5 Ways to Kill Your Design Firm

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I review a lot of creative service firm websites. Sadly, the frequency with which links to a design firm website results in a 404 page is far too great. Design firms go out of business with sobering regularity.

When I mentor my clients, I use a methodology called “the 5Ms.” I evaluate a creative service firm’s health from five different perspectives: Money, Minutes, Marketing, Management, and Motivation. Each perspective leads into important practices design firms need to establish—if they’re going to avoid the path to a 404—creative service firm website not found error.

Is your firm on the path to deletion? Here are five ways (essentially the opposite of the 5Ms) you might kill your design firm.

1. Ignore Your Money’s Voice. The nice thing about listening to your money is that it will never lie to you. It might not always say positive things, but it is honest. The trend line of your total equity on your balance sheet will tell you a lot. Your percentages of expenditures have to stay in a certain range or you will bleed out. Your effective hourly rate needs to be strong. Your cash flow (that is, the cash flow document you use—not the cash flow experience of payroll shortages) needs to be continually evaluated. If you are not listening to your money, you are probably losing money. And of course we know where that ends up.

2. Ignore the Clock. You need to listen to your money, but you also need to look at the clock. It’s conceivable that you might find a way to quickly get more money—a great client with a generous budget could show up and hire you. But while you could theoretically increase your money supply, you will never increase your time supply. Time is measured equally for everyone, and it moves at the same speed for everyone. In this respect it’s even more important to measure your minutes than your money. Additionally, if you do listen to your money and it tells you that you have a problem, without measuring your time you’ll have very little information to use to figure out where the root of your problem lies. But if you do measure time, keeping timesheets of all the time spent in your firm—on projects and downtime—you will have a rich source of information to begin righting the ship. But if you’ve silenced this source by ignoring the clock, you may not be able to find your way off the path that leads to shutting down your firm.

3. Be a “Full Service” Shop. There was a time when very large advertising agencies were able to be full service, one stop shops. But today’s marketing channels are diversifying at light speed. Even large agencies can’t keep up. So for a small firm, with a dozen or fewer employees, to claim “full service” is highly suspect to your prospects. And the reality is you can’t keep up with the claim anyway—nor should you want to. Creative service firms want to say they are full service because they feel like it casts a wide net to haul in all sorts of opportunities. The problem is, it does lead to all sorts of opportunities. As a result you have to change gears from brand identity work, to print projects, to web development, to SEO, to photography, to mobile app development—and you never develop deep expertise in any of them. You become a Jack of all trades, and master of none. Not only does this diversity keep you from becoming great at any of them, you also can’t ever establish repeatable processes in doing the work—so you never build efficiency. You’re always having to play catch up ball on new technologies. You have less historical data (and less experience) to deliver accurate quotes. And on top of all that, a generalist firm always loses out when competing with an expert firm, so that wide net doesn’t even haul in much anyway. If your firm isn’t intentionally narrowing its focus, it may get narrowed all by itself—down to nothing.

4. Hire People Out of Desperation. If you want to rapidly speed up your way toward 404ing your firm start hiring out of need rather than through careful planning. Building your staff should be a very deliberate, carefully thought through process, especially since hires tend to come in batches. That’s because there is a necessary proportion between “doers,” facilitators, and leaders in your firm. And so you have to hire proportionately. If you’re hiring practices get out of balance you’ll just be creating more problems that you’re solving by hiring in the first place. So if you’re facing problems whose only solutions seem to always point to hiring more people, you probably have more fundamental problems. And if you don’t fix those first, it will only lead to deletion more quickly.

5. Strive for Creative Fulfillment Rather Than Life Fulfillment. Artists and designers are particularly vulnerable to this problem. That’s because their personal identity as an artist and their desire to satisfy their creative appetites tend to blur the lines between work and life. Not that other careers don’t cause people to get caught up in them—but there’s something about the pursuit of artistic vision and creative expression that intensifies this impulse. And when you’re up at midnight perfecting your creative product, you’ll have little time to give attention to “less creative” business matters. But there’s a time to work and a time to rest. A time to create and a time do the books. A time to explore and a time to stay focused on one thing. Finding the balance in these things is essential if you’re going to endure for the long haul. To be unbalanced leads to burnout—and the more imbalance, the faster you burn out.

I’m sure that for every 404 I hit, there is a story that includes elements from all these mistakes. And that’s why I use my 5M methodology to help mentor creative service professionals, from early freelance days all the way through the creation of a successful creative service firms. These five areas can help identify where wrong turns have occurred and get them back on the path to health, success, and enjoyment in their work.