How do you run a successful medium-sized consultancy, staying profitable without selling out or losing creative edge? asks Jonathan Davies
The age of growth for the medium-sized design consultancy is upon us, so let us not hide from it or run scared, but embrace it and look at it as our way of finally creating our own global brands.
The past five years have seen change in the design industry. There has been the birth of the virtual consultancy – a collection of freelances and consultants setting up virtual companies – where each individual is based in separate, low-overhead premises, often their home, in order to keep costs to a minimum.
Many of these individuals have learnt their trade at medium-sized design consultancies, and these cost savings are then passed on to the client – though sometimes not. This low-cost offer is tempting for price-aware clients – the medium-sized consultancy cannot compete because of its overheads.
The virtual consultancy, however, has risk associated with it as there is no feeling of definition: Who is doing the work? What am I buying into? Does it stand for anything other than low cost?
The financial threat is one that can potentially be challenged through growth, as a larger consultancy can spread its overheads more evenly or offer a wider service for the same fees.
On the flip side, there is another big industry change sweeping through medium-sized consultancies, and that is buyout by media groups. Over the past five years or so these groups have realised that design is a major part of communicating brands, be it digital, packaging or experiential.
Such groups have also realised that they need to invest in the best names in the business. This has meant that some of the most famous names in design, many of which have been medium-sized consultancies, are now part of media communications plcs.
Plcs exist for the long-term benefit of their shareholders. Shareholders invest in businesses for two financial reasons – first, to receive annual dividends from group profit, and second, to benefit from the value of the share price. The potential for profit here is often based on many factors, the dominant one of which is the size and scope of the business.
So can a medium-sized, profit-making design group exist within a plc? Not really. The most natural thing is to want any successful consultancy within a plc to become even more successful and to make more profit.
Other pressures come from clients. Clients are interested in 360-degree communication across their markets. They want a global unity for their global brands, but with local market nuances to make sure that they perform well in all cultures.
A medium-sized design consultancy can find it hard to deliver on this need and so has to look at making allegiances with other consultancies in local markets or set up offices there. Creating its own global business signifies the loss of medium-size status.
So, why is it that design consultancies are so scared of growth, despite an obvious need for them to expand? One slightly cynical view is that many of these successful medium-sized groups, bought by plcs, have been successful because of the drive and commitment of the founders.
They are often the personalities behind the consultancy and the reason clients have bought into that group in the first place. They are, in essence, the brand the plc has just bought.
What happens after they become wealthy from the sale, have delivered on their three-year earnout and suddenly notice that it is not their consultancy anymore?
As a result, there may be a lack of drive, the business and direction can get confused, the founders leave, and with them, the brand. The truth is we all love our consultancies and we want to protect them. Most of all, we don’t want them to lose their creative souls.
However, there is an obvious solution to all of this, but it is still one that consultancies shy away from. We need to look at ourselves as brands – brands that compete against each other, that need to differentiate from each other, that are bought by clients for what they represent, but that cannot be reliant on the founder.
Jonathan Davies is managing director of Holmes & Marchant
making it medium-sized
• The medium-sized design consultancy brand must be based on a truth and a difference • The group must exist for a reason, around which its character, its product and its manner must be all based • This essence must have a defined look and feel • No matter how fast, how big or into which markets your design consultancy grows, the consultancy soul will remain