A Decade of Lessons in Small Business Management
As we round third plate to complete our 10th year of business at era404, it’s impossible not to reflect upon the previous decade’s successes and lessons. In fact, despite the enormous pride we have for our successes—the awards we’ve won, the opportunities we’ve been afforded, the pieces we’ve created—it was in the lessons that our company grew the most. We can only assume that the same way the triumphs and tribulations of a child’s first ten years shape his or her personality, a business uses its own experiences to analyze the risks it will take and the directions it will pursue.
The first ten years weren’t always easy. We’ve had our share of overdue invoices, missed opportunities, delinquent payments, unreliable subcontractors, server meltdowns, mismanaged interests, incompetent vendors, substandard printers, unmatched commitment, bankrupt clients, misinterpreted visions, unsold products, poorly judged risks, unbridled ambition and lost accounts. In our early years, we made a number of mistakes. We’ve pursued opportunities where the risk was too great. We’ve caught employees attempting to embezzle funds. We’ve made promises too great to keep. We’ve invested in talent that showed little return. We’ve written off close to $40,000 in bad debt from clients. We’ve encountered irreconcilable fall-outs with long-term vendors, contractors and friends.
But ten years, 237 clients and approximately 1,500 projects later, the difficulties of our past have helped to hone our focus, reputation and relationships to who we are today. We’ve retained our enthusiasm for venturing in uncharted waters, but tempered the ambition with risk assessment. We’ve built a network of designers, developers, artisans and vendors that have consistently proven to be reliable and edifying. We’ve learned how to detect problems in prospective projects before signing contracts. We’ve created mutually beneficial and gratifying relationships with clients that have spanned the greater part of our existence. We’ve ascertained which industry voices are worthy of giving advice and listened intently. We’ve learned that the best equity we can gain is in the people that believe in the growth of our business.
Like everything in life, the endeavors that are easy are rarely as rewarding in the end. But, despite the list of pitfalls above, we’d like to impart a few of the lessons we’ve learned in the past decade so that others may find their journey a little less rocky.
Relationships are the life-blood of your business
It’s common knowledge that retaining existing clients is less expensive than finding new ones. But beyond simply managing long-term accounts, the success of your relationships with them helps grow your reputation in the industry and an unprecedented sales force. Not only do the projects create a strong sales piece for your portfolio, but also a powerful salesperson for your future projects. It’s easy to recognize that a client thinks of your relationship as an investment into their own business. But you should equally consider their business as an investment into yours.
Jump and the net will appear
Our greatest growth has come through taking risks. Gambling on promising talent, designs, clients, ventures, concepts, technologies and equities have propelled our business far beyond the small steps of playing it safe. Learn how to assess the risks before you and calculate the potential value from the potential hardship. Anticipate best and worst outcomes and determine your ability to direct them in your favor. Play the odds and don’t get discouraged by minor setbacks. Remember that your clients are taking risks on you just as you are taking risks on them. However, if you sense unmatched commitment or feel the risk is too great, don’t be afraid to walk away.
Hire a great accountant and lawyer and pay them well
People tend to think of accountants and lawyers as unnecessary financial burdens for small businesses. We did. But after bad experiences with unqualified friends or family members handling the books and the contracts, we realized that this is one place where you really need to spend the money. Businesses with strong relationships with their lawyers and accountants are more likely to be successful, and also more apt to sing your praises. Seek recommendations, do your due diligence, and pay them well. They’re worth the investment.
Briefly, while we’re on the subject, there are three things you should never exclude from your contracts:termination costs (or “Kill Fees”), liability clauses and, intellectual property ownership/protection. Research options and schedule time with your lawyer for a long discussion.
Skills may be learned, talent cannot
Learn how to determine the difference between someone lacking proficiency in skills, and someone using inexperience as an excuse for lack of creativity. Your business thrives on ingenuity. Examine the portfolios of potential hires (or current contractors) and ask yourself if each project has strong, original concepts and clever, meticulous fulfillment. If all the work that someone creates feels similar, they’re not really employing creative problem-solving, they’re following a template. A designer’s ingenuity makes them both a strong candidate for your broad client base and a creative mind for developing concepts that contrast with your own. True talented thinking is just as valuable as creative diversity. The last thing your business needs is someone inept or unoriginal. The second to last thing your business needs is another you.
