July 21, 2014

Forrester Research Annual Report

If you're going to read retail annual reports, then you should read research brand annual reports as well. Click here to take a peek at the Forrester Research 2013 Annual Report (or click here).

A few tidbits for you.
  • Client retention dropped from 80% in 2011 to 77% in 2012 to 73% in 2013. 
  • Net income is at a five year low.
  • Cash is at a five year low.
  • It costs Forrester $39 to produce $100 of services.
  • It costs Forrester $36 to sell and market products and services. Is your ad-to-sales ratio 36%? It's really tough to generate profit at a 36% ad-to-sales ratio.
  • Pre-tax profit dropped from 13% in 2011 to 11% in 2012 to 6.7% in 2013.
  • Growth is coming from consulting services - not from the traditional research they sell to clients.
  • If you look at the salary information for top employees, you'll quickly see that these folks are not compensated at rates you might think they should be compensated at. Few are earning bonuses, which tells you that Forrester is not achieving internal financial projections.
  • Social tactics are considered "brand building". Contrast that with what the experts tell you about social tactics.
  • Client erosion is blamed on sales force issues.
News got worse in the first quarter of 2014. 
  • Revenue was flat.
  • Expenses were up.
  • No profit at all ... in fact, they posted a small loss.
  • 1% of employees were "terminated" as part of a reorganization. 
  • The company lost money on consulting, one of the few growth areas in 2013/2014. 
  • Client retention is down again, continuing what may now extend to a four year trend. 
  • Selling and marketing increased to 40.9% of net sales.
Forrester's stock price is a shade under $40 ... it was a shade under $40 in early 2011. In other words, the stock price hasn't fundamentally changed in three years (up and down and up again), a timeframe during which the S&P 500 gained 50% in value.

You have to feel really bad for the analysts at Forrester. Really bad. Can you imagine the pressure those poor folks are under, pressure to generate revenue? 

It's hard for me to go to a meeting or to spend ninety seconds on Twitter without somebody quoting a Forrester Research fact that if you're not mobile, you're dead - that you have to adapt your business model now (#mobilemindshift ... click here to see).

But Forrester is also struggling mightily to adapt and change - the mobile mindshift is not paying dividends for Forrester, at least in the past five years - in fact, the multi-year results are dreadful. They are in the same boat many of us are in. In fact, their position is arguably worse - they're competing against free resources (me), you're just competing against Amazon. 

Forrester financials do not look good. Keep that in mind the next time you read a particularly powerful tidbit from Forrester Research - consider the motivation behind the tidbit, and the need to "sell" ideas. It's got to be tough to be Forrester Research, or any research brand.