Budgeting: why the time has come to look beyond hours

The key for the future of PR is not simply to predict and measure resource requirements better, but to reject the hourly-rate myth and use a new, ground up budgeting process. In chapter 15, Alex Myers talks all things budgeting.

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You’ll learn:

·         How to use tools to budget and resource appropriately
·         Two key reasons agencies fail
·         An alternative way to budget other than by hourly rate

The public relations industry is kneecapped by one thing and one thing alone. We need to learn how to budget like consultants rather than cleaners. Or from an in-house perspective, how to budget like the integral cog in the machine we are.

Our ability to understand (and therefore charge for) the value of an idea is the proverbial elephant in the PR agency boardroom.

The price is not always right

Budgeting, on the face of it, is about estimating costs and getting that right.

Your budget – before being about profit and loss – is about creative parentheses. It steers the creative process. As such, you need to value it and place it front and centre of the planning process.

Too often, a budget is based on £ signs. Have you ever fine-tuned a budget with the reasoning of whether the total sounded too much or too little?

Although I always attest that gut-instinct is big data for the little guy, looking closely at what makes up those ££s and not allowing the picture to be clouded by if it sounds a good deal or not, is the key to balancing value and quality.

Democratise the budgeting process

Use a resourcing tool to predict fee, rather than a spreadsheet. The latter can too often result in post rationalising a figure you’re happy with (we’ve all done it).

Coupling budgeting with resourcing has the added benefit of ensuring team capacity matches workloads, as well as provides more realistic time estimates for work.

We use Forecast, made by Harvest, to predict resourcing but also to plan budgets. Involving account managers and account executives in plotting out a campaign, as well as a senior team member, ensures time plans are more accurate but also gives the whole team a sense of responsibility for matching the work delivered with the budget.

Technology allows for more accurate and agile forecasts

As client requests inevitably come in during a campaign, tweaks are then made to our Forecast prediction, and in the project dashboard of Harvest we can see how those changes might carry a project over budget (in combination with time already spent).

This thin red line is integral to adjusting work to the budget, or indeed the budget to the work. We are experimenting with giving clients complete transparency and access to our time reports and forecasting within Harvest – and it’s working in our favour.

OCD: Overservice Compulsion Disorder

Essentially, by making budgeting and resourcing intrinsically linked, you’re less likely to face the curse of over-servicing – and when you do, at least you know the source of the problem as it happens (or even in advance) so you can deal with things.

As an agency you will fail commercially because of only two things: over-servicing, or being shit. I can’t help you with the latter, but there’s no excuse for not paying attention to the former until we find an alternative to billing by the hour.

Delivering consultancy, but charging like a parking space

Plotting time accurately only deals with half of the problem. For too long our industry has at once decried the reliance on measuring outputs, while blushingly clinging on to them for budgeting purposes. It’s a hypocrisy we all turn a blind eye to.

At the end of the day, it’s easy to say what a press release costs your business to produce. Or indeed how much an account executive costs for three hours. It’s not easy, however, to state (or even know) the value your idea brings to a brand. Yet that is what everyone – from internal stakeholders to external clients – are buying.

The key for the future of PR is not simply to predict and measure resource requirements better, but to reject the hourly-rate myth outright and start from scratch by building a new budgeting process from the ground up. If our industry can unshackle itself from the confines of hourly rates (and realise we are charging for consultancy not parking spaces), we are saved.

Results-based budgets are agile budgets

At Manifest, we recently introduced a separate department for forward-thinking campaigns for agile startup businesses, whereby we are not simply testing out new communications strategies for brave challenger brands, but also new ways to budget for and service them.

By first undertaking research into the potential of a brand, we look at the commercial success a campaign might bring and budget according to that.

There’s no mark-up on third party costs, there’s complete transparency on both sides and this delivers a unique working relationship whereby both parties are focused on the work. It’s called Naked & Famous.

Analytics, rather than measurement

Through Naked & Famous, we have replaced traditional campaign measurement with campaign analytics, watching the impact of the campaign (sometimes in real time) through web tools and often adjusting the budget accordingly to dial up or down results – around which our fee is calculated – just as other digital marketing disciplines like PPC or SEO might.

As always, the budget adjustment relates to the success (whatever the key quantifiable KPI might be) of the campaign, which in turn gives us creative capacity through either hours or additional costs to amplify the campaign further, or indeed dial down our future resource if the results do not correlate as predicted.

Surprisingly, the resistance to this way of budgeting a campaign most often comes from the brand – either because it demands access to business data and insight they are uncomfortable with handing over, or because although they are happy to pay less for results being less impactful than predicted, they are less happy agreeing to increased costs for results that smash the targets out of the park.

Just as agencies and internal teams need to evolve, they need to help those commissioning the work to break free from the traditional structures and stereotypes also.

How do you charge for awesome?

This all creates a more agile environment built on a solid strategic campaign foundation. For Naked & Famous clients, we budget for strategy separately as a one-off start up cost that incorporates both time and intellectual property. We literally charge by how awesome the campaign concept is.

If the strategy is right, the campaign will work. If it’s working, you can measure it. If you can measure it in a real time, the execution budget itself becomes real time and is evidently paying for itself as it goes. And nobody questions the cost of the strategic thinking up front.

As long as nobody is inflicted with the glass ceiling of ‘we said it would take us X amount of time’ we also open ourselves up to using all manner of tools, services or outside expertise to enhance results over the course of the campaign, with the client remaining laser focused not on an hours breakdown, but on a final result.

And because we are being paid for the central idea, it is delivered with the care and sophistication required to create a genuine catalyst for success and long term brand value.

A budget is about giving the work a chance

Our industry must place the emphasis back on the work.

The future of communications depends delivering exceptional results, born from exceptional ideas. You cannot automate ideas, and they will always deliver better, sustainable results than anything that can be automated.

Our industry at its best marries art and science, so it’s important we look to technology to help us measure the impact and significance of art and the élan of our great creatives. Otherwise people outside our industry will believe what we do can be matched by an algorithm and a dash of AI.

And worse still, shit agencies owned by people searching for profit over purpose and manned by unpaid interns, flogging pre-packaged tactical ideas of floating giant things down the Thames, will continue to dominate. Nobody wants that.


Alex Myers is Founder and CEO of Manifest London and Manifest New York. A multiple award-winning creative communications consultancy, Manifest was built as a result of the changing shape of the media, the changing role of brands and the changing demands of their audiences.

Twitter: @AlexMyers