How to make sure your business survives without you

After you retire or leave your design practice, how can you ensure it will stay afloat? We speak to designers who have taken their consultancies through a business restructure.

When you have nurtured a design consultancy, it can be difficult to let go. Planning your succession can take several years, says Adam Fennelow, services director at the Design Business Association (DBA). “The DBA recommends people have a road map to exit the business,” he says. But what route should you take? Founders can be succeeded in a variety of ways. Here’s a run-down of your options.

Employee ownership

A meeting at PriestmanGoode's office
A meeting at PriestmanGoode’s office

This involves making your employees stakeholders in the company. A business owner can hand their consultancy over to their employees in three ways: by making them individual shareholders, holding shares collectively for them through a trust, or a combination of both.

Paul Priestman, co-founder at PriestmanGoode, opted for a trust when he turned his consultancy into an employee-owned business this year. “Establishing a share trust felt like a fairer option for all employees”, says Priestman. “Only people who have the money can buy individual shares – then it becomes a race to power. With a trust, the shares are distributed equally if the employees decide to sell the company. They can also collectively decide how to spend profit, rather than it going to the founding directors.”

The process took six years. “I began by taking designers, who were five years ahead of me, out for lunch to understand the process of restructuring,” he explains. When it started transitioning, PriestmanGoode began “empowering” its employees by creating new internal departments that were in charge of hiring their own staff, choosing their own software and equipment, and representing the company at events.

According to the Employee Ownership Association, the employee-owned business model can improve the company’s recruitment potential because of its employee benefits. “In attracting talent, being employee-owned is a really big draw,” says Priestman. “There’s a good feeling about the set-up, and it prevents hostile takeovers.”

Priestman went to specialists for advice during the process, such as creative industries’ management consultant Clear Partnership and commercial law firm Fieldfisher. He recommends consultancy founders do their research, learn about the finances of their business and be prepared to delegate. “Talk to the Employee Ownership Association, and people who have done it. Be willing to let go and give your designers responsibility – don’t let your ego interfere.”

Management buyout

CJO Upcycling packaging, by Kinneir Dufort
CJO Upcycling packaging, by Kinneir Dufort

This involves selling the consultancy to select managers within the business, who have been trained through the ranks to eventually take over. The managers can pay the business owners out through different ways, such as an agreed mortgage or a bank loan.

Product design consultancy Kinneir Duffort took on a management buyout structure in 2002. Starting in 1997, the process took the consultancy’s founders Ross Kinneir and Francis Dufort five years, and aimed to “grow a team-based entity, rather than a founders’ company”, says design director Craig Wightman.

The consultancy has continued to involve more key members of its senior team in the management of the business, says Wightman. “Design consultancies are people businesses. To help the business develop and thrive, it’s important to provide opportunities for people in the team to do so too, and to feel like their efforts and ideas can directly influence its direction.” Being an independent company encourages an “open, collaborative and team-focused” ethos, he adds, which would be more difficult to achieve if Kinneir Dufort was part of a network.

To complete a management buyout, Wightman says your business needs to be in good shape. “You need to have a clear vision, a strong and capable management team, a healthy business position and the drive and ambition to grow,” he explains. Wightman also suggests speaking with professionals, such as lawyers and finance advisors. “Designers may be experts at running a design business but the world of corporate transactions is not something we do very often, if at all,” he says. “You need to get good advice.”

Selling to a network

Paul Hollywood range branding, by Coley Porter Bell
Paul Hollywood range branding, by Coley Porter Bell

This involves selling your consultancy to an umbrella company such as WPP or Publicis and becoming part of a group.

Coley Porter Bell was bought out by WPP in 1991, later becoming part of a sub-group called Ogilvy & Mather Group UK. Coley Porter Bell saw joining WPP as an opportunity to gain new skills through cross-disciplinary working and to find new talent, says Vicky Bullen, the consultancy’s chief executive officer. The consultancy has been able to collaborate on a more diverse range of projects with other teams, says Bullen, as “clients’ requests for integrated teams have grown”. Recently, all Ogilvy & Mather Group UK companies were brought together under one roof, which has also encouraged this, she says.

