Getting the balance right in your business
Yesterday The DBA organised a training workshop with David C. Baker, the respected marcomms strategist, commentator and author from the US. David’s business has worked with over 650 organisations in the creative services sector through his consultancy ReCources. He presented a three-hour thesis on ‘Making Money, Delivering Impact and Living Culture’.
Needless to say, all the assembled design consultancies expressed the view that making money was top of their priority list (and David agreed it was the same for him) but he took us through a series of propositions which drew together all three themes in a creative business context, punctuated by practical examples and useful sources of information.
His views had been gleaned over 20 years from his consultative role, so while some would argue that an industry guru needs his theories to be tested through peer review, others value the contribution of someone who has worked at the coal face of the industry. We can equate his common sense contributions to the real world and chose to agree or disagree as necessary.
He shared his benchmarks for successful agency business performance:-
· Net Profit between 15-20% of fee income,
· Headcount costs no greater than 45% of turnover (excluding bonuses)
· Operating costs no greater than 6%
· Average billability across the whole business 60% (85-90% for client facing)
· Average fees per FTE between £69k- £100k per annum
· Cash in hand- no less than 2 months operating costs.
· Ideally no borrowing
He also suggested that any agency reliant on one client for more than 35% of its business was vulnerable.
David clearly positioned design businesses as residing in the professional services space. His rationale is clients generally procure creative skills from recognised experts in the same way as financial or legal operations. Many UK creative businesses may not see themselves in the same space as Law Firms or Accountancy practices, but is that just a state of mind?
He challenged the tendency to over service clients- the notion that creatives covet their design skill as the cornerstone of their DNA. The need to add more and work beyond a brief to get the ‘right’ solution because clients ‘either don’t know or don’t understand what they are talking about’- which in turn leads to work being under-billed and maybe under-valued.
He generated the most response from the audience to his views regarding positioning, and the need to distinguish between the ‘craft’ of an agency and the consultative/strategy side, which he maintained would elevate business upstream into a stronger position with clients. His analogy was illustrated through a building containing two rooms- one that handled the strategy side, and the other which was a flexible space containing the ‘design’ processes.
His view was that where possible the business should not separate the two and that the ‘physical’ (e.g. traditional/conventional) aspects of the business should augment the strategic/consultative competences of the agency, even to the extent of avoiding the use of a drawing as proof of the strategy.
David invited candid replies from the audience- and these were duly delivered. One delegate commented that he felt it was difficult to express his agency as a purveyor of consultancy or strategy as it had such negative connotations. Even worse that it should include something as crass as the word ‘marketing’ in the title.
David concluded by sharing his model for the business priorities that Owners should ascribe to:-Ist. Financial
2nd. Hiring and mentoring new staff
3rd. New business- positioning and closing (and the impact on business culture)
4th. Strategy (as generated for clients)
5th. Implementation (e.g. design services etc)Left to their own devices, how many creative organisations have a leadership culture that operates in reverse order to this model?David’s business website is www.ReCourses.com
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