partners.

I know the CIPR is not in business to make a profit, but it has to be run in a business-like manner to be taken seriously. My advice to the CIPR is get advice from your members who run their own PR businesses, because you need to fix this problem fast for the sake of all of our reputations and “hoping” to be in profit next year is not exactly a stretch target.

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9 thoughts on “CIPR finances – surgeon heal thyself

  1. It does seem a remarkable amount of money for a trade organisation to loose in one year. Anyone know what the CIPR’s turnover is? Obviously this will have a bearing on the speed of the recovery.

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  2. Good point Ben. I guess we multiply the number of members by the membership fee and make an addition for training courses etc. Not sure if they publish theri accounts? Anyone else know?

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  3. Ben – CIPR income in 2008 was £4.8m. Wouldn’t have been too different this year I’d guess.

    Actually, the CIPR also made a loss in 2008, albeit just £44k. However, that was after having turned a profit in 2007 of some £180k (and after having increased income in ’08 over ’07 by £500k). Having said that, in 2006 it lost £230k in the year and in 2005 it made a loss of £150k so the slippery slope had been reached long before this year.

    Looking at the ’08 annual report, it does look like a pretty obvious inability to control costs, particularly ‘administrative expenses’ which were up £300k in the year.

    So, as you say, the CIPR needs to be coming up with some fairly concrete measures for getting its costs under control.

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  4. I find these statistics staggering – it all sounds like terrible mis-management to me. I think the board should take a long hard look at themselves and get their house in order. A business which makes a loss, year in year out is not a business.

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  5. I can’t help feeling the CIPR’s love of living in grand buildings in famous central London squares doesn’t help….

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  6. The CIPR is in the fortunate position of having predictable, upfront revenues, so exceptional costs aside you have to wonder how the hell it can make such a loss. And then not forsee it.

    Your questions are good. Agencies have the additional challenge of managing a debtor book of course.

    The CIPR is an easy target but for this reason needs to be beyond reproach.

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  7. Stephen you are right they are an easy target and this is not meant to start a witch hunt, more to encourage speed of getting things back on track. I am not even a member, but they are one of two bodies that affect what my customers think of the industry I am in. They do much that is good and I sincerely hope they can afford to keep doing that soon.

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  8. I’ve had chance to look at the CIPR’s 2008 financial results and balance sheet since I posted my comment. Unless its income has fallen off a cliff in 2009 it’s not at risk but does clearly need a recovery plan.

    Its income in 2008 was £4.7m: membership accounted for 30 per cent; education 38%; and events 28%. The latter two areas will almost certainly have suffered during the current year and it’s likely to be where you’ll likely find the £200k shortfall when the 2009 accounts are published.

    The CIPR has a great financial model. How many of us would like to manage a business that was able to collect almost a fifth of its income 12 months in advance.

    Assuming that I’ve read the numbers correctly it ended 2008 with reserves of £335k (7% of 2008 income) which combined with accruals and deferred income £888k (18 per cent of 2008 income) presumably means that it remains cash positive despite the reported losses.

    Granted three years is a long time to re-balance the books when in agency land we work to three month cycles (or shorter in the current climate).

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