Slides from "My Top 10 Design Business Failures"

This Thursday and Friday, I provided two lectures for SCAD's Entreprenurial Forum 2011 in Savannah, Georgia. This event was presented by SCAD's Office for Career and Alumni Success, and was designed for students across all majors to gain perspectives on how they can become successful as businesspeople in today's economic climate.

The above slide deck is from my second lecture, called "My Top 10 Design Business Failures." You could call this my greatest hits album of major business mistakes I've made over my career, both as a freelancer and while working within agencies of all shapes and sizes.

My first lecture, "Being an Agency of One," kicked off the event on Thursday night. I talked about the four primary areas that any designer or artist must master in order to create the foundation for a successful business practice and be responsible while doing what they love:

• Understanding your business model and what sources of revenue can support it
• Designing the appropriate touchpoints required for well-considered client service
• Discovering how effective project management creates sustainable studio success
• Crafting the philosophy and plan that drives both your personal practice and your business practice, via a framework that David Conrad and I created called "The Elements of Design Studio Experience"

You can see an 11-minute clip of me answering student questions after the first lecture on the SCAD eLearning site. Some of these student questions I will be readdressing on this blog in the coming weeks.

If you live in Seattle and want to dig deeper into this material, please join me for the Design Business for Breakfast Series in Seattle, which is going on right now. Registration is still open for the last three talks. The next one is this Wednesday, February 23rd.

All of this material is drawn from my current work-in-progress for HOW Books, Design Business from A to Z, which will be out in the Fall of 2012. Both presentations were deeply informed by the following collaborators, who deserve great thanks: Erica Goldsmith, Fiona Robertson-Remley, and David Conrad.

Buying the Whole Enchilada

The client ask seems innocuous on the surface: "Could you share with us your hourly rates, and how many hours your team will be spending on this website redesign by role?"

Whenever these kinds of questions come up, I can't help but think of my first efforts in making mole enchiladas.

Common Pitfalls of Estimating Design Time

As I am able to read the thoughts of design professionals, I can provide a transcript for what goes through each and every one of your minds while you're estimating a design project:

"Hmm... I think this project is only going to take me 20 hours. Last time, it took me about three days, and we only billed them for 15, so if I make it 20 then it should be approximately what it took me to design it last time."

Time passes. Your boss and/or the account manager review the estimate and think that it isn't cost-competitive. They want you to find places to cut your hours.

"Hmm... maybe I can do the concepts in 16 hours. That seems like one of the few places we might be able to cut back. Besides, I've designed a ton of web pages, so this one should be a little easier than the last time."

Sorry to break it to you, but you're going to spend at least 24 hours working on that project you just squeezed into 16. You're also going to lose money on that project, unless if you bill an astronomical hourly rate.

Why does this happen over and over again? Because of these very common estimating issues.

Estimating Projects by Long-Term Asset Value

In 1998, I remember catching up with one of my former classmates from college and hearing about their experiences of working at their first design studio as an intern. She related to me the following story (which I hope wasn't mangled by my faulty memory banks):

"All of the designers were really busy, so one of the owners gave me an identity project to work on over a week. I worked on a few concepts, but the one that I was really excited about had the last letter of the logo (a T) working like a construction crane picking up the letter to the left of it.

My boss showed the logos to the client and they immediately fell in love with my favorite. With just a little bit of further work, we delivered the logo and invoiced the client their standard fee for the logo. At the time, it seemed like a robbery for the amount of time I put into it.

My boss was really happy, they didn't have to spend much time art directing me, and they offered me a job when my internship was up."

As I asked her further questions about how the project went, then did the math:

One logo. One intern with minimal oversight. One week. $8,000 flat rate fee for just the mark.

How to Estimate Design Projects: Tips from a Pro

Two words that make a designer's ears bleed: "Over budget."

Estimating is the scariest activity that designers manage for themselves or their studios. We are experts at making intuitive design decisions based on qualitative information—but in the rational world of dollars and cents, that same intuition doesn't always make for a better profit margin. We learn (and forget) this, over and over again. I've heard countless designers say to me, "I haven't done this kind of work before. I don't know what to charge. So I just made a guesstimate, and if I go over budget, I'll just eat the difference."

Sadly, "the difference" is not edible. While designers may hate estimating, it's a business skill that you'll need to develop—that is, if you'd like to make some money.

For professional estimating advice, I emailed Fiona Robertson-Remley, a fantastic project management guru I'd worked with at Worktank Brand Storytellers on a wide range of interactive and traditional marketing programs. This is what she had to share on the subject.

Design Business in a Nutshell

Almost two years ago, I wrote these notes to myself—so that I wouldn't forget these key lessons I'd learned about working in the design business.

Not Good Proposals. Great Proposals.

With titanic battles happening nowadays over new business, it's crucial that you craft great proposals to win life-sustaining projects.

Not good. Great.

