The biggest issues facing design agencies
There are a number of issues facing agencies at the moment which are applying pressure to everyday operations.
Developing younger talent within the business is concerning many of you.
The hybrid working model is making it difficult for more inexperienced team members to pick up the important bits of experience they gain from working in close proximity to their colleagues. The role of senior creatives may be changing to ensure more time can be spent with juniors helping them develop the skills they need to progress.
Recruiting top talent is another issue. It’s coming at a price.
Agencies who are recruiting are finding it incredibly difficult to match the demands of sought-after talent. Some DBA members are reporting that it is costing them 25% more to replace certain types of staff.
Inflation and the rising cost of living is also feeding demand for staff pay-rises.
Through recent years of low-inflation it has been common practice for agencies to give staff pay increases every year, generally raising them a couple of percent. Even during the pandemic, we saw small increases at the more junior end of the scale.
The problem is that lots of agencies have not followed suit with fee increases every year. So, my first recommendation is a small increase every year regardless of the situation. Your clients are much more likely to accept two consecutive years of 2.5% increases rather than a 5% increase after a fallow year.
If your costs are increasing, your fees should be increasing. But the aim is a balance. Keeping an eye on the ratio between the salary of a specific role and the charge out rate is important to make sure it does not fall out of kilter. Some roles can be charged out at a higher ratio than others.
Bear in mind this advice from DBA Expert Sim Thirunesan: “If you are considering increasing your charge out rates as a result of increasing base costs, be aware that an increase in rates won’t necessarily translate to an increase in profits and healthy margins.” Sim recommends reviewing your pricing strategies and positioning, alongside carrying out benchmarking exercises.
When it comes to keeping staff happy, motivated, and effective it’s important to remember that other factors can also be considered.
Improving the overall employment package, not just the salary, is one alternative. What are your added benefits? We are seeing an increase in agencies experimenting with 4-day weeks (or one Friday a month off), early Friday finishes during the summer etc. No doubt we will see some interesting trends emerging around benefits in this year’s DBA Annual Survey Report when the findings are published in the Autumn.
As Sim says, “There is a lot more which can be considered and included beyond financial incentivisation. The first step is to understand what the motivators and hygiene factors of your employees and the prospective candidates are? Ask yourself – why would someone want to work here?”
Segmented by geography and size of agency, and covering fees, salaries, utilisation, income, recovery rates and more, the DBA Annual Survey Report can help you interrogate your ratios and benchmark your financial performance. So, my other recommendation is to participate in the Survey in order to utilise all the data. With the current pressures on design businesses, the Report’s findings are likely to be more valuable than ever to help you maintain your competitiveness in the market.
The 2022 Survey is currently open for completion until Monday 13 June.
By participating in the survey, you gain access to the full set of results (both through a pdf report and online dynamic data tables) in the 2022 Annual Survey Report, released in October. Full access to this data is only available to survey participants.
DBA members have recently received details on how to participate. If you have any questions, please get in touch: email@example.com
If you are not yet a DBA member, find out about the many benefits of DBA membership and join to gain access to the Annual Survey Report.
Balance the pressures your design business may be facing: read DBA Expert Sim Thirunesan’s article The Balancing Act.
Members – post your vacancies on our jobs board for free, and receive a complimentary shout-out on the DBA’s social channels. More info