How to run an efficient design business

This year’s Design Week Top 100 survey proves that consultancies of any size can run an efficient practice.

If you look at the top 20 most efficient consultancies, staffing levels run from fewer than ten to more than 500. It’s quite a swing, yet fee-income per head, which is the leveller here, ranges from about £100 000 to £150 000.

Regardless of staffing levels, the thing these consultancies all have in common is the ability to optimise their human resources. But how do they do this? How do they build efficiency? And how do they ensure their staff are not flogging themselves to death through overworking?

Accountancy firm KingstonSmith W1 believes consultancies should be setting themselves an efficiency target of between £80 000 and £100 000 of fee-income per head, which would make this year’s top 20 high achievers.

Anecdotal evidence suggests the many smaller consultancies aim for an optimum of 12 staff, but our table proves that is a misconception. If TS Design can achieve a fee-income of £97 167 per head with a staff of six and Imagination can achieve a fee-income per head of £113 202 with 555 staff, it is the way these agencies are set up and managed, rather than their size, that makes them so effective.

We have spoken to consultancies with a range 
of staffing levels to get an idea of the management story behind the numbers.

Cheltenham-based ArthurSteenHorneAdamson has a staff of nine and boasts a total fee-income of £969 000, which is £107 667 per head.

The consultancy sets efficiency targets, but ASHA managing partner Mike Horne says, ‘These are only used by us as owners of the business as a health-check. Our people don’t know about it and aren’t managed to it financially. Our commercial focus is on delivering to clients on time and to budget.’

Over at Bulletproof, which brings in £7.9m, the fee-income per head is £118 167, an increase from last year’s £97 189. There are 60 staff in the UK and five overseas.

Bulletproof managing partner Jonny Stewart says the consultancy reviews and sets efficiency targets as a whole, against individual clients and against individual projects when required.

‘We constantly evaluate our working efficiencies and at the year-end we are able to establish reasonable, competitive targets for billable hours, billable rates and efficiencies across various facets of the business for the forthcoming fiscal year,’ says Stewart.

Like ASHA, Stewart says Bulletproof monitors the efficiencies to get ‘a health-check of the agency’. He adds, ‘At any given time we are able to understand the efficiencies and subsequent profit margins being achieved at various levels from client to project, project stage and mid-stage, ensuring we proactively manage profitability and investment across our clients, projects and project stages.’

Leicester-based retail specialist Checkland Kindleysides is a much bigger consultancy, with 100 staff bringing in a total fee-income of £15.3, making the income per head £153 880.

Founder of the consultancy Jeff Kindleysides says productivity targets are set by the managing director and the financial director but are for the eyes of management only and are ‘used as a barometer for them to measure productivity’.

However, he says that the business model is driven by delivering a professional design service that is relevant to the needs of commercial clients and ambitions, brand equity and long-term plans.

Kindleysides says, ‘We nurture a sense of creative freedom among our teams, which we believe delivers the best results for both our clients 
and our company.’

When it comes to big projects, nine-strong ASHA still handles the work in-house. Horne says,
‘We have a core of very bright, capable people that can manage and be supported by external resources if needed. We also discuss delivery as a team and may feel that we can work intensely for a period and deliver by ourselves.’

Regardless of project size, Bulletproof says it takes the same approach – department heads are brought together from creative, strategy and client services to plan a bespoke solution for the brief, the client, the business and the brand.

The approach is ‘mapped’, a project proposal 
is made and a timeline is created so the client can approve the budget and timings.

Stewart says, ‘To ensure a project stays on track, throughout the process we hold weekly status meetings with our clients and highlight any critical dates for key stakeholder feedback and approval.

‘In our experience everything runs more smoothly when we are in constant communication with the client, keeping them abreast of everything that we are doing and what they themselves need to action.’

Checkland Kindleysides has developed ‘bespoke in-house systems’ to monitor all projects regardless of size. Kindleysides says all aspects of cost control can be reviewed on a daily, or if necessary hourly, basis.

He says, ‘Over 35 years we have developed
 a sophisticated project-management system, enabling our project managers to accurately plan, schedule and control all of the complex details that typically come with successfully delivering large-scale projects.’

Being efficient does not mean running your staff into the ground. There have to be enough of them to do the job effectively and this can be managed by calling on a pool of freelancers with particular expertise when necessary.

ASHA’s Horne says, ‘We talk a lot about projects and workloads, and there is a lot of teamwork. We try to make sure no one is isolated, we have daily catch- ups and sometimes a little hug.’

Bearing in mind that ASHA has a staff of nine, Horne says it does sometimes rely on freelancers ‘but never for the core thinking and consultancy’.

Bulletproof’s Stewart concedes that in a business that is driven by client deadlines, ‘being overworked can be seen as part and parcel of the industry we know and love’.

But while these deadlines ‘can contribute to the buzz of an agency’ he admits ‘agency life and too many late nights can take their toll’.

Stewart says he is mindful of the downsides of staff being overworked. ‘We always want the best for them and from them so our aim is to mitigate the effect by constantly monitoring workload for individuals and teams and continually recruiting to ensure permanent and freelance resource is available should the workload become excessive.’

