Ten years ago, I took that first step off the very short plank and started Produktworks Design, a product design and development consultancy in Austin, Texas. I was convinced that, having worked in the industry for years as a mechanical engineer, I was adequately equipped to start my own creative agency. That couldn’t have been any further from the truth. In fact, I was wholly, unreservedly ill-prepared to do so (and on occasion, still feel that way. Thanks, Impostor Syndrome!). So, why is Produktworks is still standing, and on some empirical evidence, now a small, successful creative agency?
I started this article with a somewhat more self-serving ‘How To Run a Small, Successful Creative Agency’ headline but realized that these are our experiences, our lessons (good and bad) and our process; YMMV. I’ve tried to learn from all our experiences and I hope some of these points might help any creative agency (particularly small to medium sized ones) run a little more smoothly, efficiently and ultimately, successfully.
The first thing we must do is define what ‘success’ is. There’s nothing wrong with aspiring to be the next IDEO, Pentagram, or frog, but don’t let that aspiration cripple your growth as a small(er) company. After the initial couple of years of wanting to be something we were not, I learned that my aspirational definition of ‘success’ was very, very different from what actual success might be. I had to be more realistic and aim for goals that were within our reach. Here is how we’ve distilled success at Produktworks:
– Do good work
– Build a great team
– Make a profit
Easy! If only it didn’t take me ten years to figure out. Here are 16 lessons we’ve learned over the years that contributed to the success (in no particular order):
1) Charge what you’re worth
Set a rate that works for your agency and your profit goals. Don’t get overly bogged down with what your competition might be charging. It’s good to know what the market rate is, but you have to be comfortable with your rate. After the first couple of years in business, we learned not to compete on price, but rather expertise, experience and our ability to make a project successful.
2) Never underbid a project
As a small agency, trying to get a foothold in the industry, it’s oftentimes easy to want to undercut your competition when bidding on projects. Shorter timelines and lower fees than other firms SEEMS like a good idea but if (when?) the project goes over, you’ll have egg on your face, and that doesn’t help your reputation. Always bid the project based on what it will take to be successful, not what it will take to win the job.
3) Know your numbers
A common trap for designers/engineers who are starting out on their own is to not understand the business/money side of the agency. You need to know your break-even number for the month (office lease, bills, salaries, loans, other fixed/variable costs), and how that break-even number translates into billable hours and efficiency. For example, at Produktworks, our billable employees need to be 43% billable every week (or ~18 billable hours/week) for the firm to break even. Keeping an eye on that number helps us understand what our profit margin will be for the month (we have a yearly profit margin in mind). Due to the fluctuating nature of consultancy, those numbers can vary quite a bit from month to month, but we now have a good handle on where we need to be for the year (MAKE A PROFIT).
4) Never do work for equity/shares/exposure
This is a particular pet peeve of mine. As a matter of policy, we do not, under any circumstances, take on projects for equity/shares/exposure; we are strictly Fee-For-Service. While we have been offered this ‘opportunity’ many times over the years, we have always turned it down. My first goal is to keep the lights on, have everyone paid on time and turn a profit. Don’t gamble on current financial obligations for some mythical payoff that might happen in a year or two. SPOILER ALERT: These agreements HARDLY EVER work in the favor of the creative agency. It’s just not worth it.
5) Don’t be afraid to say ‘No’
One of the biggest things we’ve been much better with over the years is knowing when to walk away from a potential project. Pride, ego, greed, all hinder us from no-quoting a project, but you have to learn when to say ‘No’. We have no-quoted seemingly good projects for a variety of reasons: we didn’t have enough experience/expertise in that field, we didn’t have the bandwidth to adequately support the project, concerns about the client’s finances, encroaching on our moral/ethical standards, or even if the wind changes direction. Call it gut feel, intuition or plain experience, sometimes you have know when to fold and walk away from the table.
6) Be loyal to the product
This is a Redza-ism that has my staff scratching their heads at times. I really believe that our loyalty is to the product we’re working on. Clients, despite their best intentions, can occasionally give direction/make requests that could be detrimental to the success of the product or the project. It’s our job to let them know the implications of their requests and to steer them in the right direction. Of course, there’s only so much we can/will push back, but we always try to do what’s best for the product. They hired us for our expertise and experience, not for our ability to say, ‘Yes Sir, how high?’
7) Respect the contract
When firms start out, they may download a generic contract or (in our case) ‘borrow’ one from a previous employer! Regardless of how you get them, spend the money to have an attorney thoroughly review and rewrite it for your firm. Agencies think that a solid contract protects their interests (which it should), but the truth of the matter is, the contract is there to protect the interest of BOTH parties. If you write a proposal/quote, you have to be sure that what you outline in the proposal matches WHAT you deliver, WHEN you deliver and the COST to deliver to your client. You have to hold up your end of the bargain too!
