“They don’t teach you this type of stuff in school, but we will tonight.”
David Baker graced us with his presence last night at the Clampitt Creative Center for the AIGA (American Institute of Graphic Arts) DFW event. Baker, a leading management consultant to the creative services profession, gave us the scoop on the top 10 mistakes principals make when managing their advertising/marketing firms.
1. Misunderstanding the Role of Marketing
When is your firm typically interested in marketing itself? When there’s a struggle to keep the business healthy. Marketing is often thought of as a way to get more work, but that’s not the case, as Baker informs us. Your firm should have a continuous marketing plan that helps build business, not only for additional revenue, but also to attract better clients and projects.
This is why marketing isn’t about finding more work, it’s about maintaining control. Think of your relationships with your clients. If a client needs your services as much or more so than you need their business, then you, the service provider, maintains control. You are then able to ween bad clients and keep the good clients. Without the business suffering.
2. Remaining a “Me Too” Generalist Firm
What’s the difference between your firm and others? Why would anyone want to work with you? ”The world doesn’t need another firm.” Baker shared three observations he’s made from his work:
- The Happy Death of Branding
- Storytelling as the Next Scam
- Alignment as the Aspirational Goal
The idea of branding has been watered down to the point that it has become fairly meaningless. Some firms are calling themselves branding firms, but they’re not doing anything different. Granted, there are a few exceptions, but unless you’re doing something painful and permanent, it’s not branding. Since branding is either dead or dying, this is why we have moved on to storytelling – the next scam.
Firms need to focus on internal alignment – when your employees believe in you, so will your consumers. Clients will notice when you’re internally imbalanced. Make no mistake that clients can easily replace you and that your only power is to withhold your expertise. The world has become “Googlized” as Baker states where 80% of clients find their agencies through search engines.
3. Being Unprepared for Client Concentration
Concentration is otherwise known as “putting too many eggs in one basket.” When we dedicate ourselves to one client because they’re our cash cow, we put ourselves in a corner. A yellow light should come on when 25% of your company’s billing comes from one client and a red light when it’s 30%.
To avoid client concentration, we have to know when to say no to clients. Be honest and know what you’re NOT good at. In addition, it’s also good to have a backup plan for the loss of a major client. Baker advises following two contingency plans, a cash cushion of 4 months of overhead, a strong positioning and an active marketing plan for 9 months.
4. Misunderstanding Growth
Growth is often misinterpreted. It’s not about getting a bigger platform, doing great work or making more money. Growth is about the role you will play, especially in terms of the size of your company. Example: when you’re the principal of a 6 person firm, half of your time is dedicated to work and the other half is free (although it’s better spent doing strategy for clients). As your company gets bigger, you start to lose that “free” half. While you can hire more people, net profit decreases as your company “grows” in size. This is when you have to decide how much your freedom is worth and if this is a business, job, or hobby.
5. Thinking Employees are Entrepreneurs
Generally, the people who work for you aren’t entrepreneurs. You can’t expect your employees to share your woes. They aren’t motivated by sharing profits at the end of the year. At the EOB (end of business), they’re going to go home to their families, like normal people do. If they were entrepreneurs, they would be starting their own firm instead of working for yours. Believe it or not, employees want structure.
6. Ignoring or Diminishing Roles of Production and Traffic Management
“40% of a firm’s billable time is spent on project and account management.”
The best companies have a centralized system that focuses on budget and schedule. Meeting your deadlines is as important as billing clients for the time spent. Don’t undermine your managers – your clients will notice.
7. Misusing (or Using) Debt
Baker makes it his mission in life not to incur debt for something that is not an appreciating asset. If you don’t have cash, don’t buy it! Here are his reasons:
- Not borrowing money is a natural filter for growing too quickly.
- You spend less when you’re spending cash. Try not to use plastic.
- Without debt, you are much less vulnerable in a downturn.
- Bankers are not your friends.
8. Sizing Capacity to Meet Opportunity
We often increase capacity to meet the opportunities we get. However, Baker advises against this. There should always be a gap between opportunity and capacity where opportunity is higher than capacity. When this is the case, you have the power to say no. As more opportunities rise, so will your confidence.
9. Caring About the Work Based On Your Standards versus Caring Based On How Much the Client Cares
Creative people tend to care more about the result than the client, which often results in over-servicing. This easily leaves you overworked and burned out. According to Baker, people leave the creative profession at a much higher rate than other professions. “It’s like they all went to this party that I haven’t been invited to yet.”
10. Counting On Selling Your Firm
Simply put, this is a rare chance and you probably won’t sell. On the other hand, everything you do to get your firm sold, benefits your company and you. “You can have your cake and eat it too.”
About the Author: David C. Baker is the principal of ReCourses , Inc. David’s work on management issues for public relations, advertising, interactive, and design firms has been published by Creative Business, Critique, PR Intelligence Report, Creative Planet, Rough, How, In-Review, Graphic Artists Guild, Promax/BDA Newsletter, Post Industry, Ad Agency Insider, PR News, PR Agency Insider, and Web Techniques. He is also a regular contributor to Internet Professional Publishers Association and VFX Pro.