Why I Chose a Paid-for-Performance Business Model
By Dick Grove, President, Ink Inc. PR, Kansas City, Mo.
I spent years working for public relations agencies that charged clients a lot of money without delivering much. They billed in fat monthly retainers, but there were months when we didn't deliver any press coverage for our clients. Not surprisingly, it didn't make them very happy and they didn't stick with the agencies for long.
So when I launched my own public relations firm, INK Inc. PR, I decided to bill clients based on our performance, rather than a flat monthly fee. Several other firms have followed in our footsteps since, but we were one of the first 14 years ago. We only get paid when we get press coverage. This model helps drive new clients to our door because there's no real downside for them -- we take on all the risk since we're the ones who suffer financially if plans fall through.
Here's how it works:
My staff includes eight full-time office employees, and around 20 contractors based around the U.S. and Europe. My office workers are paid salaries, but the contractors are all seasoned PR executives who don't make a dime unless they get press coverage for a client.
My PR reps brainstorm with clients, and even fly out of state to visit clients in-person. They learn everything they can about the client and what makes them newsworthy, and then they send pitches to the publications that seem like a good fit. They get paid if, and only if, the client gets a mention in a story. Their commission is based on the size of the publication and the length of the article, and those with more seniority get paid a higher rate.
Often a story will fall through for a reason that has nothing to do with us: A piece of breaking news will steal newspaper space allotted to our client's story, or a magazine editor will change her mind about the piece. It's disheartening when that happens, most of all for the PR rep who's put countless hours into pitching the story and working with the publication. In essence, he's done all that work for free.
Why the staff sticks around
The people I work with have been in this business long enough to recognize that there will always be highs and lows. They're competitive by nature, and always seeking that next challenge. So when something doesn't work out, they get back out there and pitch something else until they succeed. My staff may go months at a time without getting paid, but when they do get a commission, it's for a substantial amount. Overall the pay is comparable to what they'd make at a traditional agency -- sometimes less, sometimes more. It depends on a combination of luck and hard work.
It doesn't work for everyone. I've lost a few people over the years. But once employees adapt to this model, they generally stick around. Some of my employees have been with me since I was managing projects for another agency, 19 years ago.
Part of the reason they stay is that there's a lot of flexibility in this model. Employees have no set working hours, except for a few conference calls and client meetings. Generally, they can work from home or any other location of their choice. And they determine their own hours -- they can pitch in the middle of the night if they want to -- but most of them choose to work 40 hours a week or more.
Clients need to work, too
Along with training our staff on how to work with our model, we've also had to educate our clients. In a traditional agency, clients won't always provide helpful input, and it's no big deal -- either way, the agency still gets paid. But we insist on regular client participation, because we can't make any money otherwise.
As soon as we start a relationship with a client, we insist on having all of the executives' home phone numbers. We need to know everything that's happening at the company before the news goes public. If they're not willing to divulge details, we'll end the relationship with them. Running a successful pay-on-performance company is contingent on having good clients, so those who aren't willing to follow our system will just drag us down.
Where we are now
After the recession in 2008, media companies began failing left and right, and most companies cut back on their marketing budget. It hit the PR industry hard, and our company is no exception. The last few years have been tough for us.
But we've done better than most: Our revenue for 2010 easily hit seven figures, well above the previous year, and we've picked up some additional momentum in the last few months. Clients like our sense of accountability and our no-risk approach makes us pretty popular during an economic downturn.
Dick Grove has more than 40 years of public relations experience, and shares his thoughts about the industry on Ink's blog.
-- As told to Kathryn Hawkins
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