8) Hire a good lawyer/accountant/doctor
You need a good lawyer to write solid contracts and help you with any potentially sticky situations with clients. You need a good accountant to keep accurate books, file taxes and do your projections. A good doctor? You’ll need one to help medicate you if you didn’t hire a good lawyer or accountant!
9) Document (almost) everything
Documentation is key and takes a lot of discipline to implement it consistently and correctly. It’s very easy for clients to call, speak to the project engineer/designer and make changes to the product; it’s even easier to do it without proper documentation. It may not seem like a big deal: ‘Sure, what’s a quick change here, a little change there?’. Until the end of the project, when you’re over hours with no documentation of who made the changes, why they were made, and how much time was spent on them. For most small changes, we request the client send an email (documentation!) and we will follow up with confirmation of the changes (documentation!). If it is a change of scope, we will submit a Change Order form (documentation!); this lists the changes, along with cost/timeline implications, that the client will have to sign, scan, and email back to us (documentation!). This greatly reduces the chance of ‘we said, they said’ down the road.
10) Specialize, to the point of being uncomfortable
A good creative agency shouldn’t be a Jack-of-all-Trades. You should know what you’re good at, why you’re good at it, and then market the hell out of your expertise. It’s going to be very uncomfortable, but discomfort can a good thing. Build your reputation on what makes you stand out from the competition.
11) Build an online presence
These days, a website with your portfolio and contact information isn’t going to cut it anymore. Clients want to get a sense of who they’re potentially working with from your online presence. Know your culture and be yourselves. I think our website is a reflection of us as a team and while it may not be for everyone, it is a fair representation of how we see ourselves. Of course, there are technical considerations, as with any website (SEO, readability, load times etc.), but those can be optimized for very little investment. Social media, blog posts, firm listings/directories, inbound and outbound links, are all tools we try to leverage.
12) Market, to the best of your ability
Not every agency will have the luxury to afford a non-billable sales team (I know we can’t). People have asked, ‘How do you market Produktworks?’ and if I really knew the answer, I’d be a millionaire! Without being too flippant about it, marketing a creative agency is something many firm owners struggle with. We have been fortunate to get the majority of our work from referrals (DO GOOD WORK) but you still need to get your company’s name out there. The Online Presence, as mentioned in the above point is a great (and low cost) starting point. Business is all about relationships, so make a positive impression with people you meet; whether it’s at a meeting, a conference/trade show, a speaking engagement or even in elevator.
13) Be hungry
So you built a successful company, you have a team that works well and with little direction, the projects are coming in hard and fast. Time to take your foot off the pedal a little, right? I’ve been guilty of it as much as the next person: Come in a little later in the morning, leave a little early to play golf/go home/run errands; ‘I’ve worked hard over the years so I deserve a little more relaxation time’. Be proud of what you’ve achieved, but never take your eye off the ball. One of the best bits of advice I’ve gotten was from another creative agency owner who once told me, ‘I operate on the assumption that we’re going to go out of business in three months. It hasn’t happened in the 10 or 11 years we’ve been in business, but that’s how I motivate myself ‘. Their continued success over the years proves that crazy idea might actually work! I think it’s great advice for any creative agency owner and one that I take to heart.
14) Be transparent with your team
Transparency can be a difficult concept to deal with when you are the owner of a firm, but your staff have to be confident in the work you’re doing to grow the business. We have a standing all-hands meeting on Friday afternoons where we all talk about the projects we’ve worked on that week, and what’s on our plate for the coming week. It’s also a chance for me to share company news: projects coming down the pipeline, projects we’ve won or lost, potential clients we’re talking to, our billable hours for the week/month. Transparency goes both ways, you have to be willing to share the good, and the bad (hopefully more of the former than the latter).
15) Surround yourself with good people
The highlight of my career isn’t any of the projects we’ve worked on, or any awards they’ve won, or any patents that we’ve gotten; it’s the fact that I have a team that I’m excited to work with, every single day (BUILD A GREAT TEAM). You spend almost half your waking time with the people you work with, so why wouldn’t you want to build a great team? Our staff are incredibly hardworking, talented, resourceful, and I’ve very proud of that. I’m sure they will also ask for a raise if they read all these nice things I just said about them…
16) Be their boss
I may or may not have a reputation for being a little, how shall we say it, difficult to work for occasionally. I do expect a lot from our team and I’m not afraid to lean on them when we can do a little more to make the product even better. We want to be sure that we can stand behind any work that leaves our door. A good leader will give the whole team credit for any successes and be willing to solely take the blame when things go wrong. We also try to build team spirit by spending time outside of work together (happy hours, company off-sites, team lunches). Showing appreciation for their efforts costs very little, yet reaps far more in terms of morale, attitude and togetherness.
I hope some of the above points will be useful to you as a creative agency owner. At its worse, running a creative agency can be incredible frustrating and stressful but at its best, which is far more frequent for me these days, it’s an incredibly fulfilling and fruitful endeavor; I can think of nothing else I’d rather do with my career. Do good work. Build a great team. Make a profit.
