A roundup of industry expertise, exclusive resources, business support and tools for your design business.
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Having a member of the leadership team with a keen eye on the financials to help drive the commercial success of an agency is key, whatever the size of a creative agency.
Some start-up ventures may set out with a finance director as part of their founding team, but this is probably the exception to the norm and what follows is more applicable to those agencies that don’t start out with that luxury.
Typically, most young agencies either engage a partner from an accountancy firm – often someone who has given them invaluable advice and support during their set-up – or benefit from having of one of the owner/founders having a particular flare for the financial side of the business.
As any business grows and develops, thought will be given as to whether the senior finance support they’re getting is the most appropriate route and whether a dedicated in-house Finance Director might be a better solution. But how do you know when it’s the right time for an employed or consultant FD?
This isn’t something that’s clear-cut and may vary from agency to agency but, ultimately, it’s a combination of:
Business size/growth – when does the volume of financial activity and transactions dictate the need for some in-house senior specialist support? We think this is likely to be when the business is operating at around the £2-3m fee income (or gross profit) level but the business also probably needs to be anticipating growth for the FD to help manage as well.
Business complexity – does the business operate from multiple locations, in multiple currencies or with multiple revenue streams, entities or divisions? Obviously, the more complex the business the earlier the specialist support will be needed.
How can an FD benefit your business?
There is likely to be more dedicated time given to understanding the overall business strategy and how this translates into financial planning, forecasting and goals – monthly, annual and longer term.
This additional time and understanding engenders a stronger connectivity and emotional engagement from the FD – with a full appreciation of the monthly targets, the people involved in the business and the creative proposals, they will live and breathe every pitch outcome as they recognise the impact of wins and losses.
They will business partner with the wider (non-finance) staff members within the agency and engage with issues they are facing on a timely basis; they are at hand to help with client and new business proposals, pricing, procurement issues as they arise meaning less delay and an ability to act quickly.
Supporting the efficient running of the agency in terms of resourcing, reporting and systems, cost control & risk management; leading or supporting other operational functions (e.g. IT, Facilities, HR); developing relevant financial management information and KPIs, and improving commercial acumen of account handlers should all be further responsibilities of the Finance Director.
Running an SME business throws ad hoc issues at you all the time – things can blind side you, for example matters with suppliers, landlords, cashflow, staff, utilisation, overservicing, potential M&A, taxation and Inland Revenue, legal matters, transfer pricing, R&D claims to name a few. As a business grows, having access to a senior Finance Director to support resolution of these issues becomes a necessity rather than a luxury.
In most instances, the Finance Director should more than cover their overhead by improving your profitability from clients or projects and/or also controlling costs and risk; or by freeing up other senior leadership time to do more income generating client work.
Also bear in mind the alternative to a full-time FD. A portfolio or fractional FD will work with you on a part-time basis. This provides much of the above support in say, 2-3 days per week, and obviously limits the financial outlay.
However, the fractional/portfolio FD route – valuable as it is in terms getting the ball rolling and supporting strategy and key financial decision-making – may not always suit.
The fractional FD will not always be available at the ‘drop of a hat’ as they will have other commitments – you may have to wait a day or two to get comments on client contracts, for example and such delays may not work for all businesses. And you may find that as the business grows, they may not have the capacity to provide more time. It’s therefore important the rest of the finance team is well structured below such a fractional FD to ensure the day to day running standards are maintained and that it can scale up as/when the business does grow.
For a more detailed conversation on your agency requirements and options for Finance Director support, as well as any other needs in your finance team, please contact Deborah or Greg at VisionFR.
Over 30 of the design industry’s most exciting creatives, thinkers and strategists, including Paula Scher of Pentagram, Gush Mundae of Bulletproof, Brian Collins of COLLINs, and new D&AD president Jack Renick have shared their lives in design on the podcast. From the discovery that design was a thing that they could build a career upon, to education, first jobs and beyond. With each guest sharing their tips to the next generation of young designers.
This series, Claire will be speaking to Michael Wolff, celebrating his 60 years of working in brand design, with the launch of his new autobiography, and will also include the founders of drinks specialist design agency Denomination, Rowena Curlewis and Margaret Nolan.