Get out of the office
The best way for you to replenish your creativity is to take a vacation. Sagmeister Studio, for example, shuts down their office one in every eight years for a creative sabbatical. And while that may seem extreme, you can certainly use the same principle on a much smaller scale. If a design problem has been flogging your day, take a walk around your neighborhood and try to concentrate on something other than the problem at hand. Frequent cultural institutions, creative lectures, cooperative businesses, artistic installations and other venues and recommend your staff join you. While it’s common knowledge that most business relationships are forged on golf courses or in bars, most design decisions and unique strategic concepts are ideated when you’re out of the office. Perpetually catalyze your senses with creative stimulus and it’ll be much easier and faster to provoke the creative response.
Your business is about making money
This is undoubtedly the most difficult lesson for an entrepreneur to learn, particularly because it falls in contrast with all of the previous lessons I’ve listed: In developing strong relationships, you may be tempted to provide discounts or perform favors for clients. In taking risks, you may focus on the costs of the investment and the expense of potential failure. Attorneys and CPAs—good ones, anyway—are not cheap. And hiring skilled and talented employees to diversify your creative offering is considerably more expensive than doing it all yourself. Everyone has heard the platitude that it takes money to make money, sure. But this lesson goes far beyond simply ponying up cash. It puts you in the middle of the toughest decisions of your career:
1. Create a blanket policy that you do not work with friends or family. The momentary frustration that loved ones could feel because you refuse to sign contracts with them is easily offset by the irreparable damages that could ensue if a relationship goes sour.
2. Create a blanket policy that you stop work immediately if a single payment is delinquent. No matter how long your relationship with a client, you cannot anticipate unforeseen circumstances that could lead to bad debt. Make no excuses, make no exceptions. Despite the difficulty it may cause, if they truly respect your relationship they will understand this requirement. Keep in mind, their deadline is only as enforceable as your payment terms.
3. Encourage your clients to entertain competition, but do not sacrifice your integrity.Negotiation is part of the process. And no matter how efficiently you work, there will always be someone out there that will agree to do things faster and cheaper than you can. If a client requests you counter-bid against a competing offer, help them to understand the value of working with your business and attempt to remain flexible. However, establish a set of minimum requirements and don’t compromise your business by accepting contracts that don’t satisfy them.
4. Do not perform spec labor or free services. People will always try to get things for free. In receiving RFPs, you may be asked to provide strategic consulting in order to be awarded the contract. Create a distinction between what you deem to be a necessity of sales and the value of your expertise. Do not put together a detailed strategy for a project, a comprehensive scope of work, or any creative or strategic concepting until you have an agreement in place. Despite working in a field of deliverables and tangible products, your most valuable and marketable assets are your ideas; fulfillment is a mere afterthought. If you find yourself in a conversation where a client is asking for free labor or ideas in order to attain a contract or retain their business, walk away. They do not respect you and capitulating will only increase the likeliness of this occurring in the future.
5. Trust your instincts. If you feel friction during the proposal process or coercion to lower your rates, advance deadlines, or jeopardize the quality of the work, politely withdraw from the running. The success of your creative is derived from confidence in your intuition. The success of your business should be, too. If you sense any discomfort on the road to beginning a relationship, it is probably your subconscious is telling you that there’s something wrong with the opportunity. Save your time and energy for positive and beneficial clients and projects. Pass on the rest.
Lastly, and most importantly, enjoy yourself. You’ve started your business to get increased satisfaction from your work and stronger gratification from your relationships. If you’re loving it, it’ll be apparent in your creativity, quality, originality, meticulousness, and ingenuity. The disposition you bring to each project and client will reflect upon the success of each relationship and your business as a whole. So, if you find yourself not enjoying work, you need to ask yourself what’s preventing your happiness and how to fix things. Some of the lessons above might be able to resolve the issues. Your own regular and diligent reflection of your business will help as well. You evaluate the satisfaction of your performance regularly, so why not do the same for your happiness? If you find yourself incapable of enjoying your work then you might need to take a step back to re-examine your vocation. But if you’re having a blast, thrilled to get started each morning and reluctant to leave at the end of each day, then you must be doing something right.
Read the original article, here: http://www.era404.com/info/a-decade-of-lessons-in-small-business-management/
Above is an article I wrote for the Informational Resources section of the site of my studio (era404). You’re welcome to reprint it in its entirety if you include a link or credit to the original post on era404.com.