Building a Viable Business

For many years, the biggest obstacle to creating a viable business of politics in the United States was financial. Political work was variable and uncertain. Clients did not always pay on time; sometimes they failed to pay at all. Consultant Bob Goodman, who estimated that in any given election season 10 percent of his billings would fail to come through, commented, “I’d never see it. I’d have to write it off.”20 Cash flow problems often plagued consultants, especially in odd-numbered years when few elections were held. Charlie Black recalled that “it would’ve been very hard to live on what you could make as a political consultant” during the off year of a cycle.21 Even the writers at Congressional Quarterly acknowledged that “most of the several hundred individuals who are paid to plan campaigns will shift to nonpolitical employment after the votes are counted in November.”22 The cyclical nature of political work could make it difficult to stay in business, much less keep qualified staff from one election to the next.23 For Joe Cerrell, looking back on his early years as a consultant, the operative question was, “How do I stay alive? How do I keep the doors open so that I’m available come the next election season?”24

The answer was to devise several coping strategies that placed the consulting business on a sounder financial footing. For instance, many consultants kept the core of their operation flexible and small, adding personnel as needed when the campaign season picked up. This was fairly straightforward in cases where the experience and reputation of one or two consultants were at the heart of the firm’s success. During an election year, the number of staff might expand beyond the principals in the firm to twenty or more, and then just as abruptly shrink back down to “a couple of secretaries and an accountant.”25 Consultants might also subcontract aspects of a campaign in order to take on more clients while keeping the core of the firm relatively small. A consultant who specialized in general strategy, for example, might subcontract with a polling firm or a media production company.26 However, flexible staffing and subcontracting had their limits. For many consultants, the success of their business relied on the formation of a personal relationship with a client, a sense of trust that was not easily replaced by a colleague. As Joe Napolitan explained the dilemma: “I’d say, ‘look, I’m not going out there this week, but I can send George,’ and they said, ‘That’s fine. George is a good guy. When are you coming?’ ” Napolitan’s success depended on the formation of “a personal kind of relationship” between himself and the candidate.27 This kind of handholding made for satisfied clients and positive referrals, but it also limited the number of races a consultant could work during a single campaign cycle. Peter Hart put it simply: “One of the things that we learned is that it’s not how many candidates you could get. It was a question of how many races you could effectively serve” in an election year.28 Hart placed that number at around 14 statewide races for his firm, although numbers likely varied by specialty.29

Given these limitations, consultants had to think carefully about what constituted the right mix of clients. A candidate’s chance of winning was particularly important in deciding who to take on, as well as expectations about the likelihood of success. “You [have] to be careful ... you don’t get caught in the situation where you have somebody in there who is expected to win and loses,” Doug Bailey explained, “and you always . want somebody in there who’s expected to lose but really can win.”30 Consultants perceived that their ability to generate business from one cycle to the next depended in large part on a past record of success. As Bailey put it, “We’ve got to be careful of our reputation, and reputation in this business more than anything else means perceived batting average.”31 Consultants had to balance the need for revenue against the political potential of their clients, protecting themselves from liabilities of the candidate that might prove fatal to the campaign.

Another consideration when choosing clients was whether they could afford the cost of a consultant, or at least had the potential to secure enough campaign contributions to pay for one. According to Bailey, clients needed the “individual capacity to raise the funds to help us meet [our] economic goals.”32 Because even the best-financed candidates possessed a finite set of resources, consultants also developed a pricing structure and a mix of products and services that could maximize their revenues. Typically, consultants worked on a combination of fees and commissions, much like an advertising agency. For instance, a political consultant might charge candidates a markup of 17 or 18 percent on the production cost of a campaign commercial and then charge another 15 percent commission if he or she purchased radio or television airtime on behalf of the candidate. Some consultants also charged a daily rate plus expenses for ongoing consulting services. Other consultants preferred a system of flat fees, in part because it provided a predictable source of revenue. For example, Doug Bailey sometimes waived his commissions “in exchange for payment of a flat fee over a ... regularly scheduled time frame.” Although he might earn more from commissions, Bailey preferred “the certainty of the funds” because it helped his firm “meet some rather radical cash flow problems” by charging for their services up front.33 As Bob O’Dell, a direct mail consultant explained, “We estimate how much time it’s going to take to be involved in a campaign, divide that up into a monthly basis, and that’s what the fee will be plus expenses.”34 Consultants like Bailey and O’Dell valued the ability to generate an accurate forecast of future revenue.

