Bring out your dead

In the posting Bottom Line Basics Spin Bunny has highlighted a damning report on the state of the PR industry.

Part of the answers lie in the Plimsoll Model itself:

• The Plimsoll Model is made from a set of weighted criteria pulled from historic data. I do not know the secret sauce of the weighting, but can assume that it could have some bearing
• The model looks at change occurring over three years for some of the data which may make sense of a traditional manufacturing orientated company but not for an 'asset light' enterprise like a PR agency or Enron. In addition many client relationships are more transient than other industries, three years is oft quoted as the average lifetime for a client relationship
  
• Working capital is looked at as part of the model with with following formula (current assets - long term debt / current liabilities). An agency usually has few if any current assets again skewing the model
• The model looks as the cover for trade creditors, this would be particularly important for a manufacturing company because of their reliance on raw materials and components, it does not fit well with service industries in general because supplies do not make up so much of the cost of the end product

Part of the answer lies in the PR agency model outlined by Spin Bunny

• Letting people go faster than clients can be expensive where they have been with the company during a sustained economic upturn, so subtantial redundancy packages are required at the wrong moment in the business model
• Acquiring fresh meat for the PR grinder is no longer cheap with recruitment agency fees and a shortage of staff at account manager level in many sectors. This has a major impact especially since junior staff are generally more profitable than senior ones
• Overservicing clients can be responsible for investment and sales being misalligned, a major no-no on the Plimsoll Model