Reframing the value conversation
When I start working with creative companies after those initial heady meetings when we’ve established their hopes, dreams and plans for growth, for new revenue streams, for new ways of working, I settle down for a long look at what they are putting out there.
Reading their website, social media, newsletter, their creds deck and draft contracts, you learn a lot. And mostly what I see is nothing to do with the hopes, dreams and plans for growth they’ve expressed; and little or no mention about value, new ways of working with clients, or differing revenue models. But ‘why should there be?’, I hear you ask – ‘that’s why they’ve brought you in’. And that’s right – but being inventive should not be limited to the creation of work for clients. Creativity should run through the whole of your business – including how you work as a business as much as what projects you work on.
As we know, ‘Creativity creates Value’ for the clients of agencies and studios the length and breadth of Britain. But often that value isn’t shared, ideas are given away, fees are earned for time not impact, budgets are nailed to the floor, and offers of equity in payment for work lead nowhere. So, if you’re open to creatively changing up your revenue models, how can you start to reframe the conversation about value and payment?
Start with your website. Introduce the idea there that you welcome different value models for your work with clients. A mix of fees for work in addition to fees for success, for out-performing your KPIs. Posit the thought that your work adds value to their business, so you expect that to be reflected in payment models.
Re-emphasise these points in your creds. With examples. One client of mine insisted on being paid a share of the life-time value of all new customers their client signed up during an acquisition campaign, once the KPIs+ were exceeded by 20%. They are still earning revenues from that client years on.
If you are involved in brand development, have the discussion around where their budget is coming from – Operational Expenditure (OpEx), where most marketing costs are put, or Capital Expenditure (CapEx) where company-building expenses are. Argue that your work should go in the latter – you are building their brand value after all. Not only is there more money available in that ‘investment’ pot but you can see the dial shift accordingly – and be paid for helping make that happen.
Contracts and the law can also contribute to your growth. Firstly you have to firmly stop your team spouting off a good idea to the client. How many times have you seen your ‘good idea’ emerge in their business at a later date, without any recourse. It is hard to do as creative companies are enthusiastic and full of good ideas. If you have a good idea, keep it quiet, research it thoroughly and do a presentation to the client about it, marking every single slide with the © symbol whilst explaining that you own this concept. (Remember ideas are not subject to copyright law – it only applies to the actual expression of those ideas.)
I ensure that this is backed up in the contract issued at the start of the relationship. In it the client agrees to give the agency/studio ‘permission’ to initiate a dialogue around any appropriate innovative ideas (outside of the agreed brief) which will be presented to the client, but which will still belong to the agency. If they decide to move ahead, a new deal can be struck. DBA member (and M&C Saatchi-owned) Re has put this term in its contract to ensure it is clearly stated and understood.
There probably isn’t a design company in the UK that hasn’t been offered equity in return for work. But equity doesn’t pay your wage bill.
I suggest several ways of responding to this ask. Firstly insist on being paid some cash. Calculate the full cost of the work they are asking you to do, then ask for the percentage – say 60% – that at least covers overheads, though perhaps not profit. To recoup the balance, you could licence the work to them, asking for a further payment every year until they can settle the full bill. With interest. Or you could ask for them to pay you the 40% balance in some other way that allows you to maximise the opportunity. This will depend on what business they are in.
Agreeing to take equity can be dangerous. The company might go bust, the equity get diluted in a raise, or the company be purposefully run at a paper loss to avoid paying dividends. Instead try asking for a share of turnover and even a small percentage of any raise. It may be your work that will have helped this early-stage company to achieve these figures, so go for a small share of it. And turnover has the added benefit of being published at Companies House.
Of course there are all sorts of other ways you can look at being paid – a royalty for sales of a product, project fees rather than time-based, and so on. I’ve come across 50 or more – all of which are listed in my book. But what is critical is that you set out this ambition to be paid in a variety of ways in both your creds and your contract. It should be part of your discussions with potential clients from the outset.
And therein lies another rub… many company owners find talking inventive revenue models tough, particularly if they are having to negotiate with procurement. But that’s the subject for another post…
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Markus Spiske | Unsplash