Scaling a design business

Scaling up a design business

In the hundreds of design agencies I’ve worked with over the past decade I’ve noted that the major issue they face is scalability.

How do they take their existing business to great heights; with better clients, higher fees and a broader service offering

When Carol and I ran Mackay Branson design the model was to increase the number of designers you employed and then do your best to increase the hourly rate that clients will pay.

That still works with some studios but it’s a risky model. Wage creep, client loses and overhead increases can quickly threaten the business.

We observed on recent overseas trips that design agencies are becoming more agile; just employing the right talent for the right amount of time for a fixed fee.

This came to mind when I recently read some research by MIT Sloan Management. MIT Sloan studied scalability in more than 90 Scandinavian businesses and also examined the experiences of a number of well-known businesses, including Google, Apple, and Groupon.

I have looked at this research and identified four patterns by which design agencies can achieve scalability.

Create products from services

The first pattern involved converting services to products. I have observed some agencies I work with being able to take some of their services, e.g. the discovery phase, and convert them into a product such as a customer journey workshop. They sell the workshop product as an intro to the services they offer. They effectively get paid extra to gather research for themselves and the client. Some agencies are deriving a major part of their revenue from these services. They attract a much higher ‘value’ fee than just hourly rates for doing design and artwork.

Remove capacity constraints

The second involved freeing the business from traditional capacity constraints. The traditional approach is to grow staff numbers and sell more hours to increase their capacity to earn. But most studios find it hard to grow the business sustainably while also increasing capacity through hiring new designers. The answer is to forget about staff growth and go for fee growth. Many agencies are now selling on value instead of hours. This effectively increases their capacity to earn. It scales up the profitability of the business without scaling up the physical size.

Co-opt your clients and partners

The third was to have clients and other partners assume new roles in your business model. I have seen design agencies scale up their fees by selling co-creation workshops that involve the client in the decision-making process. I have also seen this involve other creatives such as photographers, digital producers, illustrators etc. This is effectively using the sprint methodology to fast track a project, get higher fees and leverage the clients’ experience.

Develop a platform model

The fourth pattern was to establish platform models which further leverages your client network. This establishes you as an expert in particular field such as manufacturing. Here you would organise networking events that bring your clients together to look at the issues facing the industry. It is not a hard sell for your services although you would present them as part of the solution.

Take away point

So how do you go about this? The starting point is to examine your current business model to see how you could apply these scalability processes. If you can’t apply them then you would look at changing your business model.

That should lead to a value proposition that defines how you add value for clients.

 

Got a question? Want to share your point of view? Please feel free to email me.

 

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Greg Branson


Greg’s passion is the research and development of methods that improve design management and the role of design in business.

Along with Carol Mackay Greg has developed The Design Business School to help owners manage their business better along with showing designers how to get more involved in the studio and develop their career path. Contact Greg.

Currently Carol is co-writing a new program for the The Design Business School. The Design Studio Management Program is aimed at designers, design graduates and existing design studio managers to help them develop skills to fast track their career path. It is due for release late February 2018. Contact Carol for more information.