Other advantages include a bigger contacts list and therefore more referrals to clients for projects, career progression through training, and more stability, explains Bullen. “We have amazing training and development opportunities through both WPP and Ogilvy, and when you have the support of a group behind you, you don’t suffer from the same cash flow problems as an independent. Plus, we have just gained a fantastic new home with amazing facilities such as recording suites and in-house digital studios.”

But in order to make the most of being part of a network, you need to get to know people, she says, and be prepared to work across a large team. “Just because you are part of a big group, it doesn’t mean people will reach out to you,” Bullen explains. “Make sure you network, and go out of your way to help people across the company – then they will help you too. Also, be prepared to compromise – when you’re part of a cross-disciplinary team, you can’t always lead.”

Being acquired by another consultancy

Spark website design, by 999
Spark website design, by 999

Consultancies can also be bought by another design business. Equator acquired 999 Design in February this year, which founding director Richard Bissland says was a move to combine skill sets with another studio. “999 had been run by the same team for 34 years and it was time to look to the future,” says Bissland. “Equator needed specialist branding skills, and we needed a more sophisticated approach to digital – bolting them together made sense.” The transitional process is still underway, with the two consultancies having already started collaborating on projects, but yet to move into the same office location in Glasgow. A big part of the process was reassuring employees and getting them on board with the advantages of collaboration, says Bissland.

Although the acquisition is still in process, Bissland believes the positives will outweigh the hassle of restructuring. “Sorting out space for various teams to operate in and pushing desks around might be a pain, but the pros will far outweigh the cons,” he says. “Having strength in digital and branding, merging client lists and having a more rounded offering are the key advantages.” Bissland advises that you pick a business you know you will gel with. “Make sure the partner or parent consultancy is a good fit for your culture and that you know and like the people you will be working with – the chemistry is important,” he says.

Closing down and starting afresh

The Art of Ping Pong project, by FiveFootSix. Bat design by Alec Doherty
The Art of Ping Pong project, by FiveFootSix. Bat design by Alec Doherty

Closing down does not have to be a result of financial difficulties – if you co-own a consultancy and decide it is time to go your separate ways and move into different projects, shutting up shop could be an option, says Adam Fennelow at the DBA.

Brand consultancy FiveFootSix closed down last year for this reason, saying it was “time for a change in direction”. “This was a conscious decision with money still available in the business, which the partners were able to share between them,” says Fennelow.

Company founders Algy Batten and Mark McConnachie say the decision allowed them to “end things on a high” and “turn [their] attention to new challenges ahead.”

Looking to the future

ALBA television branding, by Elmwood
ALBA television branding, by Elmwood

Jonathan Sands, chairman at Elmwood, led a management buyout of the consultancy 27 years ago. He hopes to keep the consultancy independent and pass responsibility to others in the management team, to “retain the culture of the business” and “provide a good future” for employees. Sarah Turner, managing director at Carter Wong, says the consultancy also hopes to stay independent to “keep creativity at its core”. “The freedom of being an independent agency is something we value highly,” she says.

The decision to restructure is a big one. Selling to a network might provide stability and opportunity to work with people of other disciplines, but lacks the autonomy an independent or employee-owned practice can bring. Ultimately, you need to work out what is most important for your own business.

DBA’S Adam Fennelow:
Top tips on exiting your consultancy successfully

1. Plan early
A successful exit can take years. The earlier you start thinking about what you want to achieve long-term, the easier and more successful it will be.

2. Consider what is important to you
A clean break, money, security for your staff, staying involved at some level, creating a legacy – all are relevant issues to influence your decisions.

3. Take advice
Good advisors cost money, but are worth it. A financial advisor needs to be more of a coach than an accountant.

4. Have a plan
Make sure your plan has milestones that can be assessed and amended if necessary. Are you on track? Have you recruited the right team to move the business on? Have you developed your ability to measure business metrics?

5. Your sums need to add up
Your finances must be in order. Not just in a profit and loss sense – you need to illustrate costs per head, profitability by client, new business projections etc. This is essential to minimise perceived risk for those taking over.

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