Stagnant businesses must go with the flow

Business prospects may be improving, but clients are keeping a keen eye on costs, so lean, efficient groups are reaping the rewards, says Ian Cochrane

Last year saw many businesses downsize and some businesses disappear altogether. This year we have seen a much welcomed mood change and an increase in confidence throughout the industry.

Nevertheless, it’s still a challenging market and there is continued pressure on margins. Clients are going the procurement route more often and there are numerous breakaways offering the same or better service at reduced rates. Pricing is therefore very much under pressure.

Salary bills may have decreased, but costs per head have increased as businesses retain more experienced and more expensive staff. Most businesses are now reluctant to increase staff levels and have opted to go the flexible, but more expensive freelance route.

So you either accept this situation or start to look for ways of doing things differently. Further cost reduction or belt-tightening is really not an option going forward.

This means thinking about your business in a different way and being prepared to take risks. The things that worked before might not work in this climate. It was Anita Roddick who said, when she saw the direction the cosmetics industry was going, ‘Lets go in the opposite direction.’

So look at every area of your business and question why you do things the way you do.

Pricing work – historically, we have priced work based on the estimated time it will take and the hourly selling rate. This means that you are limited by the size of your business and prone to the inefficiencies of your client when projects stop and start and briefs change. An alternative is to use value or success pricing, where you quote a client, say, 75 per cent of the estimated cost or 150 per cent if successful criteria are achieved. We’ve all seen examples of design that have led to staggering increases in client performance and profitability. Why not have a slice of this?

Outsourcing – consider outsourcing services that you have always had in-house. For example, you may have always employed a new business person, a hugely difficult role that most design groups struggle with. We expect so much of these people – they are supposed to generate new business leads, write press releases, organise new business collateral, attend new business meetings, write proposals and entertain prospective clients in their spare time. You could outsource some or all of these activities. As a guide, if you don’t understand the role you are asking someone to undertake or if it requires a different sort of animal, you should consider outsourcing, but you will still need to manage this activity.

You could also consider outsourcing finance, technology and personnel management.

Management information – rarely are design businesses happy with the management information they receive, largely because it is designed by accountants, for accountants. Running a design business is very simple and the information you require is very simple. Decide what you really need to know and make sure that you receive this information daily, weekly and monthly. Don’t accept the excuse that the computer accounting package can’t produce this information. Talk to your accounting package supplier directly or request that the information is produced manually or using Excel.

Rewarding staff – we’ve got rid of overtime and company cars and increased everyone’s base pay. The result is that many people are overpaid now in relation to fees. Also, clients are much more demanding. If you require design or production staff to work through the night then consider bringing back overtime or introduce shift working. Studios running 24 hours per day are common in advertising, why not in design?

Other staff may prefer a better quality of life and will be prepared to sacrifice salary for increased holiday or sabbaticals. Salary can also be sacrificed for training or time off to study.

Staff involved in generating business from clients can be put on lower basic salaries, with the possibility of earning commissions and bonuses for fees generated.

Space-planning – A good environment and space-planning have a big impact on a business. Your reception area and the staff who man it are crucial. The most common practice is to sit designers together and account managers separately, since the former need loud music and the latter want quiet. I recommend mixing everyone up, including management. Communication improves and barriers disappear. Get rid of cellular offices. Working from home occasionally is also permitted.

How to get a fresh perspective

• Get away from the office and climb your nearest hill. There is nothing better than looking at your business from on high – the higher you are the less detail you see and the more of an overview you get.

• Look outside the design industry. Make a point of meeting and talking with people from other industries. Find out how they do things and see what you can learn.

• Employ people from outside the industry and prepare to be surprised and refreshed.

• Prepare a balance sheet of intangible assets – these may be skills, learning, relationships or technologies that are peculiar to your business. Once you’ve identified them, consider how you can capitalise on them.

• Observe something completely random (like David Blaine in a suspended glass box) and see what lessons can be learnt.

• Ask an outsider’s opinion on your business on a regular basis. Ask them to wander around and give you a fresh perspective. Allow them to question the way you do things. Allow them to make you feel uncomfortable for one afternoon a month.

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