My Life in Design can be found on all podcast platforms and is a collaboration between brand design PR specialist Red Setter and the DBA.
“In the course of the last year we’ve seen the design industry come under more pressure than we’ve seen for many years. As the economic headwinds grew and companies looked to cut costs, we’ve seen projects put on hold and for the first time in many years the industry retracted. Whilst I recognise the need to manage costs as sales fall, it’s inevitable overheads will have to be trimmed down. But cutting future product development and innovation spending is a short term gain and a longer term problem.
As companies seek out efficiency gains and look for opportunities to standardise, it’s easy to see why design systems and AI are seen as potential saviours. But this is where we need to exercise caution and ensure we integrate and leverage AI as an augmentation of the creative process and not a replacement. As with any process, set of tools or indeed system, it’s ultimately only as good as the people who are involved.
Of course design is only a part of the new product development and innovation process. But let’s not be shy of clearly stating the value we, as a design profession, bring to the table. Now more than ever we need the passion, the empathy and ultimately the creativity that good design(ers) will always bring. Let’s continue to build the case for design by celebrating diversity and nurturing creativity, to build better solutions that deliver better outcomes for people and businesses.”
“It’s an incredible privilege to be a part of the DBA Design Effectiveness Awards’ judging team. The panel of judges are all at the top of their games and come with a broad variety of experiences from a diverse set of industries.
I’m looking forward to some robust discussions as we review and challenge the entries to ensure they clearly demonstrate the true impact that design has had. And as more businesses and brands strive to be known as being purpose led, I’m looking forward to seeing more entries where design can clearly demonstrate its benefits to society, the broader economy or the environment.
I’m hoping we’ll see many inspiring cases where design has helped deepen understanding of human behaviours and how to drive the change needed in delivering more sustainable and equitable solutions for society. But more than anything else I’m looking forward to learning more and being inspired by a dazzling display of creativity and design talent that has clearly delivered an impact.”
“I love the fact the DBA Design Effectiveness Awards are far more than the usual celebration of good design. Entrants need to demonstrate impact and have evidence to show they achieved, or surpassed the intended goal. This can be an incredibly powerful asset for designers and design leaders who so often struggle to demonstrate the value of design to their counterparts in a business. I’ve had the privilege of judging a number of international design awards and what really sets the DBA Design Effectiveness Awards apart from others is this focus on demonstrating impact, through good design.
Behind every one of the winning entries are effective collaborations between businesses and designers; teams who have gone the extra mile to ensure they’ve understood the target user or audience. They’ve equally paid attention to the commercial realities of costs, as they’ve made informed choices and trade offs. It’s also evident that great design can only happen when you have frictionless collaboration across all parts of the business, from concept through to launch. The DBA Design Effectiveness Award winners clearly demonstrate why it makes good business sense to enable and support designers to do their best work.”
And yet even the launch of the Apple Mac, social media and the iPhone will not come close to the impact of AI on your business, people and society.
At Unfold:AI, we simplify the AI landscape using a straightforward model, categorising it into three essential types.
Sensing – AI that performs, or understands the input from the real world, such as computer vision, data reading, temperature gauges (this is the software that when you search for images on your phone, recognises your cat!).
Thinking – AI that performs decision making, transformation, translation or language processing, this includes chatGPT, Siri, Alexa.
Acting – AI which is capable of interacting with something else, robotics, processes or other computer systems.
Often an ‘AI’ solution will combine elements of each of these three domains.
The last change of this magnitude was probably the launch of Windows and Word in 1984, or the introduction of steam into mill production. The difference this time is the pace of adoption.
Let’s consider the adoption of AI, compared to a model such as Rogers Innovation Curve.
Currently, we’re in the ‘Early Adopters’ phase, with approximately 2 million chatGPT users in the UK – just a fraction of the 28-million-strong workforce. It’s likely that by the end of Q1 2024 the adoption rate will have moved to ‘Early Majority’.
By the end of 2025, we will be at the start of ‘Late Majority’ and by 2028 we will be in laggards.
So, about five years from innovation to maturity. This is really fast. For comparison, the digital transformation took about 20 years, and according to McKinsey only 12% of companies have declared that they achieved all the objectives of that transformation.
“It’s in Photoshop, so what more is there for design agencies to do?”
