Small firms rake in big business along K Street

Small boutique lobbying firms are thriving in an otherwise mixed year for K Street by promising to deliver more bang-for-the-buck than marquee houses.

Revenues at some of Washington’s biggest lobbying firms have been falling as companies and trade groups look to cut costs during the recession. Eight of the 10 firms that booked the biggest earnings in the first half of 2008 saw hefty declines in the first half of 2009 — some as high as 18 percent.

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But at their smaller counterparts, business is booming. Firms like the Gephardt Group, mCapitol Management and the Raben Group are reporting growth rates between 30 and 200 percent.

An analysis by The Hill, using revenue totals collected by CQ MoneyLine, found that aggregate earnings of the 100 largest firms dropped in the first half of 2009 compared to the same period last year. The largest firms reported revenues of $414 million, down about 4 percent from the same period in 2008.

While firms ranked 100 to 200 in terms of earnings brought in much less revenue overall — roughly $125 million — they also saw a combined 3 percent uptick in business.

“There is an increasing recognition that smaller firms hustle more and can do things at a lower price point,” said Stewart Verdery, founder of Monument Policy Group, which saw a roughly 15 percent growth in business. “We have eight people and no support staff. We don’t pay for a whole contingent of secretaries and researchers.”

Scott Parven, of Parven Pomper Strategies Inc., said his clients benefit from having all six of the firm’s staffers working on every contract.

“The fact that we’re small and focused means we can focus on what a client needs on a daily basis and not get too big or too diffuse that we have to juggle too many plates,” said Parven, whose firm saw a 22 percent increase in revenue.

Some of the small firms are benefiting from having big-name Democrats on staff. The Gephardt Group is named after former House Majority Leader Dick Gephardt (D-Mo.). Kountoupes Consulting LLC, which grew by nearly 40 percent in the period, was founded by Lisa Kountoupes, a former legislative affairs staffer under President Bill Clinton. mCapitol Management’s president, Gary LaPaille, was the chairman of the Illinois Democratic Party when Barack Obama served in the Illinois state Senate.

“It doesn’t hurt to be someone who is from Chicago or Illinois,” LaPaille said. “I don’t market it like that, but there aren’t that many of us out there.”

When it comes to measuring earnings growth, smaller firms also have a mathematical advantage over bigger shops. The money from one or two additional clients will cause larger earnings growth at a firm that makes $1 million versus one that brings in $20 million.

And lobbyists at small shops say they’ve benefited from an aggressive legislative agenda pushed by the Obama administration, on healthcare, financial-services reform and energy and climate change. The activity has helped offset the effects of the recession for firms small and large on K Street.

Lobbyists at boutique shops insist their size is increasingly viewed as an advantage by clients. The firms offer lower overhead and more hands-on services, they say, than do their larger competitors, which appeals to penny-pinching executives.

“At the major shops you have a U.S. senator who does the pitch and then you suddenly have a 26-year-old managing the account,” said LaPaille. “The buyer is getting more sophisticated.”

The Raben Group has seen a nearly 50 percent increase in revenue during the period, but Robert Raben, the firm’s founder, said the growth isn’t due to a change in business strategy.

Raben said he has never been successful cold-calling potential clients and continues to win most of his work through referrals. The firm focuses on a range of public policy and advocacy issues, such as reproductive rights, gay rights and affordable housing. Roughly 80 percent of the firm’s work is for not-for-profit clients, and the rest for corporate clients with similar goals, Raben said.

While Raben has more clients and has been able to hire more staffers, he said some lobbying work remains mostly off-limits for smaller firms.

“It remains the case that the largest corporations, the coalitions and definitely the foreign governments are the exclusive domain of the big, mostly law, firms and some lobby shops,” Raben said. “And then the boutiques get hired as tactical add-ons.”

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