Cost on hours – sell on value
Time is a limited resource and that’s a problem for any service business.
We all work with a limited number of hours x a set number of people to deliver a service.
The only way to make more money is to sell more hours. To do that you need more people, and on it goes. It’s just not sustainable.
That’s why it’s important design studio owners cost on hours and sell on value.
The base of productivity is a measurement of how long a project takes to deliver. It’s not rocket surgery, but still it’s a roadblock for many designers.
We’re constantly bombarded with reasons designers won’t/can’t record their time:
- I’m a designer not a bean counter
- It stifles my creativity
- I jump across too many jobs to stop and record time
- I didn’t learn to be a designer to clock on and off
- I forgot
- I don’t need to stick to times. I just work later to get finished.
And the list goes on … there are just too many to list them all here.
Time is a limited resource
The fact that designers are employed for a set number of hours each week can be a challenge for creative business owners. By law they cannot be required to work more than 37.5 hours per week without additional pay. That means there is an hourly cost rate for every designer and the cost will vary depending on the number of hours worked. It will also vary according to the designers’ salary.
To build a sustainable business creative business owners must charge out a cost rate plus a margin. To do that they need to estimate how many hours a project will take. And then, after the project is finalised, they need to know whether the estimate of time was accurate.
It makes it imperative designers need to know the time allocated for each project and they have to record the actual time taken.
Easier said than done
It does sound easy but pricing and managing creative time is a complex task. Some designers work faster than others. Others are slower but more productive. And wages differ with experience. All this means that the one hourly cost rate might not work across a design team.
Estimating/pricing/costing/hourly rates is one of the mainstays of our Chair program – we’ve built up a knowledge bank of methods to do it well.
We’ve helped hundreds of studios develop their approach to managing time. We start by analysing the studio’s profit and loss statement to assess the real studio time sold. Time management is the perfect start to developing a pricing policy for the studio.
The Chair program
The DBC Chair program is more than mentoring for design studio owners. It’s based on a board of management model common in other professional businesses – a group of industry specialists that meet regularly to work on a business quite separately to those that work in the business. Boards are managed by a Chair.
Problem is, creative studios aren’t like other professional businesses. Research shows a majority have less than three employees. That’s a micro-business able to run lean and agile with little management structure. But it also means leaders are often lonely and without support.
Sustaining a business in our competitive landscape needs management knowledge and expertise. It needs someone taking a ‘helicopter view’ while others are on the ground, dealing with the day to day dramas. Problem is, there’s not usually enough headspace, let alone cashflow to employ that expertise.
The answer is the DBC Chair program – a six-month commitment involving monthly meetings to discuss your business and your challenges.
Meetings are scheduled, have an agenda tailored to your needs and your studio, and minutes– accountability delivers results. Part of each meeting is to set (and review) measurement goals to monitor improvements. Between meetings, Greg and/or Carol are available for phone, skype or email support as needed.
It’s access to two, design management knowledge banks to help you manage your studio, plan growth and even negotiate with staff.
Just want to talk time management? Contact Carol or Greg.
Greg’s passion is the research and development of methods that improve design management and the role of design in business.
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.