Is it time to merge?

Many creative businesses are reporting a drop in profit of 20-30% this financial year. We know it’s cyclical and it will improve (with or without the hand-wringing). So, maybe we use the slowdown to pause and reflect? To question what’s working and what’s not…

Running any business is tough. Running a design business has to be one of the toughest. It requires two distinct parts of the brain: a business brain and a creative brain shoved into the one head. While that’s far from impossible, it’s difficult to have both cogs turning, simultaneously, at the same speed.

That’s why many designers consider partnerships and/or mergers. Both are looking to share the load, divide the tasks and chew the fat.

Why merge?

We’re fresh from The Design Conference where the value of creatives collaborating was on stage for all to celebrate. Merging is worth considering because it can:

  • add another skill to your offer
  • plug a gap in a cyclical billing cycle
  • open your business to another client / industry sector
  • be the entree to tried and tested processes and procedures
  • add another location to your capabilities
  • give you the opportunity to take a holiday without your laptop
  • renew your interest in creativity
  • or simply reduce the feeling of isolation working alone or in a small team.

That said, partnerships and merging rely on finding the right partner.

How to choose the right business partner

A clone isn’t the answer — if your weaknesses annoy you, imagine a business with twice your bad traits — inconceivable mayhem. The best partners are those with complementary skills. A ying to your yang.

You can’t have a company of kites. Someone has to be on the ground holding the string firmly.

When considering a merger, designers traditionally gravitate to another other designer they respect and admire. (Hi to Paul and Kiel from Pennybridge in sunny Palm Beach.)

Alternatively it might be someone with another skillset like Cass Mackenzie (Design) and Sarah Gross (Creative Strategy) at Storyfolk  or Nick Thorn and Tim Meyer at Atollon or merged their businesses years ago and more recently have merged with a digital agency.

Partnerships and mergers also work brilliantly if you’re looking to expand geographically, like Dominic Hofstede and Rob Duncan at Mucho.

The most important aspect in all of these examples is the appreciation and regard each of these designers have for their partner’s expertise. Our experience has shown you don’t need to socialise with your colleagues outside work but you need to admire and respect what everyone brings to the business.

And it really helps if it’s someone with the same attitude to money; projected profitability and the use of business funds.

Short-medium and long-term goals for a merger

Money is the perfect segway into addressing goals.

Life moves fast in a creative business but it’s crucial to share thoughts about short, medium and long term goals when considering a merger.

Short term: are you hungry for a long holiday/learn a new skill/do further studies? Do you want to work from home permanently or never? Do you want to employ a team or use subcontractors or neither?

Medium term: Are you interested in growing the business or does the merger satisfy your ambitions? Do you want to change the focus of your offer or hone your skills?

Longer term: are you interested in building to sell or taking on more partners.

Merger and partnership agreements

Much of our work is helping creatives play nicely with other creatives and most often we’re brought in when the wheels have fallen off the cart. Much of what we cover can be settled with a partnership agreement and writing one is far easier when things are good than when things are ugly.

Partnership agreements are like pre-nups. Here’s some of the topics we often include:

  • What to do in a disagreement / an impasse?
  • If needed, how would the business access additional funds?
  • Who decides if a potential client is a good fit?
  • Who owns IP if the partnership is disbanded?

If you want to tick all the boxes for a partnership agreement you should consult someone like Media Arts Lawyers.

The role of job descriptions in a merger

It’s pretty well known job descriptions are crucial in the smooth operation of all businesses because they manage expectations. Problem is, they’re often overlooked for founders and owners. That’s a shame because defining roles and responsibilities early helps avoid conflict.

The type of conflict we see includes discussion about who takes responsibility for:

  • presenting to potential clients
  • ensuring a healthy new business pipeline
  • chasing overdue accounts
  • interviewing and negotiating supplier terms
  • cashflow and the profitability of the business
  • hiring and firing.

Management meetings

The continual vortex of client needs makes any internal discussion difficult (read: your lack of preparation does not constitute my emergency) but; regardless of how busy you are, it’s crucial to treat the management meeting with the same reverence as a client meeting. Management meetings should have a designated time and place.

Meeting often stops small problems escalating into bigger problems. Plus, regular updates stop either partner feeling they lack control and that makes it easier to delegate.

Takeaway

Mergers and partnerships are not for everyone. Good partners in business, like in life, are hard to find (hi to my business partner with whom I celebrate 40 years of business partnership on July 1. ;), but when done well, it can make business more fun and lessen the load for both parties.

Mergers are just worth considering, it’s just one option open to creative business owners.

 


Want more?

Here’s more information on designers making change to stay head:
1 Mini case studies about designers doing new business well
2 Perhaps your new partner is on LinkedIn?
3 Perhaps it’s time to close your studio and that’s OK


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About Carol

After 30+ years running a design studio, I accumulated a pretty special network of fellow designers. One thing most have in common: a need for more information about the ‘business’ side of design. Most are impatient with any task competing for time spent doing what they love – designing so they wanted more info about how to work more efficiently and effectively.

Not me. I love that intersection between design and business. I built a career working with Ombudsman schemes, the Emergency Services sector and the Courts. My special power has always been an ability to use design to translate the difficult to understand or the unpalatable message.

I now use exactly the same skills with creative business owners. I translate the indigestible into bite-sized chunks of information. I share insights, introduce tools and embed processes to help others build confidence business decision-making skills. More confidence makes it easier to grasp opportunities. More confidence makes it easier to recognise a good client from the bad.

Outside DBC I have mentored with Womentor, AGDA The Aunties, and most recently Regional Arts NSW.
And I’m a proud board member of Never Not Creative.

Always happy to chat, I can be contacted here.

Our second site is designbusinessschool.com.au – Australia’s only business school for designers

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