Investing in design – working for profit-share rather than cash

Keith Forbes of Good Creative makes the case for working for profit-share rather than a cash payment.

Profits

Source: LendingMemo

If you make your career in design and branding, you’ll be familiar with being asked to work without cash payment. From pro bono charity work and start-ups with no funding, to wedding invitations for friends and family – I’d bet absolutely all of us have been there.

When you run a consultancy, the requests don’t stop. But if you do it right, you can end up with an arrangement that allows you to learn, innovate, take risks, and can even make you a better business.

We’ve been approached by a number of start-ups in need of branding. And while it’s often clear that there’s no viable future for them, sometimes we do see businesses that we feel we can help. But they simply don’t have the funds available to pay us for what they need. 

So in two cases, we’ve backed ourselves and taken a punt – a very well planned and legally binding punt, but a punt all the same – on their futures coupled with our expertise, and worked for equity and a share of profit.  

The two we’ve taken on to date are a technology start-up and a drinks brand. Both had great thinking and a sound business plan, but minimal budget for branding.

In both cases, we’ve created the brand and concept from scratch; given them a robust positioning, names, and a graphic platform for every environment.

And in both cases, before even starting work, we’ve agreed a watertight equity and profit-sharing framework. This has allowed us to precisely outline the nature of our work and avoid the situation where we become an on-call creative resource. We sit on the board of the companies, and become shareholders.

So what does Good get out of this? Potentially nothing. If the venture fails, we lose the time and money we have put in.

But at the same time, effectiveness is something we pride ourselves on – and putting our money where our mouth is in this way means we get to further test the returns case for great branding and design.

In the future, it would be great if consultancies could construct a range of different ways of recognising the value of their work. Most of the time, work is done by a consultancy for an agreed fee. But the value down the line, when a brand floats or is sold based on the equity created by the creative work, can be vast – and this of course doesn’t get passed back to the consultancy.

In the way that some actors have moved to taking a percentage of gross, this is a chance for designers to experiment with the same. The prospect might be a small business without much money now. But they could be millionaires in a decade because of your work.

Outside of money there are huge learning benefits. You can get an inside track on distribution, production and all the practicalities from legal to financial that go into businesses so different from your own. And creatively you’re the client as well – it really drives home the fact that design exists solely to get results. 

Of course, it’s all about manageable risk. There’s no doubt that waiting several years to get paid is not something you can attempt with all clients.

But if you have the resources, there’s a lot to be learned from these investments if you run them well. Back the right businesses and you’ll not only get the chance to see your work mature, but hopefully reap what it sows.

Keith Forbes is partner and creative director at Good Creative.

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Comments
  • Kartik Mani November 30, -0001 at 12:00 am

    Nice post, Keith. As someone who runs his own agency i’m very curious to know a few more details. I have explored this model on a couple of occasions but always stumbled with the implementation. But the biggest challenges were – how do you indemnify yourself against liabilities or misdoings by the client, and is such a relationship tenable.

  • Julia Kay November 30, -0001 at 12:00 am

    Profit share only really works if you have a stable of work that you can depend on. Because with profit share deals, you have to be able to afford to not get it. The deal is a total gamble.

  • Keith Forbes November 30, -0001 at 12:00 am

    Kartik. Thanks for your comments. The challenges you’ve mentioned are the million dollar ones and the prime reason why you have to choose your partners very carefully. In both cases I’ve mentioned, we are board level directors of the new entities so sit at the table with all other shareholders, ensuring complete transparency. In order to do this we had watertight legal documentation, from an independent legal practice agreed and signed by all parties before engagement. On top of this of course is good old gut instinct. Are they good people? Can I trust them and work closely with them? If there’s that wee niggle in your core that says no, trust it and don’t do it.

  • Keith Forbes November 30, -0001 at 12:00 am

    Totally agree Julia, the risk involved really isn’t for everyone. Which is why you need to be so careful and rigorous in choosing who you partner with.

  • Keith Forbes November 30, -0001 at 12:00 am

    Totally agree Julia, the risk involved really isn’t for everyone. This is why you need to be so careful and rigorous in choosing who you partner with.

  • Keith Forbes November 30, -0001 at 12:00 am

    Totally agree Julia, the risk involved really isn’t for everyone. This is why you need to be so careful and rigorous in choosing who you partner with.

  • Yumma Samuel Rothman February 26, 2015 at 6:35 am

    Hi, just wonder how much the percentage for the profit sharing scheme? is it 10%?

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