Design consultancies must budget carefully to stay ahead

We should not be surprised by Willott Kingston Smith’s findings that staff costs are down per head within design groups (see News, page 3). It is heartening to see the industry heeding advice to ensure a brighter future.

We should not be surprised by Willott Kingston Smith’s findings that staff costs are down per head within design groups.It is heartening to see the industry heeding advice to ensure a brighter future.

WKS partner Mandy Merron has long been counselling that design needs to watch staff costs if it is to maintain profitability as the sector recovers from the downturn. According to the accountancy firm’s latest Marketing Monitor report, which tracks financial performance across the marketing services arena, per head staff costs in design are down by 15 per cent from the £50 566 published in the last edition to £42 808.

These latest findings put staffing at 58.4 per cent of gross income and so in sight of the 50-55 per cent cited by WKS as the ideal ratio. This is good news as long as the reduction has resulted from a kerb on excessive salaries and a reduction in unnecessary posts, and that staff are being rewarded in other ways – say, through profit-sharing schemes.

But indications are that the balance isn’t yet right. While design might now be one of the lowest payers in the marketing services sector, with only media buyers paying staff less, income per head appears to be down 4.8 per cent, suggesting that consultancies need to look at also reducing other overheads – and to boosting their fees per project.

Design Week’s 2006 Top 100 consultancy survey, due to be published next month, is expected to show a welcome upturn in fees reported by participating groups during 2005. Couple this with the optimistism about growth that most of those groups are showing and we have one of the key indications of economic recovery in the sector. This is particularly noticable among digital and retail specialists.

This is the ideal time to be checking the budgets to determine how to run the business through the coming, critical months. Those who heed the warnings given by WKS and other management specialists will certainly be in a fitter state to compete.

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