As PR agencies scramble to press the reset button in a bid to remain both relevant and competitive in a post Covid-19 world, the role of cost structure management has never been more important.

Get it right, then having a sustainable business model with the potential for growth seems infinitely possible; get it wrong and you will be in a one-way race to the bottom.

One issue that has always dogged our profession is scalability and, dare I say it, a lacklustre desire to either identify business risk or to having the right financial strategy in place that would mitigate any potential softening of business performance.

We are about people
You see, our profession has always been about people. We’re a P2P business; where our people influence the behaviour of other people through informed, balanced and creative engagement strategies.

And no matter what economic circumstances we face, protecting the livelihoods and careers of our people must always come first.

But therein lies the problem. When business is booming, the natural tendency is to hire more consultants, take on bigger leases and invest in swanky office fit outs. And while many agency owners and boards will chorus that increased revenue is “a good problem to have” and justifies higher fixed costs, this reasoning is both shortsighted and, to a degree, bordering on negligent corporate behaviour.

The two biggest operational costs for agencies have traditionally been gross staff salaries followed by office costs – always in that order.

Knock down walls
However, office leases tend to have lengthy contractual terms which means a longer fixed financial commitment.

In 2019, the average office lease for SMEs was 6.4 years and for large companies 7.5 years with only 43.8% of contracts including a breakout option . 

Compare this with the average notice period for a PR consultant, which is less than three months, and you see an ominous crack appearing.

Unjustly, it’s the people who win the clients and manage the accounts that become the sacrificial lambs. And in the aftermath of coronavirus that flock is sadly starting to get bigger.

The tragic irony is that Covid-19 has inadvertently created a better cost-structure, a management solution for agencies and will force a completely different operational model, one that involves a future without walls.

This is being driven by two primary factors that businesses have had to adapt to: working remotely and staying connected with our colleagues and clients through unified communications platforms such as Zoom and MS Teams. As we become more accustomed to a mobile working environment, we become less reliant on large office space and that comes at a significant annualised cost saving.

Will we see a surge in demand for co-working space once all restrictions have lifted? Yes, absolutely.

Fewer and lower leases
The offer from brands like WeWork, Regus, Fora and The Ministry is a flexible workspace solution that gives companies the ability to scale both up and down without the restriction and high cost of a long-term commercial lease. There’s also a co-working community to engage with not to mention ultra-cool facilities for members (they outright refuse to describe them as tenants) such as onsite gyms, production studios, recreational areas and even private cinemas.

Given the nature of our business, will we ever need office space that can accommodate all our staff? The answer is an unequivocal no. Agency life is about getting out, meeting clients, networking, spending time at outer office locations that provoke curiosity and inspire creativity.

Win-win situation
With less dependence on being in the office, productivity for some firms has surged with agency staff having better control of their time without having to battle with the masses, not to mention incurring the high cost, of a daily commute. This also has a significant social impact where individuals can make a positive contribution to the environment by reducing their own carbon footprint.

All of these considerations will help agencies of the future to protect their biggest asset, their people; to prosper by focusing on their business, while giving them time to breath and press the reset button.

Written by Andrew Laxton, CEO and co-founder of agency Mixology Communications