How do you scale your business, from 2 to 20 and beyond? A creative company's approach: Part 2

For those of you who have not read my first article on this topic, please do so before reading Part 2. It sets the tone for some specifics I am going to talk about in this next article.

So now that we have our groundwork in place--the right thought leadership, positive revenue growth, the right clients, and a reason to expand--we can begin to scale up. It is important to note that the topics below are not in any specific order of execution.

1. Hiring Strategy: It's not as easy as just hiring a designer or support staff at your company. You must weigh each decision to hire a new team member with equal importance to your company. Let's say your goal is to be big enough to support 20 staff members. Each member will play a role in the success of your business, whether they answer the phones and cut payroll or manage a project.

You must, even early on, develop a hiring strategy that you and the other leaders at the company can agree on. How do you interview? What questions do you ask? What type of potential team member is the right fit for your vision? And will you base decisions on past performance and references, or will you base them on your gut instinct and what potential you think the person might have? Perhaps it is a little bit of both. Whatever the need is for hiring, having a strategy in place first will save you and your potential staff members a lot of headaches and will ensure interviews are focused to complement a streamlined process.

2. Firm Capabilities: Once you're established and ready to grow, you must revisit the capabilities you offer to your clients. As a creative shop starts out, it usually takes on a lot of projects it is not always qualified to complete. A newer shop is going to get hit with a lot of requests that will span the spectrum, and while building a base from these types of projects is OK, eventually you have to look in the mirror and concentrate on your very best offerings.

Also, as you hire new people, each team member will contribute to the capabilities offering, and so focusing on what the firm is good at and what made you successful in the first place, is a critical step in the growth process.

For a creative firm, capabilities are essential. You are only as good as the work you push out the door to many potential clients. And for those clients that come through a referral, don't assume that you won't have to demonstrate your capabilities to them.

-Take a look at that last 12-18 months, categorize your work, and rate the successes versus the failures. You should end up with a nice list of projects that demonstrate your strong points and should represent your "bread and butter" client work.

-Once you have honed in on your true strong points, sit down with the other leaders at your company and make decisions on how these strong offerings can be managed internally.

-For the weak offerings, brainstorm ways to increase success for those capabilities you wish to continue to offer to new and existing clientele. You should answer internal questions like, why do we want to improve these capabilities, what does the market look like for these moving forward, are we going to be able to hire staff to support these capabilities, and so on.

-Develop a capabilities report outlining your findings from the above discussion, and make sure that for each service offering, you have a plan for acquisition, execution and evolution.

Once you have your final capabilities in check, and you have a plan to support them, your small firm will be on a good track to continue to move forward. What happens if you don't go through this exercise? Well, it's pretty easy to understand that as part of a proactive growth program at any company, you must know in your gut what offerings are appropriate for the market, what will grow your company, what offerings will generate positive revenue and what capabilities your staff can support.

3. Thought Leadership: Are you a designer or a business person? Or both? If you start a firm with a partner, and you divide the "Creative" and "Business" responsibilities from the get-go, you will likely see success much earlier. This is how Killswitch has grown so rapidly over the past 6-7 years and why we have been successful. Seems simple right? Well it is, and it isn't. Not only do these two people need to respect each other and their "halves" of the business, but they have to be able to bring to two parts together as a whole. The creative has to match the business offering and promises, and the business offerings should not sell the creative short. In other words, if you are a higher-end shop creatively, you don't want your "business" side of the firm making cold calls and selling web design door-to-door right? The business market model has to match the creative approach to accelerate success and to build a brand with not only the perception of high-end, but also one that can deliver the goods. The business offering that goes out can only be successful on its own if the creative matches.

But for those of you who do not have the 50/50 split I describe above, than you have an even bigger challenge. You must identify what your are best at. If it is design, you will need business guidance, and if it is business, you will need design guidance.

What I am really getting at here, is figuring out what you are best at and how you fit within the thought leadership as you begin to scale your firm up is a critical exercise to go through. If you haven't done an audit on yourself, and you think your hiring strategy and firm capabilities are in check, you need to look in the mirror and make sure that your business, the hiring strategy and the offerings can be supported by your thought leadership alone, when you are singularly in-charge of a creative firm.

Knowing this helps you hire the right people, and it helps you find the right clients which I will talk about next.

4. Client Acquisition Strategy: I know this sounds rather technical for an element within a creative firm, but it is so important. When you are starting out, you take on any client you can find, especially if you start younger and without a reputation or past firm experience like we did here at Killswitch. You learn the hard way which is sometimes the best way to learn. You get knocked down, time and time again, but as long as you get back up, there will be a reward.

If your small firm is about to embark on a growth phase, you must develop a client acquisition strategy. This can be a plan that outlines the type of clients you will go after, based on the capabilities we discussed earlier. How will you approach cold clients? How will you approach referral based clients? How will you approach clients who invite you to bid on an RFP? And the list goes on.

There are 6 major client categories Killswitch has identified, and they apply to all the industries out there.

