A MIND FOR DESIGN: KEITH’S BUSINESS ADVICE FOR DESIGNERS
As a design professional, you understand how to hone your creative skills by staying current with the trends, styles, and fashionable products that attract your clients and raise your profile. But are you also putting in the hard work to ensure your financials and operations are resilient and can position you for expansion and growth? Some designers put so much focus on designing, creativity, and client interaction that it can be easy to neglect the financial side of their business.
You may come to a point when you feel you have hit a wall—even with peer acclaim and a pipeline of devoted clients—but feel like you’re not achieving financial gains you think you are due. Have you taken a moment to consider if your costs are in line with your operations and if you have properly set up your financials to track business growth? There are numerous steps and actions you can take to increase the profitability and ultimately the overall forward path of your design business and I detail them here.
Price Your Services Correctly
Sometimes you need to take a step back and evaluate your company’s entire mission and consider the value you’re bringing to the table. You have to truly know your business—not just what you do or how you do it but why you do it. In Chapter 2 of my book The Business of Design called “Business and Financial Management,” I share that there are designers who are so passionate about their work that getting paid properly isn’t the priority. If you truly assess all the education and experience acquired in your career, you can communicate to clients that you are worth higher fees.
You have the practical knowledge and creative expression to decorate a home interior with high-quality, well-scaled, and beautifully arranged items. You have to demonstrate this value time and again to clients by providing top-notch services, without too many unexpected expenses.
Budget for the Year and for Each Project
To increase your profits, you need to establish both an annual budget, as well as budget per project. An annual budget will help you manage your entire firm’s expenses including projected income, both time billing and purchasing, as well as overhead expenses i.e. rent, salaries, office supplies—ultimately this will give you a targeted profit.
Many design firms can get by without an annual budgeting process, but they are not fully equipped with all the data and tools necessary to grow and improve as a business. I strongly urge you and your bookkeeper run a Profit Planning Report for the year, also called an operational budget report or an actual versus budget analysis. This report allows you to quickly see any losses or profits. It is very important to set goals with budgets and a large part of that is staffing needs.
Project budgets allow you to manage the costs associated with each individual project including time expected on the project, direct expenses solely for that project like travel, printing, consultants, etc. and you should compare this budget with current monthly expenses.
Build the Right Team for Success
You want to avoid being a “hire/fire firm” that hires employees on a project-by-project basis to save money in the short term. It creates an unhealthy working environment, and it is better to hire for the long-term for the overall health of your business. You will truly save money in the long run with a dedicated and long-term staff. If you build a core staff of skilled individuals who get along, then you’ll be equipped to handle work and future growth. As I often impart to my clients, you have to hire first for fit and second for skill. Of course, your employees must have the proper skills sets and qualifications, but it is crucial that they fit into your company culture and overall business goals.
Understand the Big Picture
With your budgets established and a good team hired, you have to really take a detailed look at your business as a whole. One of the best tools for doing so is setting up an Executive Summary of your business, a process I outline in Chapter 2 of The Business of Design. This summary—that includes total monthly income, total monthly expenses, total profit, and cash balance—serves as an important dashboard showing you the financial health of your firm in one glance.
Establish Good Money Habits: Use the 10% Rule
This is a quick and easy rule of thumb to remember that will pay off nicely for you later. I want to encourage good money management habits for designers and the 10 percent rule means saving 10 percent of the money coming in. If you put away and save this amount from all the checks coming in, this can quickly add up. You should also take 10 percent off of fees in budgets, so that you and your staff will spend what is given to you and only spend 90% of the budget giving you a good 10% for contingencies. Lastly, find ways to improve staff by 10 percent every year with mentorship and education.
Review your Financials Frequently
It can be overwhelming to check everything all the time so here is a handy guide for you to know what to check and at what frequency:
| Data to Check | Frequency |
|---|---|
| Cash balances Project reports, timecards Purchasing reports | Weekly |
| Financial statements Accounts receivable Accounts payable Executive summary | Monthly |
| Accountant’s final review | Semi-annually |
| Creating a budget | Annually |
Transparency Delivers Better Money Management
One of my favorite motivational speakers is Simon Sinek and he has a quote that I think is of great relevance to the design industry: “Transparency doesn’t mean sharing every detail. Transparency means providing the context for the decisions we make.” Design firm leaders should be willing to share all costs associated with performing the work. They can share the percentage of overhead runs without needing to share the detail and they should also share the percentage profit goals to allow the team to help achieve them. They should be told that profit allows design firms to give bonuses, and profit-sharing, plus better benefits. If your entire staff or firm is empowered with important data and information to do their work, then they can make the necessary decisions to improve financials and ultimately generate more revenue and profit.
Use Contracts for the Unexpected
The best thing you can hope about contracts is that you don’t have to use them with respected and trusted clients. Contracts are necessary legal documents that clearly outline expectations for each party. However, to protect yourself as a business, you have no choice but to plan for the unexpected and contracts protect you for catastrophe if and when things go wrong.
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