How PR agencies can stay liquid during client cutbacks

Key takeaways

• Build a survival cashflow model to know exactly how many months of cash you have if retainers are cut by 10%, 20%, or 30%. This is the foundation of PR agency recession budgeting.
• Focus on strategic cost cuts, not across-the-board slashing. Protect your billable team and client-facing talent. Cut discretionary spending and renegotiate fixed costs first.
• Contingency planning is not optional. Create a clear, written plan that triggers specific actions at different cash runway thresholds, so you never make panicked decisions.
• Diversify your revenue streams proactively. Use quieter periods to develop project-based offerings, retainer alternatives, or new service lines that are less vulnerable to cuts.
• Communicate transparently with your team. A team that understands the financial reality and the plan is more resilient and can help spot opportunities.

What is PR agency recession budgeting?

PR agency recession budgeting is the process of planning your finances to survive and navigate periods when clients reduce their spending. It's not just about cutting costs. It's a proactive strategy to protect your cash flow, extend your financial runway, and position your agency to recover quickly.

For a PR agency, this is especially critical. Your revenue is often tied to long-term retainers. When a marketing budget gets cut, PR is frequently one of the first line items clients look at. A sudden 20% drop in monthly retainer income can wipe out your profit and threaten your ability to pay salaries.

Effective PR agency recession budgeting means having a plan before you need it. It combines financial forecasting with operational flexibility. The goal is to stay liquid, meaning you always have enough cash to cover your bills, even when income is unpredictable.

Why do PR agencies need a special approach to budgeting in a downturn?

PR agencies face unique vulnerabilities during economic slowdowns that make standard budgeting insufficient. Your service is often seen as discretionary, retainer models create fixed cost expectations for clients, and your own biggest cost—people—is hard to adjust quickly without damaging the business.

Unlike project-based work, retainers create a false sense of security. A client can give 30 days' notice and cut a £5,000 monthly fee, instantly creating a £60,000 annual hole in your revenue. If you're running on a 15% net profit margin, you'd need to find over £400,000 in new business just to fill that one gap.

Furthermore, your cost base is predominantly people. Salaries, benefits, and payroll taxes are fixed and must be paid every month. You can't just stop buying raw materials like a manufacturer. This inflexibility means you must plan further ahead. Specialist accountants for PR agencies understand this pressure and can help build models that reflect your real economics.

How do you build a survival cashflow model for a PR agency?

A survival cashflow model is a simple spreadsheet that shows how long your cash will last under different "what-if" scenarios. It starts with your current bank balance and projects forward month by month, subtracting your costs and adding your best-guess income. The key is to model multiple versions based on different levels of client cutbacks.

First, list all your essential fixed costs. This includes salaries, rent, software subscriptions, and utilities. These are the costs you must pay to keep the doors open. Then, list your variable and discretionary costs, like freelance spend, training, marketing, and team social budgets.

Next, forecast your income pessimistically. Create three columns: a "best case" with minimal cuts, a "likely case" with a 15-20% reduction in retainer income, and a "worst case" with a 30%+ reduction. Be brutally honest. Factor in that new business will likely slow down too.

The model will then tell you your "runway"—how many months of cash you have left in each scenario. For example, if you have £100,000 in the bank and your "likely case" shows monthly costs exceeding income by £20,000, your runway is five months. This number is your most important metric. It tells you how much time you have to make changes.

What are strategic cost cuts for a PR agency?

Strategic cost cuts are targeted reductions that protect your agency's ability to deliver client work and generate future revenue. They are the opposite of panic cuts that harm morale and service quality. The goal is to reduce your monthly "burn rate" (the cash you spend each month) without destroying your core business.

Start with non-people costs. Renegotiate your office lease or shift to a hybrid model to reduce space. Audit all software subscriptions and cancel what you don't actively use. Challenge every line item in your marketing and discretionary budget. Could that industry conference be attended virtually instead?

Next, look at people costs strategically. Before considering redundancies, explore alternatives. Implement a temporary hiring freeze. Reduce freelance usage by reallocating internal capacity. Consider a temporary, voluntary reduction in working hours or pay for senior leadership, with a plan to repay it later.

Protect your billable team at all costs. They are the engine of your revenue. Cutting them might save cash short-term but destroys your ability to service clients and win new work. Strategic cost cuts are about trimming the fat to keep the muscle intact. This approach is a core part of smart PR agency recession budgeting.

How does contingency planning work for a PR firm?

