Twenty-five principals representing twelve graphic design/marketing/branding firms and six product development firms discussed a range of subjects during the day long forum.
Twenty-five principals representing twelve graphic design/marketing/branding firms and six product development firms recently participated in an Owners’ Forum sponsored by the Association of Professional Design Firms (APDF), an organization dedicated to the business of design. The group discussed a range of subjects during the day long forum.
As is the custom, at the outset of the meeting each participant offered perspective on his or her current business climate. The use of words such as “change” and “uncertainty” was universal. While the group agreed they all knew how to run their businesses when times are good…or even when times are bad…when times are uncertain, such as they are presently, many owners found managing their firms much more challenging. Some firms reported dramatic downturns soon after the extended election; some reported improvements in early 2001. But everyone was cautious about the uncertainty they were “certain” the next three to five years would bring.
This brought the group to its first topic: “Change: How do we successfully manage our business and staff in these changing economic times?” brought these observations:
Back to Basics:Carefully monitoring and reporting the important factors of a firm’s performance—chargeability, efficiency and profitability—on a regular basis, softens the blow to employees if things begin to turn downward. Regular communication of such information can make employees more responsible for the performance of the firm.
Leveraging: Leveraging existing clients for additional work, but not letting one client represent too large a portion of one’s backlog, can help maintain profitability. Every employee should be laying the groundwork for and promoting new business for existing clients each time they visit and work with a client.
Conditional Benefits: Several firms make some benefits (e.g., fitness club memberships, 401k contribution levels, child care) conditional on the firm’s financial performance. When it begins to turn down, certain of these benefits may be suspended until performance levels improve.
Reeducation: When necessary, firms will reeducate key employees to perform different tasks in order to keep them on board.
The next topic, “Business Basics: How to deal with tightening budgets, still rising rates, and taking your business to the next level?”, raised these insights:
Perception: When you’re in the “marketing mode,”(developing clients) appear bigger than you are. When you’re in the “performance mode” (servicing clients), act smaller than you are.
Reality Check: Discuss budgets with clients prior to preparing the proposal; know when to “hold” and when to “fold” during the negotiation process. All clients are not good clients. Thus…
“Client Training” is important. Firms need to train their clients to be better clients. Consider that we may only be as profitable as our clients enable us to be.
Alliances: Look to alliance partners to enable your firm to break into emerging markets. In addition to the added expertise, such partnerships can offer the ability to deal with projects of larger scope as well as offer a geographic advantage. It is important, however, than one firm clearly serves as the point of control for the project.
Public Relations: Establish and maintain an ongoing program of public relations. Many firms now issue press releases on CDs complete with imagery for use by the press. On average, it takes two years for a PR program to yield significant results.
Raising Rates: Consider raising your rates every three months to keep them in line with your costs.
Reducing Fees: Don’t agree to reduce your fees for a client without working with them to remove deliverables to compensate.
Strengthen the Foundation:Consulting firms have four things to offer clients:
Innovation: It is our primary product. Clients can’t put a price on it.
Capacity: Clients come to us because they can’t do it themselves.
Expertise: The cross-pollination we foster builds tremendous internal expertise.
Speed: We can do the work faster than our clients can.
Work to make your firm’s offerings the finest in each of these four categories.
Value: Consider what your firm’s unique Value Proposition is and articulate it elegantly and succinctly.
Hourly Rates: Don’t quote them. As we have moved from being “order takers” to “order makers,” the concept of charging a fixed fee for value-added services has become paramount to profitability.
The third topic of the day “Organizational Structure: When to change, how to change, and how to manage the culture,” resulted in these thoughts:
When to Change: When growth drives it. When clients drive it. When projects drive it. When the exit strategy drives it. But, by all means, be open to change!
How to Change: One way is to grow by adding specialists, as opposed to giving existing employees new job descriptions. Diversity fosters creativity. One firm recently added a writer to its staff. In addition to contributing to all the firm’s interactive and web-based projects, the writer is advancing the firm’s PR program and business development efforts.
Who to Change: Develop a program for employee retention that enables the firm to keep its most valued employees. As the principals age, teach them to let go and empower valued employees to assure the firm’s timeliness and longevity.
What Not to Change: If the firm’s culture is valued and contributes to its success, change it carefully, and perhaps only with the help of outside assistance. If emerging internal changes to the culture seem too abrupt, resolve the related issues quickly and decisively.
Exit Strategies: When to merge, when to sell, and how to hand off control,” was highly debated, but three clear points emerged:
Transition: Delegating operational activities and authority to a second tier of management is a significant issue for professional design firms today.
Strategy: An effective transition plan demands the assistance of outside expertise. Be careful. There are not a lot of financial consultants who are that well versed in the sale, merging or transitioning of professional service firms. The process can be an educational one for everyone involved. The firm’s principals must drive the creation of the Transition Plan to assure its success.
Incentive: To be effective, a Transition Plan must have sufficient incentive for the recipients to make it work (especially if they are employees). Loyalty alone does not necessarily qualify an employee as a future owner.
Having dwelled on the aura of “uncertainty” and reality of “change,” at the end of the day everyone agreed that the present is also a great time for renewed opportunity for professional firms that are well positioned, well informed and well managed.
*About the Authors: Jeffry Corbin is a Past President of the APDF, and President of Corbin, a wayfinding and information design firm, Traverse City, Michigan, whose Value Proposition is simply “access=success.”
Danae Loran Willson is the APDF’s Executive Director. APDF has been a participant in the Design Futures Council since 1985.*