Big is beautiful – and lucrative

Most UK design consultancies are tiny. More than 80 per cent employ fewer than ten people, and two-thirds fewer than five. Some consultancy owners are more than happy with this state of affairs. ‘Being small makes us more creative; and, anyway, we’re not just in this for the money, you know.’

In my view, large, extremely creative groups such as Ideo and Imagination disprove the first part of this argument, and the second part (that creativity equals sacrificed profits) is also out of date. A whopping net profit in year one means you can subsidise award-winning work in year two as a marketing strategy for clients and a hook to retain talent.

Big is beautiful, so owner-managers of small design consultancies would be well advised to grow. The exact scale is a matter for your particular niche – but £1m in revenues and a headcount above ten people would be a good start. Otherwise you may work 30 years or more at the helm of your business without creating a pound of capital value – three-man design shops don’t often trade sale, let alone for big multiples.

If enlightened self-interest is not a good enough reason, commercial survival may be. Small consultancies often struggle to keep up to date with the necessary investment in new skills, techniques and equipment. They also fail to offer a career path for their best people, or a sufficient breadth of services for bigger clients. Depth of expertise is also tricky to maintain, because everyone ‘has to do everything’.

Finally, small will become less of an option as the globalisation of manufacturing accelerates. A world market calls for design consultancies that can trade overseas into economies like India and China. This is difficult with a few Apple Macs and a winning smile.

But putting together a growth strategy should not be tackled lightly. It transforms cultures and burns cash – it can even kill your business, but the rewards can be huge. So if you are a design entrepreneur with the ambition and ability to grow, here are a few tips gleaned from the work the Centre for Creative Business has done to help creative industry management teams.

You need to realise that growth will require a change in your role. You’ll spend more time managing the business and less time designing. Your day will be about strategy, managing your team, keeping clients sweet and raising finance, if necessary.

If you can’t cope with this new order your consultancy won’t grow, or it will grow very slowly or in a damaging way. One route around this is to hire a partner who can manage the business. But, to get someone good enough, you will need to pay a lot in wages and/or share options. Another alternative is to invest in your own skill set in areas such as managing people, setting strategy and controlling finances. That way, as the group grows, you can delegate rather than abdicate managerial responsibilities.

Finally, you will need a vision you are fully committed to, which is agreed among other partners. Is this a gentle climb over ten years, or a five-year forced march to exit? Sadly, businesses fall apart because the ownership team has stopped understanding each other’s motivations.

The second area is your team. The old criticism of a people business is that the most valuable assets walk out of the front door every evening. Growth will lessen the ‘key man’ risk which drives this, as each individual then matters less to performance. But you can accelerate the effect by investing in ‘process IP’. This is your ‘way of doing things’; it might be a proprietary approach to managing a project, an organisational structure that allows you to put creative teams together faster than your competitors, or a house style that staff knows well and which is appreciated by clients.

This codified process should enable you to lower recruitment costs, increase productivity, provide a unique selling proposition and improve the scalability of the business. All this will increase the value of your consultancy in the eyes of a potential investor and make that post-career sojourn in Antigua more likely.

Greg Orme is chief executive of the Centre for Creative Business, a not-for profit joint venture between London Business School and University of the Arts London to improve management skills in the creative industries

SCALING UP
• Getting bigger does not necessarily mean sacrificing creativity
• A growth strategy should not be taken lightly – you need to have the right skills and know why and how you are doing it
• For the founder it means embracing change to their role
• Bigger consultancies are more valuable to potential investors because it lessens ‘key man’ risk
• Embedded processes make your group more scaleable