Recent research suggests a significant part of the workforce will be impacted by AI, as non-routine tasks (typically knowledge workers) can now have activities automated and augmented.
As much as 85% of all of these roles could be improved by up to 50% (World Economic Forum, 2023). Rapidly adopting AI is going to provide competitive edge within organisations, and allow for previously un-economic but valuable projects to now be achieved. The net end position is that a greater number of jobs, of better value, of greater productivity and improved satisfaction to do, will be created.
To sum it up, AI could handle the equivalent of two workdays per week in the near future. The real challenge lies in strategically delegating tasks to AI – those you either don’t want to perform or that AI excels at.
It’s likely founders and leaders in the design industry are currently really intrigued (and perhaps even a little concerned) about how AI will impact on design teams and agencies, and the design process as a whole.
“That’s okay, AI can’t do ‘creative thinking’. Humans are better at that”.
Repeatedly AI has proven to be excellent at starting the ideation process, or helping people get ‘off the blank page’, but not for the whole creative activity. The key to maximising the potential of AI is in taking a ‘Human + AI’ approach; an augmentation process to generate AI powered super humans, if you like.
Let’s consider some of the typical day-to-day activities of a design team/agency, and the different ways AI has the potential to help across these areas:
Creative Ideation: We all believe this is the majority of our activity. But in raw time and effort, is it? It’s certainly an area where each agency provides its unique business DNA, and it’s also the area where AI will support and allow greater options. However, it’s probably the least impactful place for AI within an agency day-to-day.
Asset Production: Having creatively ideated, AI has the potential to assist in creating variations, enabling the rapid re-working of concepts and the creation of additional assets. This is probably the main area of work in the ‘creative’ teams by hour of activity. In this space you will find an explosion of AI tooling in existing workflows, such as Adobe. There are emerging solutions which can lead to further productivity gains. Particularly emerging AI, such as translation, multi-lingual, video editing, video style transferal. This is a key area for AI exploration.
Execution: The execution of activity, campaigns, social media posts, short form content, and the re-purpose of assets for other channels. This is an area where AI will be highly impactful. It is highly process orientated, predictive, data driven. The core strengths of AI when combined with any form of tooling from the ‘Act’ segment of AI.
Administration: The day-to-day running of the agency, including email follow up, calendar management, staff reviews, expenses management. This is an area where AI will definitely be available to help, particularly as the cost to automate and build some of these tools is lowering every day. They will also be baked into tools like ‘hubspot’, ‘xero’, and other common administration systems. Just watch that the licence fees on things like ‘co-pilots’ don’t escalate for you, versus the proven measured productivity gains.
In addition to segments of activity like these, you need to consider the implication of AI helping people to ‘Act Upwards’. For example, helping less experienced people to do the work of more experienced (40% gain in capabilities and quality). If you are the most experienced (17% gain in output quality) if you work at your own level.
So, what is stopping you from ‘acting upwards’, and lifting the bar of what can be done?
It’s our belief that there are two big challenges:
The Talent Gap in AI Expertise: As of now, AI experts are a rare breed; research suggests that less than 10% of the workforce has in-depth AI experience in a commercial setting. Premiums on salary of circa 20% are already appearing in the job marketplace.
If 80% of your workforce could be made 40% more efficient, this is the challenge you should be considering as a priority. Greater productivity, reduces operational costs, and increases profitability. How are you going to reskill, retrain, upskill yourself, your team, your organisation?
The Challenge of Time-Based Billing: Customers may start questioning, “If AI can do this, why am I being billed so much? I could probably do it cheaper myself.”
It’s time to do the difficult pivot, as rate cards are likely going to become a legacy activity, or at best a race to lowest cost.
Agencies need to modernise to be based on ‘product’ and ‘outcome’, rather than billed hours per job.
The challenge on how to do this will be unique to every organisation, but requires thought today.
If you consider leaders in this will outperform laggards by 35% within 36 months (World Economic Forum, 2023), can you afford to not start on the most impactful generational change in technology?
There was much, much more covered in the hour – you really had to be there. Do make sure you join us in our next DBA Members’ Forum on Monday 6 November at 4pm GMT, look out for an email from me in a few weeks with more details. If you would like to attend, get in touch here.