He also advises, ‘If time is tight don’t fill it with meetings – work sharp and work effectively.’

We should not lose sight of the fact that making staff happy will make them effective, although it sounds a little inhuman to use the word effective in this context.

Stewart agrees, ‘Overall, the best way to prevent people feeling like they are being overworked is to create a culture and environment that allows people to feel they are valued and have the freedom to have fun and express themselves.’

As a medium-sized consultancy, Bulletproof
 is able to keep most of its work in-house, although Stewart says that recently, ‘there has been a higher quota within the studio to bring in complementary specialists specific to particular projects.

‘As a consultancy we like to keep work within our permanent resource, preferring to scope the work out from afar, ensuring it can be accommodated in-house.’

Checkland Kindleysides, the largest of the three, may be the least reliant on freelancers.

‘Our in-house capability and experience, together with our efficient planning and use
 of resource, means we rarely have to rely on freelancers,’ says Kindleysides. ‘However, we do have a trusted network of talented and like-minded freelancers that can provide us with a degree 
of flexibility when responding to our client’s needs at peak times.’

Nurturing a ‘well-supported creative environment’ is the key to not overworking staff, says Kindleysides, who adds, ‘I’ve learnt that as management we have to keep an eye on what’s developing volume-wise each day and wherever possible try to support individuals. I’m proud to say that our staff turnover is well below industry standard, which I’d like to think 
is a reflection of how we run our business.’

When it comes to managing the profitability 
of designers, consultancies need to consider who is responsible. Is it a case of designers being aware of and managing their own profitability, or is this for someone with a broader view of the business needs to be aware of?

Ultimately, the size of a consultancy determines this.

Horne says that for ASHA, managing the profitability of designers is not the responsibility 
of any individual.‘We don’t think about life like that,’ he says.‘Our designers are creative consultants
 as much as designers. We attack projects as
a multidisciplinary team and we look at how 
the whole team is doing.’

At Bulletproof there is both individual and collective responsibility for managing designers’ profitability.

On the one hand Stewart says it is the core responsibility of Bulletproof’s studio management team to ensure that things run efficiently, and profitability falls within their remit.

However, he adds, ‘It’s everybody’s responsibility to make sure we manage the profitability of our studio.’ That means everyone managing their time to ensure they are working as smartly as possible, client services making sure ‘they are on point with all dealings’ and the strategy team looking to achieve ‘concise delivery in the studio, so the logic fully complements the magic’.

Kindleysides says that his consultancy’s project management systems are ‘built to provide a desired level of responsibility’, and allow project managers and designers ‘to see and assess a project at any point in time’.

Again there is a level of collective responsibility. Kindleysides says, ‘We are collectively accountable and responsible for delivering our projects on brief, on budget and on time as required and expected by our clients, which ultimately ensures our long- term success.’

We know that efficient studios come in all shapes and sizes, and we know that efficiency is achieved through careful management of teams and individuals.

We have also discovered that efficiency itself 
is a known target, it is deliberate and it is a tangible goal that can be created at the beginning of a project and monitored over a progressive period. It is also 
a final destination and if you can keep it in your sights and keep everyone happy, that’s half the battle.

Efficient studios work to targets which in some cases are set and seen by management only, plan large projects in a way that their efficiency can be monitored and come in all shapes and sizes.

Maximising efficiency: Five key areas to watch

Esther Carder, partner at Kingston Smith W1 offers tips to maximise efficiency, around five key areas.

Quoting: Get the quote right. Ensure all scopes of work are agreed upfront and are sufficiently detailed; this will put you in a much stronger position for billing any inevitable extras. Put a clear narrative on timesheets to help support this.

Commerciality: Develop your staff’s commerciality. This will help when quoting and negotiating. Stand up to procurement! Ensure everyone understands the numbers and set targets so employees understand the importance of not over-servicing and making a profit. Ensure senior people have their own responsibilities for revenues and profitability.

Monitoring: Ensure you have good job costing and finance software, as well as a good finance team who can manage inputs and outputs and provide you with meaningful and timely reporting on which quick actions can be made. However, your output is only as good as your input, so ensure senior management take accuracy of timesheets seriously – if they don’t, no one will!

KPIs: Make sure you have target key performance indicators so that KPIs are monitored on a regular basis. The most important of these is the ratio of employment costs to revenue (fee income or gross income). Make sure you include freelancers in this calculation and target between 55 per cent and 60 per cent. If you get this ratio right, everything else should fall into place. Target an operating profit margin of at least 15 per cent.

Resource management and capacity-planning: Ensure you capacity-plan so that you know when the right time to make additional hires is. Know the point at which new projects will overburden staff and potentially weaken delivery to existing clients. Use of freelancers will help with uncertainties, but knowing when to replace with a permanent hire is important. Set targets for chargeable time and monitor against these so you know at any point what the agency’s potential spare capacity is. Target an average of between £100 000 – £120 000 revenue per head across the consultancy.

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You can see this year’s Design Week Top 100 in full here.