The operating structure of your amazing creative firm is not unique, it is rather simple, and it can be optimized.
I feel very lucky to have been invited behind the protective covers of some of the world’s best-in-the-business creative agencies to see how similar they are to one another. I would think that being able to see the inner workings of some of the most impressive brands, is fairly rare, so I feel compelled to share some thoughts. All of my clients want to do important work that solves their clients’ needs while providing a good living for their staff and associated collaborators. They all want to be proud of their work product as it relates to providing unique creative results. Perhaps it is commitment to being unique that creates a conflict in the operational nature of their businesses, which each team has developed independently of any other, sometimes from scratch. To be sure, they are amazingly creative, but operationally they are consulting businesses.
Let me define “consulting businesses” a bit. I consider anyone that provides a service based on the use of specialized skills learned through study and practical experience resulting in mastering the practice, to be in the consulting business. To be clear, lawyers, architects, medical practices, construction companies, CPAs, media planning and buying, design*, advertising, PR, digital shops are all under this umbrella of being in the consulting business. (* this covers all manner of design including but not limited to: print, packaging, product, UX, UI, software, structural, brand, corporate identity……)
There is a lot of talk in the industry of not using timesheets, and collaboratively throwing staff at a problem until it is solved. This is great if you don’t have to make payroll, or you have an optimistic investor sponsoring the effort, but if you are in business for profit, you have to know how to prioritize your resources to support the business long-term while making the best choices you can based on limited information. The simple model is: capturing staff and vendor time, and selling it on to clients and making a profit in the difference between the input costs, and the retail price for their product. In our industry, the direct input is your staff and vendor time and the retail price is the fee for the end product/service/website/campaign/(insert your deliverable here). The retail price has to be a multiple of the direct input, specifically you must recover overhead, indirect costs and a profit margin.
If we are on the same page to this point, your awesome creative agency is a consultancy. So, why not follow the tried and true practice of budgeting your projects based on a process/scope, managing against those budgets, learning from the experience, and optimizing your business continually? Yes, most agencies have some form of budget tracking, but in my experience, it is usually looking backwards, after all the time and money has been spent. Further, I have yet to see these systems tie directly to the firm’s accounting systems (yup, that place where you are already doing timesheets, cutting checks, and processing payroll)….which is the strangest disconnect possible. I feel this is the worst way of finding out how your business is doing, in fact all it tells you how your business did, and you are left with zero preventable outcomes. Anticipating the worst-case scenario is not a great life philosophy; but as a business, it prevents many real anxiety-inducing situations.
Then there are pragmatic reasons to manage time: the government rules and regulations covering overtime, the need to manage mandated benefits, contractually obligated audit trails, which all make the need to capture this data inescapable. So, if you have to do it anyway, why not use it to optimize your business? Knowing what one of your typical project entails, creates a scope to which you allocate the right staff mix and resources against. If you are still learning how to run your business, you need data. Time budgeted vs. time used is just the first data point you need, because you have to look at your business trends over time and you learn through the experience of fine-tuning your operations. All of this is impossible if you are not tracking time and other project inputs against a certain scope in real-time, and ideally laddering up to your financials through a cost accounting system. Without this process, every project is a single experience unrelated to any other experience, and frankly, pointless if you are trying to build a solid foundation for your creative output.
The creative services business is a consulting business. As such, there are very good models to follow (law, consultants and CPAs) as long at there is a clear-eyed understanding of the business. Barriers are minimal, I’ve run a five office $30MM fee company with three accountants and a $1,500 off-the-shelf software package. The creative firm has to focus on inspired work upon which to build its reputation, but that does not conflict with managing it like a consultancy. Training yourself to be a consultancy is not hard, but it starts with being aware of the need to do so.
Peralta Consultants 