Consultants who did work on a commission basis, of course, faced a rather different incentive: the more polls, pieces of mail, or television advertisements a consultant provided, the more money he or she made from the campaign. Although some consultants disliked this aspect of the business, most acknowledged that they were not engaged in charitable work. “It dawned on me pretty early I needed to make money,” Ray Strother recalled. “That’s my chief, primary reason for being in the business or I would just go be a volunteer occasionally for some good woman or good guy that needs help.”35 Bob Goodman admitted that even if consultants “didn’t like to be hired on the idea that the more he spends, the more I make,” the profit motive still influenced the structure of the business in important ways.36 In particular, certain products and services were more attractive than others. Jill Buckley, one of the first women (after Leone Baxter) to make a successful career in the consulting business, specialized in political media because it carried a higher premium than advising clients on general strategy. As she explained, “One of the problems about selling general advice is that you’re just one amongst many people who have an opinion on how a candidate ought to be, what he ought to say, and how a campaign ought to run.”37 By contrast, political ads were something campaigns could not provide themselves. For Buckley, “It became abundantly clear ... that if you were selling a real product like the media, you could charge significantly more for it ... [and] you could also get the respect of campaigns because they thought you were selling something that they truly didn’t know how to do.”38 Consultant Matt Reese made a similar observation: “I couldn’t make it on time. I had to get paid for a product.”39 Providing clients a menu of services created multiple opportunities to make money. In Reese’s case, “We made a profit on the letter. We made a profit on the phone calls. We made a profit on the computer work. We made a profit on the polling.”40

Television clearly illustrates how the financial incentives consultants faced shaped the character of the industry as it developed in the 1970s and 1980s. Because consultants possessed the skills and expertise required to produce political advertising, they were highly valued by causes and candidates seeking access to the airwaves. In fact, buying television time on behalf of a client became an extremely profitable niche as consultants could make money by earning commissions on what stations charged for airtime. Moreover, the price of TV airtime increased just as the consulting industry took off. Between 1975 and 1985, the real per capita cost of television spot advertising rose by 30 percent.41 For consultants who charged commissions on the ads they placed, this meant a healthy increase to their bottom line. Buying television airtime not only was lucrative but also offered consultants a reliable source of income. Although consultants often waited to get paid for producing commercials, campaigns had to purchase television time up front if they wanted their spot on the air. This allowed consultants to collect the commissions on time buys during the campaign, easing some of their cash flow problems.42 Some consultants even used a portion of the commissions they collected to offset the fees they charged the campaign. In doing so, consultants created an incentive for campaigns to spend more money on television.43 For every dollar spent on advertising, campaigns spent less on consulting fees (even as consultants earned more from commissions).

Even with these new ways to make money in politics, consultants still faced significant financial risk working for candidates and campaigns. Therefore, many consultants sought ways to expand their client base as a way to stay in business. For instance, some consultants sought out the relatively small number of races taking place in odd-numbered years, such as governors in some states and down-ballot campaigns for mayor or city council.44 Other consultants worked for political parties, especially state party organizations, providing ongoing or year-round work such as polling services or soliciting contributions through direct mail.45 Consultants also found work with advocacy organizations of various kinds, helping them develop grassroots lobbying strategies that relied on campaign-style techniques in the pursuit of legislative goals.46 Some of the more prominent consultants turned to international work, especially in Latin America and the Caribbean, where there were few restrictions on political spending and American campaign strategies were well suited to the plebiscitary style of politics in the region.47 Most lucrative of all, consultants often worked for corporate clients seeking to change policy or simply improve their standing with the public. As Joe Cerrell explained, “The knowledge that you have acquired from politics” could be parlayed into year-round work on behalf of a range of clients, including “companies, [trade] associations, labor unions, environmental groups, religious groups, [and] academic organizations.”48 Because of the financial rewards of corporate work, diversifying one’s client base promised a degree of financial security that politics alone could not provide.

