Among the speakers at the recent Public Relations Global Network meetings was Warren Riddell, a director for Beaton Capital.
Beaton Capital is an independent corporate advisory firm based in Australia and Hong Kong providing strategic and financial advice, specializing in advising professional service firms on strategy, mergers and acquisitions, owners’ exits and divestments, balance sheet and capital optimization and governance.
Riddell’s discussion focused on “Navigating to Blue Oceans” and getting away from “Red Ocean” thinking. In other words, making and keeping an agency profitable vs. sinking into financial losses.
He said some interesting and relevant things.
Among them – which is particularly prevalent in the communications world is that industry boundaries are defined and accepted:
“Lawyers do litigation, accountants do audit, engineers do bridges, PR does…”
It’s breaking out of that mentality that can help an agency grow.
He also cautioned, “When thinking outside the box, know your box,” Riddell said.
Here are Riddell’s six metrics that really drive business, helping those interested in “Navigating to Blue Oceans:”
- Client retention - Pareto profits: 20 percent of clients generate 80 percent of profit
- Share of client’s wallet - How much does client spend overall? How much of that is spent with a PR agency? Do you know where/how your client spends its money? Ask the question: “How do we rank and compare across the service lines we offer?”
- Sourced by recommendation - Zero acquisition cost. Don’t be afraid to ask for recommendations!
- Define the addressable market - Boundaries of brand permission, how far do clients trust and value you? Where do they allow you to work and what do they allow you to work on? “Brand Permission” -- clients often underestimate potential/capabilities, lawyers practicing law/engineering firms doing engineering…
- Margin - Use as a proxy for price-setting discretion. Once services become commoditized, price can become an issue. We have discretion to set fees/prices.
- Organic growth - Use as a measuring stick for client’s recognition of value and as a way to determine a firm’s attractiveness for a merger or acquisition.
The blue waters are definitely better than a red ocean!