≡ Menu

wrestlingHere’s a sobering rule of thumb. The easier it is to enter into a business partnership the harder and more messy it will be to get out. And since failure rates for design firm partnerships are very high (statistics vary, but a greater than 50% failure rate is conservative), when you enter into one you may be signing up for a complicated and unpleasant experience.

On the other hand, the harder you work in setting up your partnership agreement, the easier it can be if you ever need to dissolve the partnership.

Since basic partnerships are the easiest type of business entity to set up, many design firms go the partnership or 50-50% LLCs route by default. But business partnerships are also among the most difficult models to pull off. And design firm partnerships are even harder–in part because designers often entered into them for personal, emotional, or moral support reasons more than for carefully thought out business reasons. It’s a familiar story, two friends or colleagues contemplate forming their own firm and with their mutual willingness to try it together boosting their confidence–it’s off to the races. All that necessary but complicated start up paperwork is the last thing on their minds, so they dash off a basic 50-50 LLC, or simple partnership so they can get on to all the fun stuff like designing the firm’s identity and website.

If you’re contemplating forming a design firm partnership, allow me to throw a few speed bumps in your way–to help you evaluate if this is indeed the right decision for you before you sign an agreement. And if you’ve already formed a partnership, and things aren’t quite working out the way you thought, well you might want to give me a call. Often you might need to go back to the drawing board and reform your agreement–undoing the mistakes that were made when you started.
[click to continue…]

unprofitableThe book of Ecclesiastes begins, “Vanity of vanities! All is vanity. What does man gain by all the toil at which he toils under the sun?” If your design firm is not operating profitably then the answer to this question is probably, “not much.” Of course you could be profitable and still not have much of an answer to that question. But without profitability your business may feel an awful lot like striving after the wind.

It’s often said that a business exists in order to make a profit. And profit is indeed necessary, but personally I disagree that profit is the ultimate purpose for business. A well run business can do much good in the world: provide needed goods and services, employ people, innovate, and create beauty. But without profitability a business will not do much good, at least not for very long.
[click to continue…]

stop watch 3My last post pointed out how tracking time is fundamental for getting a grip on your profitability. You can’t fix what you don’t know is broken. I also addressed one of the barriers design firms face in tracking time. That is artists and designers tend to perceive time tracking as negative pressure on the creative process. There are some cures to that angst, but in the end, measuring time is necessary and the design firm owner needs to insist on it. It is a prerequisite for profitability. And in the end creative freedom is greater at a profitable firms since the symptomatic pressures of unprofitability (negative cash flow, desperation for new business, and getting behind on existing projects) are relieved.

So let’s assume you want to start measuring time and you’ve made a commitment to timesheets. Once you get over the hill of gathering the data, what do you do with it? How do you use it? Let’s consider some basic principles for using your time data effectively.
[click to continue…]

grandfather clockBack in 2000, one of my employees at Newfangled produced a Gantt chart of our typical web design process. It revealed that we were spending, on average, almost three times the number of hours on our projects than I had budgeted. No wonder I was chasing after old invoices, desperate to close new business, all the while trying to dig out from the mountain of accumulating work. How could we be so busy, and yet have such persistent cash flow problems?

Circumstances like these do not primarily reflect sales problems. They reflect profitability problems rooted in inadequate estimates, grounded in guessing rather than actual time data drawn from similar past projects.

You have to break this cycle–starting with a commitment to begin measuring your most vital, and nonrenewable resource, your time.
[click to continue…]

hourglassWhether you’re a freelancer or an agency principal, setting your firm’s target hourly rate is a crucial decision. While I would advise my clients not to bill by the hour, setting a target rate is essential for estimating projects and evaluating your profitability.

Your target rate must take several things into consideration. Most importantly your overhead, and your unutilized hours. When you do factor in overhead and unbillable time you might be surprised to discover what your actual (or effective) hourly rate really is.
[click to continue…]

salesguyOver the 15 years I owned Newfangled, I made the mistake of hiring a salesperson more than once. The idea of a dedicated employee whose job is to find clients and who operates mostly on commission was too attractive an opportunity not to bite on. But it never worked out. There are many reasons why a design or marketing firm should probably not hire a salesperson. I’ll give five below.
[click to continue…]

motivationOne of the distinctives of Rewarding Toil consulting is the 5th “M” of my methodology, that is “motivation.” Sometimes when we think about business motivation we conjure up thoughts of sales teams gathering for a hyped-up, pre-game pep talk. That’s not the kind of motivation I bring. My purposes in addressing motivation goes much deeper than that. [click to continue…]

Back in 2005, as I was writing monthly newsletters for Newfangled, I took an opportunity to write one on how the Bible had influenced my experiences in business. This is part two of a re-posting of that content–slightly edited to bring it up to date. [Part one is here.]

fightingPart Two: Dealing with stress and difficulty

A gentle answer turns away wrath, but a harsh word stirs up anger. Proverbs 15:1

If you are going to be in business, you will have difficulty! A common source of business conflict comes when one party feels that they have not received the value for which they negotiated. This is especially common (as Harry Beckwith points out in Selling the Invisible) in service industries. How can one definitely measure the value of a service? Evaluating products can be easier. If it won’t turn on it fails to meet the conditions of the exchange. But how does one determine whether a brochure has been designed well? If the logo is printed upside down it is clearly flawed. But usually, if there is dissatisfaction with design, the reasons are more subjective. The same design can be loved by one client and hated by another. Sometimes, when design is submitted to a group for evaluation, some people love it while others might think, “it’s not quite there yet.” Has the exchange been met? The designer has delivered their time on the project (which is often what they are selling), but the client is not satisfied. Such conflicts, though hopefully rare, are inevitable and we need to be prepared for them. [click to continue…]

designer-businessmanMost advertising agencies and design firms began with a designer’s impulse to strike out on their own. This ambition was usually fueled by a combination of desires: a desire for greater creative freedom, higher compensation, or more personal freedom. Sometimes a small group of designers get together and think it would just be a blast to start a boutique firm. Whatever the initial impulses, the actual experience of design firm start-ups is never what was expected. The shine soon wears off–and the original excitement turns to extreme stress. And that big salary increase starts to look more like a big pile of accumulating debt. [click to continue…]

Back in 2005, as I was writing monthly newsletters for Newfangled, I took an opportunity to write one on how the Bible had influenced my experiences in business. Re-reading this content I find it all still very relevant to some of the core values I bring to my current efforts in consulting and mentoring small business.

This is a re-posting of that content–slightly edited to bring it up to date.

bible-business1I enjoy reading. I especially love books that unleash my imagination and inspire ideas. The puritan Richard Baxter once wrote: “It is not the reading of many books which is necessary to make one wise, but the well-reading of a few, could they be sure to have the best.” Books like Selling the Invisible by Harry Beckwith make my list of the few best business books that should be read often, and read well. But the absolute best book on business isn’t found in the business section of your local Barnes and Noble. To find this book you’ll have to head over to the religion section–they are the books of Proverbs and Ecclesiastes. [click to continue…]