by Doug Powell
For design business owners—whether a solo practitioner or the leader of a 100-person firm—the last couple years have been enormously challenging. The recession has hit our industry hard, forcing even the most successful and long-lasting firms to lay off staff and even close their doors.
Now, as the economy shows a few small signs of recovery, the design industry is bouncing back and design business owners are beginning to consider how they will rebuild. This rebuilding process presents a rare opportunity to rethink the model on which our businesses are built, and to develop a more diverse base of revenue and, ultimately, a healthier business.
Most design businesses are built on a “fee-for-service” model, in other words, we make money by selling our services to clients. This model is certainly a viable one, and seems—on the surface—to be fairly risk-free. But what happens if clients stop buying our services (like they did in 2009)? And what happens if the value of our service declines due to increasing competition and a fragmented market (which is happening even as you read this)? There are other ways for design businesses to generate revenue, and one of them is to put our considerable creativity into developing entrepreneurial product ideas and bringing those products directly to market. If successful, this approach can lead to a supplemental source of revenue that can help buffer the business from future rough spots.
Of course there are many challenges with this new approach, and one of them is how to build an entrepreneurial function into a traditional design business. If you are used to maximizing billable hours, this new approach will require some planning and discipline—especially when the traditional client work picks up. Here are five steps you can take toward a more entrepreneurial design business:
1. Put It On The Clock
Dedicate a certain percentage of staff time to developing entrepreneurial ideas. This could be a couple hours per week, or a half-day per month. Make a commitment to stick to this plan for a set period of time, like six months, to give it long enough to materialize.
2. The Next Contestant Is…
Build an internal program around this activity. Maybe it’s set up as a competition where employees will pitch their concepts to the rest of the firm and everyone will vote on the best ideas. Or maybe you bring in a panel of expert judges to critique and advise on top ideas.
3. Put Your Money Where Your Ideas Are
Make a commitment to help fund the development of the top ideas. Even a few thousand dollars of seed funding can help get an idea closer to reality. This incentive proves to your staff that you have a strong commitment to this exercise.
4. Share Your Network
Beyond financial support, make a commitment to put your professional network behind the development of top ideas. Legal, financial, and business planning advisors will be a big part of the key to success.
5. Clarify The Rules
Set some parameters around who will own the ideas that are chosen for development and make this clear from the very start. This will be important to avoid any conflict if/when an idea becomes a money-making reality. In most cases this will be a shared arrangement based on the level of investment on both sides.
Injecting entrepreneurial activity into a design business can be a great way to energize your staff. By supporting—and investing in—their business vision, you will not only get great ideas that could transform your business, you will also get a more motivated, engaged, and committed working environment.
One way for traditional design businesses to weather downturns in the economy is to put creative effort into developing new businesses and products alongside traditional client work.
1. This is not a “quick fix” scheme. Developing an entrepreneurial concept will likely take months, and even years, before it makes money. Be planful, patient, and persistent and you will enhance your chances of success.
2. It’s easy to view staff time spent on entrepreneurial work strictly as “non-billable” time. But if it’s spent developing a startup concept, it’s also “new business” activity. Rather than trying to find new clients, you are inventing your own.
3. Don’t limit this to only your creative staff—great ideas can come from anywhere, and anyone. Even your account and admin staff.
This post from Merge features a conversation with designer Joel Templin of Hatch in San Francisco. The Hatch business model is a blend of traditional client work and entrepreneurial activity. Their first product launch is the wine brand JAQK Cellars.