Arts and Communications Counselors Inc.: Public Relations Services

Arts and Communications Counselors Inc.: Public Relations Services

Definition of Success

To make economically and operationally feasible decisions that will generate a positive return on investment by the end of 2012, maintain a positive opening cash balance at the end of the next 3 years, and hire employees that possess business knowledge and a passion for the arts.

Critical Issues

• Critical Opportunity: Increases in customer need for public relations services.
• Critical Threat: Due to the rising demand for public relations services, A&C may lose their current and potential client base to companies that already offer these services.

Situation Analysis

Arts and Communications Counselors Inc. has the critical opportunity to increase its clientele base by adding a public relations division. There is an increasing demand for PR services for corporations when searching for a marketing agency (see Exhibit 1). Companies are beginning to seek marketing agencies once again after the economic recovery from 2008 (see Exhibit 1). A&C’s strong track record has earned its good reputation, strong customer base and expertise in arts and culture (see Exhibit 6).

A&C faces the critical threat of losing clients and potential customers to in-house options. Many of the organizations started their own departments and appointed individuals within their organization to handle marketing, sponsorship, and public relations to secure funding in 2008 due to the cutback of $45,000,000 from the government for arts and cultural programs (see Exhibit 1). This is reducing the need for help from marketing agencies such as A&C.   ^[a]

Decision Criteria

Criteria 1:

Earns a net income of at least $600,000 over the next 3 years combined.

Criteria 2:

Achieve an ROI of at least 25% over the next 3 years^[b].

Options Analysis

Option 1: Add public relations services and hold annual conference to promote services.

This requires hiring a public relations specialist for a salary of $100,000/year to provide new public relations services to A&C. It will cost $191,922 in 2010, $199,192 in 2011, and $202,901 in 2012 (see Exhibit 4&5). This option with the lowest projected ^[c]sales numbers provides a net income of $135,086 in 2010, $227,875 in 2011, and $381,586 in 2012 (see Exhibit 3). The highest projected revenue gives a net income of $170,559 in 2010, $268,541 in 2011, and $428,352 in 2012 (see Exhibit 3). This option meets decision criteria 1 as it has a higher overall net income over those 3 years at $744,547 (135,086+227,875+381,586) on the low end of the projections and $867,452 (170,559+268,541+428,352) on the high end. This option also meets decision criteria 2 as the ROI on this expansion exceeds the target of 25% (see Exhibit 7). Adding PR will give A&C an average at 30.47% on the low end of the forecasts and 58.16% with the higher projection.