8 Things Every Design Firm Should Know About Running A Business
Almost eight years ago, I sat down with my partner in crime, Gavin Kelly, and we made one of the best decisions of our lives--we started our own design consultancy, Artefact. We were driven by the not so humble ambition to become the best digital design and innovation company in the world.
And we think we are on the right path. But starting, running, and growing your own design company has also been a tremendous learning experience. With every achievement comes a new set of challenges to overcome and lessons to learn. In the spirit of transparency, and with hope that by sharing the lessons we have learned we could save fellow designers some frustration, here are eight insights we've gleaned over the years.
The design industry is changing rapidly. There is a ton of business out there, but it has gotten a lot more competitive. Always be ready to adapt.
The design industry has changed dramatically since we founded Artefact almost eight years ago. In an industry that shifts as much as ours does, you need to be ready to constantly adjust, evaluate and improve along with it. You should know there is no such thing as a steady state.
Compared to when we started, there are many more businesses out there doing what we do, with more entering the arena every year. Early on, Artefact competed with the classic design consultancy legacies of companies like Ideo and Frog. Today, many different kinds of competitors have entered into the digital innovation and design thinking fray, from McKinsey Digital to Accenture Digital, not to mention encroachment from the big digital agencies like R/GA. The fact that so many different kinds of companies are now working in this space is testament to the demand for our kind of expertise, but when demand is strong so is the competition. A discussion about starting your own agency would not be complete without a little reality check about how hard it is to set yourself apart these days.
Your two biggest assets are your people and your reputation. Quality and creating a best place to work is what drives profitability.
The only way to get a great reputation is to do great work. The only thing more important than doing great work is hiring great people. That’s the simple secret of doing business well. It’s a cycle: hire well, do quality work, get recommended and the quality of opportunities (for both work and new hires) will improve.
The other part of doing great work is making sure you don’t compromise on quality just because you are young, new to the business or plain hungry. When you start out, make sure you are being hyper vigilant about your values, quality and integrity and avoid bad habits. The first gig you get with a client will be how they cast you forever, so act as if you’re a much more mature company doing exceptional work (and then do that), because that’s the only way you will survive.
You can’t design culture. But you can design the conditions for a culture to come into existence and thrive.
Culture is a far subtler thing to design than a policy. Culture emerges from the values, policies, and behavior that you and your employees manifest each day. It’s never static and always subject to the tensions and moods of the people in the studio, the clients, and the business climate.
As an employer, you have this relationship with people who came to work for you and believe in you. You have to give them reciprocal amounts of trust back to create a place of work where people want to return the next day. At Artefact, we dropped the corporate baggage adopted from previous employers for a much more trusting environment. Everyone gets the same amount of vacation, there is no limit on sick days, and employees can work from home as long as they communicate with the people they are working with. As a result, we work in a much more egalitarian organization.
Start as you mean to go on. The first project you do with a client casts the mold forever.
Your best clients know your worth and will pay you for good work. You should never work for less than you’re worth and especially never work for free. It not only devalues your work, it devalues our whole discipline.
The rare exception to this is when the opportunity is so great, relative to the investment, that you would be crazy not to go for it. But if you go down that path, go all in, and do it to win. These opportunities are often competitive and if you don’t put in the work, your competitors will. This goes back to the point about reputation: the first job you get with a client forever casts the mold for that relationship, so make sure to start out on the right foot.
You don’t have to like sales. But you have to do it, and you have to be good at it.
A consultancy is as much a design business as it is a relationship business. This is especially true when you first start out, because your first client relationships can determine if you succeed or not. But it really doesn’t change even after you are more established. Even now, 70% to 80% of our work is repeat business as a result of existing connections we have cultivated over time, with the help of great people and a great reputation, of course (see Insight No. 2).
The business has two temperatures. Scolding hot and ice cold.
When the business is thriving, you’ll wonder if you can grow quickly enough to keep up. In the opposite state, you’ll wonder if you’ve lost your mojo. You have to be resilient enough to keep a steady hand on the business and a balanced response to business conditions. Do not panic.
Here are the secret numbers to starting and maintaining your agency: three out of four of your employees should be at least 70% billable in a given year, after adding your profit margin to all your expenses. Don’t let those proportions get out of whack.
Use slow times to invest in initiatives that help you grow as an organization or within an industry. At Artefact, we have a big-picture vision for what success looks like and we invest in areas we are passionate about. Initiatives like our internal innovation program Startefact and passion areas like civic engagement and health care help us even out the extremes and maintain an environment of constant development.
Your only real power: say no and walk away. Focus on what you believe and what you are great at.
You would be surprised at how often saying “no” actually results in a more positive outcome. The honesty generates more respect from your client and the relationships that result are often stronger. It’s true what they say: being principled is a fine thing.
Do it for the right reasons. Because there are two exit strategies: death and quitting.
In order to build a great consultancy, you need to think long-term. Start an agency because you love the idea of working with great clients on a massive variety of exciting projects and you want some degree of autonomy over your destiny and legacy. If you are starting an agency in an effort to do something else, then you are choosing a risky and roundabout path. Eventually, most agencies fold; some figure out leadership succession plans and a very small fraction (think winning-the-lottery) sell their business to a bigger business and survive the cultural transformation that results. Starting a consulting company is not a get-rich-quick plan or a startup; but when things are running well it’s a great and fulfilling life.
Artefact’s other co-founder, Gavin Kelly, and I agree--Artefact is the best thing we’ve ever done in our careers. It has not always been a smooth ride, but we set out to make a company that was world class and that is what we’ve got. I’m around people I respect and want to come to work with every day. I’m inspired by what we can and do accomplish every day. I’m challenged day in and day out to help us realize our full potential. What more could you ask of your career?
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