Contingency planning means having a written, step-by-step playbook that you activate as your financial situation changes. It turns your survival cashflow model into actionable decisions. A good plan has clear "trigger points" based on your cash runway, so you're never making emotional decisions in a crisis.

Your first trigger might be when your runway drops below 12 months. The action could be to enact all non-people strategic cost cuts immediately and launch a focused business development push on your most resilient service lines.

The second trigger might be at 6 months of runway. Here, you might implement a formal hiring freeze, reduce all discretionary spending to zero, and begin confidential conversations with key team members about flexible working options.

A third trigger at 3 months of runway would involve more difficult decisions, like considering temporary pay reductions or, as a last resort, restructuring the team. The point of contingency planning is that these decisions are pre-defined and rational, not made in a panic. Everyone on the leadership team should know the plan.

What should a PR agency do to diversify revenue before a downturn hits?

Diversifying revenue means creating income streams that are less vulnerable to blanket marketing cuts. The best time to do this is when you're busy and profitable, not when you're desperate. Look for services clients see as essential or project-based work that addresses acute needs.

Consider developing "crisis communications" packages or "media training" workshops. These are often project-based and can be sold as one-off engagements, even to clients who are cutting their retainer. They also address needs that become more prominent in uncertain times.

Another approach is to unbundle your retainer. Offer clients a lower-cost "core" retainer for essential media relations, with add-on project modules for strategy, content, or events. This gives them a way to stay engaged at a lower commitment level, rather than leaving entirely.

You can also explore adjacent services. For example, could your team offer basic social media content creation or copywriting? This leverages your existing skills but taps into budget lines that might be more protected. Diversification makes your survival cashflow model more resilient because not all income is tied to the same type of client decision.

How can PR agencies improve cash collection during tough times?

Improving cash collection is about tightening your financial operations to get money in the door faster. When cash is king, letting clients pay you in 60 days is a luxury you can't afford. Small improvements here can add weeks to your cash runway without losing a single client.

Shorten your payment terms. If you're on 30-day terms, move to 14 days for all new clients and projects. For existing clients, communicate the change professionally, framing it as a standard business update. Many will comply if you give them reasonable notice.

Implement upfront payments or milestone billing for project work. For example, take 50% to start a project, 25% at a mid-point, and 25% on delivery. This ensures you're never funding client work out of your own pocket for months on end.

Be proactive and relentless with chasing overdue invoices. Assign someone to manage accounts receivable daily. A friendly reminder email goes out the day an invoice is overdue, followed by a phone call a few days later. Don't let late payment become the norm. Every day you reduce your average debtor days (the time it takes clients to pay) puts more cash in your bank. This is a critical, often overlooked, part of managing cash flow.

When should a PR agency seek professional financial help?

You should seek professional help the moment you start worrying about cash flow, not when you're about to miss payroll. An external perspective can help you build a realistic survival cashflow model, identify strategic cost cuts you've missed, and provide the discipline to stick to a contingency plan.

If you're spending more time worrying about money than serving clients, it's time to get help. If you don't have a clear view of your cash runway under different scenarios, you're flying blind. A specialist advisor can build that model with you in a matter of days.

Professional help is also valuable for difficult conversations. An advisor can help you structure temporary pay arrangements or team restructuring in the most tax-efficient and legally compliant way. They can also act as a neutral party, helping to communicate necessary changes to your team with clarity and empathy.

Working with accountants who specialise in PR agencies means you get advice tailored to your specific business model. They understand the retainer economy, the people-heavy cost base, and the seasonal ebbs and flows of PR work. This expertise helps you create a PR agency recession budgeting plan that actually works.

What are the biggest mistakes in PR agency recession budgeting?

The biggest mistake is doing nothing until a major client leaves. By then, your options are severely limited. Other common errors include cutting the wrong costs, like junior client service staff, which increases burnout for seniors and hurts service quality, or stopping all business development, which guarantees a deeper hole in the future.

Another major mistake is using optimistic forecasts. If you assume you'll replace any lost revenue within a month or two, your survival cashflow model will give you a false sense of security. Always model the pessimistic case. It's better to be pleasantly surprised than catastrophically wrong.

Failing to communicate with your team is a critical error. When leaders become secretive about finances, rumours spread, morale plummets, and your best people start looking for other jobs. Transparent communication about the challenges and the plan builds trust and unlocks your team's creativity to help solve the problem.

Finally, many agencies forget to look for opportunities. A downturn can be a time to hire great talent that becomes available, to acquire a smaller struggling agency, or to double down on marketing when competitors go quiet. Your contingency planning should include an "opportunity" trigger as well as defensive ones.