1. Cold Clients: Clients who you engage on your own when there is no work on the table at that time.
2. Cold RFP Clients: Clients who you engage to bid on an RFP that was not sent to you as an invitation only.
3. Cold Referral Clients: A client who is referred to your firm through someone who recommends you who has not necessarily worked with you.
4. Referral Clients: A client who has been referred to you by a client you have worked with and have a relationship with.
5. Existing Bid Clients: A client who you have worked with, who comes back to you to do more work through a bid process.
6. Existing Clients: A client who you have worked with, who comes back to you to do more work, without a bid process in place.

As you go through the list above, the clients get riper and riper. Obviously each category has its plus and minuses, and I won't go into each now, but the bottom line is that as part of your strategy you must make some decisions about which of these categories you will contend in. You should have an acquisition plan in place for each, because each demands a different type of engagement.

In addition to determining the client categories in which your firm will work, you must also think about industry. Which industries fit the firm the best? This is another question easily answered from your capabilities exercise. If you can hit a few industries and make them your sweet spot, you will grow quicker than you imagined. Just make sure you have enough in the tank in the event you lose clients. Some industries, as just exhibited in the recent recession, can stop sending money all at once, and that is something that you want to protect your firm from.

5. Internal Structure: Once all the strategy and discussion is in place, the bare-bones structure of your firm must be addressed. This problem is probably the single biggest issue I hear from small business owners, both in and out of the creative industry. How do I structure my business? Well, if you go through the above exercises, you should have an idea of the positions you need to create at your firm and the type of people that will best fill those positions.

Each business has a model that hopefully works for them, whether they have 20 people or 2,000. And the size doesn't matter that much actually. As the company gets bigger, there are just more tiers and layers of accountability. Some creative firms choose to be heavy on the account manager/designer position, while other firms like Killswitch that are more evenly split between creative and web development have two over arching structures in place: one for managing the creative side of the business, and one that manages the web development/sofware side of the business.

Development:
-Principals oversee development managers, development managers oversee developers, developers execute development.

Creative:
-Principals oversee designers, designers execute their projects.

Projects:
-Principals oversee project managers, project managers oversee clients and projects.

Admin:
-Principals oversee human resource staff, human resource staff oversee employee needs.

Client Acquisition:
Principals oversee new client acquisition.

Hiring Strategy:
Principals oversee new hiring strategy, human resource staff supports hiring strategy.

Obviously the above descriptions over simplify things a bit. Within each are additional layers of description which define how each role is executed, but the important thing to take away is that all tiers have equal importance and equal input on all stages of a project depending on what capability area they are working in, and that is essential for a small firm like Killswitch.

It is important to not over complicate your structure. Even for smaller shops, it's important to have these tiers defined so that everyone has a clear understanding of responsibilities.

6. Paperwork, Paperwork, Paperwork: Do you have an employee handbook? Do you require any legal documents like an NDA or Non-Compete for your employees? Do you have a sick-leave policy? Are you even sure you are following the laws of the state with which your firm resides?

One of the most overlooked things by creatives who scale their business up is the legality of hiring and firing. If you are scaling up, you should have things in place to cover the interests of your business, and you should meet with a human resources consultant to ensure all laws are being followed. Having these documents is for the benefit of everyone involved.

7. Finances: Uncle Sam is in control when it comes to scaling any business up. Your business is likely taking risks when hiring people, especially in this climate. Having enough funds in the bank to back up these risks is essential.

Creative businesses, like many others, have one major form of traditional revenue.

- Client Receivables: The money that is on its way to your doorstep from those projects you just completed can be most easily broken down into "per-project income" and "retainer income." Both will support just about 100% of the revenue at your firm, and for many, I am only speaking the obvious. For some firms who offer additional products or other services for sale, there may be a 3rd called "recurring customer income," but for purposes of this article I am not going into that.

So while these are obvious, there is one area that time and time again business owners fail to realize (especially those in the design industry) and that is good ole' cash in the bank. Savings, savings and more savings is the best alternative strategy to ensure your scaling up doesn't bite back. There is no magic number here, but most businesses should try to save up to 3 months of monthly costs and have that in the bank at all times, and if you're scaling up from your current monthly expenses, I would recommend having at least another 2 months saved at the new budgeted monthly amount. That means if you operate on $100,000 per month and you are expanding 20% you should have $300,000 in the bank plus another $240,000. This could be in the form of saved client receivables, a line of credit, or even a loan. Whatever the form, if you are going to scale up, make sure you have money to back it up. In this climate, it may not seem reasonable to require this type of rainy day fund but it is a discussion that must be had during the process of expanding your firm.

8. Expansion Plan: All of the points thus far should be articulate in a singular document, a plan that outlines your expansion and everything that comes with it. There may be things as you draft this plan that you will see are unique to your specific scenario that need to be addressed. Issues such as office space and presence or other issues like planing out how you will set up interviews. You may also find that you have already addressed everything. No matter what happens, bringing this all together will help streamline execution, and will allow you to communicate more easily to those in the company as to how the strategy is rolled out.

Obviously for certain people, there will be areas that I have not covered. The points above are simply meant to be a guide and are not all inclusive.

Feel free to email me through our general email address if you have any questions or need help figuring out how to get things off the ground with your new venture.