Reply To: Company and profitability

Hi Loopy,
Good questions.

I co-founded the business in 2004 and have been the Managing Director since inception. In 2012/2013 my business partner and co-founder exited. Given we were married, and had personal financials to agree concurrently, the exit /asset settlement took place during the subsequent financial year. I acquired the other 50% to become the sole owner. This required a change of structure, hence the new operating entity.

Once my partner exited I was able to make choices about the strategy of the firm and how to position us for future revenue. Traditional PR is in decline as are traditional media.

Yes the revenue and profit are way down on previous years. I made a deliberate decision in calendar year 2016 to ramp up investment – and spend 18 months investing the business’s profit in order to set us up for growth in a multi-channel, online and social media-powered world. We’ve hovered around the 2.5m revenue mark for several years. We have exceptionally strong client relationships at senior levels of many wealth and financial services companies yet were doing only PR for them, while other agencies picked up a range of other marketing services. The strategy is to diversify our revenue – use the strong relationships we have, bring in new marketing talent and offer a broader range of services, in particular online marketing.

I’ve invested my operating cash flow in people, marketing and advisers (Advisory Board).

DETAIL
People
Two key marketing people (approx 250k per annum), Advisory Board and an external adviser (approx 80k per annum)

Marketing
Development of content and services (new intellectual property circa 150 per annum billable time) and our own marketing (marketing automation sas hubspot, lead generation content and campaigns). As a result we now have inbound leads from marketing as well as leads from referrals and sales. We currently have more leads than we can convert, and as of the last month have started declining new business until we hire additional people.

OTHER
In order to support/focus on the investment in marketing I cut my own billable time from around 50% to less that 30%. This has materially impacted both revenue and profit margin.

My billable hours are now heading back to above 50% (ideal range is 55-65% albeit will be north of that from now until FY end) due to the volume of client work.

Our sales target for marketing is to have 18k per month in retained (ongoing contracted) revenue by 30 June or exit that service line. Last FY we broken even on the new marketing services but it was mostly project work, not ongoing contracts. Right now we’re working on converting leads and our outbound contacts to ongoing contracts so the marketing services are a sustainable and less sales-intensive part of the business. The target date for this is 30 June. If we don’t hit our financial targets by then I’ll be looking to re-shape the team.

Any other questions please let me know.
Carden