The career of consultant Matt Reese illustrates how political consulting extended well beyond the realm of campaigns. A native of West Virginia, Reese helped John Kennedy secure a victory in that state’s crucial primary during the i960 presidential campaign. Recognized for his talents, Reese became a deputy chair of the Democratic National Committee and then headed the voter registration drive for Lyndon Johnson in 1964. In August 1966, Reese struck out on his own, forming Matt Reese & Associates as a specialist in voter turnout. Reese quickly established a reputation for success by targeting precincts most likely to turn the election in his client’s favor, paying particular attention to undecided voters and those favorably disposed to the candidate but who seldom went to the polls. In the 1970s, Reese teamed up with pollster Bill Hamilton, and together they developed a powerful tool that combined surveys and market research to provide even greater precision in targeting campaign communication and outreach efforts. Using an early form of computer-assisted data analytics called the Claritas Cluster System, Reese and Hamilton could identify zip codes where concentrations of like-minded voters lived. Armed with such knowledge, Reese explained, “you could put the resources where they should be.”49

In 1978, Reese used this system of data-driven targeting on behalf of organized labor to defeat a statewide ballot initiative that would have turned Missouri into a “right-to-work” state. Although opinion polls suggested that a majority of Missouri voters would approve the measure, the right-to-work initiative lost by a surprisingly wide margin.50 Reese credited his victory to the effective targeting of almost 600,000 households he believed would vote against right-to-work if persuaded to turn out on Election Day. Spending less than 15 percent of his budget on television, Reese concentrated his resources on these persuadable voters using a combination of door-to-door visits, phone calls, and specially tailored mailings to get them to the polls.51 The victory demonstrated the power and precision of sophisticated targeting methods to identify voters open to the message of the campaign. Or, as Reese liked to say in his homespun West Virginia manner, “You pick cherries where the cherries is.”52

Although a self-described “left-leaning Democrat,” Reese supplemented his political work with high-paying corporate clients from the oil, gas, and tobacco industries.53 Like other consultants who took on corporate work, Reese applied the same methods he devised for political campaigns to help companies better understand how the public viewed their products and, especially, the regulations that impacted their bottom line. In 1976, for example, Reese managed a campaign in New York State on behalf of the tobacco industry that sought to build public support for a cut in the cigarette tax.54 In 1980, Reese and his colleague Bill Hamilton used the same targeting system first deployed in Missouri to analyze which segments of California voters supported the creation of nonsmoking sections in public places.55 Working for the Natural Gas Supply Association, Reese coordinated a massive grassroots lobbying campaign on behalf of the industry that targeted potential supporters for a letter-writing campaign (complete with computer-generated stationery recipients could sign and mail to Congress). As Reese told an interviewer in 1996, “The corporate [work] was so intriguing and so profitable.” Nevertheless, Reese admitted that “you’re not doing anything you’re particularly proud of. ... I do good now, to try to make up for that.”56 Moral qualms aside, Reese found corporate work to be an essential part of his business strategy. Many others in the industry followed suit.

In sum, consultants structured their fees, tailored their services, and diversified their client base in order to alleviate the uncertain and uneven character of political work. Combining political and corporate clients while extending the reach of their professional services, either farther down the ballot or across the globe, helped consultants to address the financial risks of the business, whether a nonpaying client or a late surprise that sunk a candidate in the closing days of the race.

 
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