Shitty profits

We were talking the other day about why a) there’s been a mass exodus from the design industry and b) there’s so few ‘older’ designers. We decided the number one reason is shitty profits.

Shitty profits suck. Many designers get to a stage in their life and career when they realise their cashflow crisis is not temporary and their super fund balance is not to ‘benchmark’. It’s a stage where life demands a regular wage and more superannuation. That mid-stage can lead to getting a ‘real’ job.

That’s a shame because shitty profits and poor cash flow can be fixed. We’ve developed the Happier Healthier Creative Business Canvas to give a roadmap for fixing issues loke this.

Here’s the 6 Canvas areas we’d look at if we were working with you…

1. Profits

Firstly, what is an ideal profit?

Do you know what profit you’re aiming for? Ideal profit means different things to different people – identifying a number helps understand the gap we’re trying to bridge.

Is the gap a chasm or a sliver? That’s the reality check because it specifies the energy and time needed to bridge the gap.

Defining profit makes it easier to research whether it’s possible to bridge the gap from your current client base (that is, get more (profitable) work from existing clients), or is it necessary to find new clients. Or perhaps it’s both?

And it’s valuable to pull job profit and loss reports to investigate whether poor estimating or scope creep are impacting profits.

Benchmark: majority of Australian design businesses range between 7 – 20% profit. 10% is a median.

2. Productivity

Productivity is not about working harder/faster/longer, it’s about everyone performing to their full potential.

Poor profits could be because there’s not enough work or because you and/or your team aren’t performing to full potential.

If there’s not enough work, focus your energy on finding more.
If there’s work, it could be it’s not profitable (an estimating issue) or the tasks don’t align with the available skillset (and therefore are taking too long).

Or maybe poor briefing is causing rework?
Or designer enthusiasm and/or poor briefs are causing scope creep.

Benchmark: majority of designers will work at around 70% productivity. Juniors a bit more because they’re not often in meetings and don’t manage others; design agency owners less because they’re often in meetings and spend a lot of time managing.

3. New Business strategy

Many creative businesses are built on referrals. That’s a fine way to start a business, but relying on referrals to grow your business is relying on others to understand the type of work you like to do, the services you offer, your skillset and your interests. The result can be a new business trajectory that looks like a zigzag rather than a straight line.

Much better to have a new business strategy.

The key to a successful strategy is seeing it as a set of choices to attract (the right) new projects and clients to your business (as opposed to getting more work from existing clients).

So, firstly, have you got a new business strategy – a plan to attract the clients you want to work with?

If you haven’t – you need one. It’s about defining your superpower and your Design Value Proposition. And it’s about attracting the balance of work that makes for a smooth cashflow.

If you have a new business strategy; track what’s working, and what’s not.

Benchmark: our experience shows it usually takes around 6-9 months to translate a client from initial contact to RFE.

4. Pitch

Maybe you’re making shitty profits because clients just don’t accept your pitch.

Does your pitch sound generic and just a repeat of what’s available online?
Does it identify the value you deliver to clients?
Does it define and communicate your distinctive competence?
Does it have clarity around your offer and how it meets specific client needs?

Benchmark: Most agencies develop value propositions based on the services they offer rather than client pains and gains.

5. Recruitment

Maybe there’s little profit because your available skillset doesn’t align with the work.

Misaligned skillsets are bad for the culture and an individual’s mental health; everyone wants to excel at what they do.
It’s essential to have the right people to deliver what you say you will do, when you say you will do it, for the price agreed.

That’s when productivity is at it’s best.

If you don’t have the right people, have you got a process to attract, support and retain them?

Benchmark: Australian design businesses have a churn rate of around 2-4 years. Faster for junior designers, slower for seniors.

6. Impact

Finally. Large budget projects deliver higher profits and clients with large budgets want to see a return on investment.

Can you measure the design impact you’re making/have made for your clients, their products/services and their customers?

Defining the impact design makes can be done in evidence-based case studies, or by collecting and tracking before/after data, or by using HCD tools. It’s information to make decision-making easier for those hard-to-budge clients.

Benchmark: Design value is over-used and under-defined. Instead of talking about the value design delivers, better to talk about the impact design makes to our society, environment and economy.

The so, what

Shitty profits suck.
They should definitely be a short, rather than long term problem.
The good news is can be fixed by systematically examining your business.

The above is an exercise from the Happier, Healthier Creative Business canvas we developed with Streamtime. We run half day inhouse workshops introducing how design business owners can use the canvas in their business. If you’re interested, email me.

 

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Want more?

Here’s more information on designers making change to stay head:
1 Relying on referrals for new business is a problem – here’s why
2 An article about design impact
3 How to talk to clients about design effectiveness