business has never been better. Last year, her investor-relations
firm's revenues grew 70% to just under $3 million and she's expecting a 75% growth this year as well. Saunders has hired 10 people in the last 12 months and is scouting around for about 8 more to join her 30-person staff this year.
The secret of Saunders' success? Being in the right business
at the right time. And being a small company. Granted, the investor-relations business is traditionally counter-cyclical -- public companies strive to influence investors' perceptions during a downturn. And they need investor-relations consultants to disseminate information to equity research analysts.
EASY THEN, HARD NOW. "The competitive conditions are tougher now," says Saunders, explaining that companies turn to IR firms to help get an edge in that competition. "When the market was hot, a company's stock was at a 52-week high, and all 13 analysts covering it had a strong buy on it -- the CEO would just say well what more can you do."
One difference in this downturn has been the success and proliferation of small investor-relations firms. Larger firms have seen some small-scale retrenchments and staff cutbacks, says Louis Thompson, president of the National Investor Relations Institute, a trade group in Vienna, Va. The reason: Public companies have reduced their budgets by 10% to 15% over the last year, and the major victims of these cutbacks have been larger IR firms, which work exclusively on monthly retainers that can run up to $20,000 a month. Smaller firms, meantime, charge retainers of $6,000 to $10,000, but often work on one project at a time -- organizing analyst meetings, helping disseminate information, or preparing annual reports.
"If you have to cut expenses in a downturn and you're faced with
an expensive retainer, you'll be inclined to drop it," says Thompson of investor-relations. "Small companies usually operate within your geographic area and they will give you a more hands-on service and will operate on a project basis without all the bells and whistles."MUSHROOMING GROWTH. For small companies, accepting project-basis work is often the best way to win clients. Last year, 50% of Ashton Partners' clients began as contract jobs, with a large percentage of those converting to a retainer arrangement. Today, 90% of the company's clients pay a monthly retainer fee.
In the last year, 102 new small IR firms -- defined by the Institute as those with less than 10 employees -- have sprouted, taking the total to 673. In many cases, these new ventures have been started by IR professionals laid off from larger companies.
Thompson expects this trend to continue in the near term. Small, flexible IR firms will continue to be needed to help companies communicate with stockholders. And as long as that's the case, this is one sector of small business that may have a cushion against the slowing economy. By Naween A. Mangi in New York