The traditional model is to employ more designers to match increased workload and then do your best to increase the hourly rate. This still works with some studios but it’s a risky model. Wage creep, client loses and overhead increases can quickly threaten the business. There are better ways to grow.
We’ve had the chance to gain insights while been doing intensive three month Business of design short courses across the country. From this we’ve identified three ways to grow a design business.
The first involves converting services to products. We’ve observed agencies take some of their services, e.g. the discovery phase, and convert it to 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 getting 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.
The second involves freeing the business from traditional capacity constraints. The traditional approach is to grow staff numbers and sell more hours to increase revenue. 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. If you have an overload use freelancers so the full cost of design is shed back to the client.
The third is to establish a platform model which further leverages your client network. The platform business model nurtures exchanges between two or more interdependent groups, usually consumers and producers or service providers. We have observed B Corp design businesses who use the community sessions to bring clients and suppliers together to examine a topic eg the youth justice system. The designer gets to present a viewpoint along side some clients. This establishes the designer as an expert in particular field or pillar such as government services.
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 you should look at adapting your business model.
Contact me if you would like to learn more about becoming a the Business of design short course.
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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.
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.