In the past, I've worked at agencies where proposal writing consisted of creating a laundry list: one final logo in the necessary formats, two rounds of client revisions, and so on. That worked fine when the money was flowing. Nowadays, the cost of entry is higher. Clients look at the deliverables, the price, and then start to haggle without mercy. Maybe that worked a few years ago. Not so much now. If you're bidding on a serious project for a new client, you need something a bit more... thorough. Be prepared to ante up with a great proposal.

Here's what to keep in mind when you write it.

Tripping Over the Waterfall

Many designers, when they get a strong business process around their studio practice, like to stick to the waterfall. There are clear boundaries for how each deliverable is presented, the client has a set amount of time to respond with feedback, and everything hums along on its merry way until the final piece is printed, goes live, etc. For trivial projects, the waterfall is just fine.

Then there are the rest of your projects: the ones that seem to veer off cliff after cliff of unconsidered demands. The projects that strain, and very often break, the carefully laid schedules and plans that protect you and your client from late work and overbilled projects. Waiter, did I order the scope creep du jour?

Most often, I've been watching these situations arise because the actual deliverables -- the Web site we were tasked to create -- was simplified into a list of pages. Such an itemized list showed a fundamental misunderstanding about what we were tasked to create. Not a Web site. A Web system.

Time Estimating Essentials for Designers

What do designers hate most? Other than improperly kerned type, being grilled by their superiors about why they went over budget on their time estimates.

Design isn't something that can be easily done on a deadline. Ideas come flying at you in the shower, while you're longboarding down Fremont Ave., and sometimes even while you're in a creative brainstorming meeting. Cut me some slack, all right? This is the way I do my best work. Can I skip out of that meeting about the TPS reports?

Yeah, that line of reasoning flies real high when the agency principal pulls you aside and lets you know that your last few projects have been a drag on agency profitability, and as a team you all need to find ways to keep costs down. Is it even possible to change your working methods and try to fit yourself into the narrow boxes you keep getting handed? Or should you start looking for the kinds of agencies and companies that give you more time to do your projects? (Oh, wait... that last one was a trick question.)

Designers Hate Estimating, Pt. 3 of 3

In Pt. 1 and Pt. 2 of this series, I shared some of the common variables that designers should take into account to reduce their "cone of uncertainty" when estimating a project.

In this final post, I want to talk about the things that designers often don't quantify when creating an estimate.

Factor: What the client needs, as opposed to what they articulate they need. The client wants a new logo, but that's not the business problem that comes out in your exploratory call or meeting. If you need to reframe the problem for them as part of the process, you need to consider it as a variable and secure more time and money to do that work. The way I couch this to clients is that designers aren't just problem solvers. They also have talents in helping clients to understand their problems, clearly define them, and then solve them. This is our strategic role beyond providing decorative assets.

Factor: How the client will behave through the course of a project, and if that will influence your work. Clients ask designers for references, but it's not always a bad thing to check up on your clients and/or closely observe how they interact with their peers or other vendors. This kind of gut check should govern what kind of buffer or multiplier you apply to your project fee, or whether you wish to engage with them at all. Sometimes you need to say no gracefully.

Factor: Not budgeting for potential failures through the design process. Why do we budget for exactly how long it will take? There should always be contingencies for at least one point of failure. Assume that at least one thing will go wrong, and be prepared for it in advance of it happening.

Factor: Not having an articulated business process that fits another designer. Let's say you're indisposed and you need to pass off your project to another designer. Many designers make the fatal mistake of estimating it to a person as opposed to a role. Don't just say, "It'll take me twenty hours to design this logo." Think about how long would it take any designer to design that logo. Leave room, should you get too busy or need to hire a freelancer, that the project can be covered without losing your shirt on the estimate. This may sound like heresy to some solo-flight designers, but this is what keeps large agencies alive.

Factor: You've never done a specific deliverable before. If a project is outside your realm of expertise, most designers usually assume they'll eat the cost of learning how to do it. This opens up risk from the client's perspective, and also gives them a point of negotiation to have you burn up hours meeting impossible goals. Do your due diligence and consult with one or two colleagues and ask them for advice on how to bid the project. Don't just give it away if you haven't done it before, or let the client know you can be taken advantage of because you're not an expert regarding this one type of deliverable. You should always continue to control the process of the project, follow your established design methods as they apply to the deliverable, and not allow the situation to become a power play.

Designers Hate Estimating, Pt. 2 of 3

In Pt. 1 of this series, I introduced Construx's "cone of uncertainty" and how to narrow the risk in your estimates by determining what unknown variables exist in your project scope.

Let's work through what these variables usually are, and how they can be brought in line in your estimate.

Define the Problem before You Estimate

In your estimate, what you need to demonstrate most is your understanding of the problem. Your approach to how it should be solved would follow, and should always be consistent. As a quick example, let's think through the variables that exist in creating a new logo for a local business.

Many years ago, I would estimate doing a logo by looking back through previous project to see how long it took for a project of a similar type, bash together an estimate based on how long they think it would take, multiply it by 1.3x to give some cushion for contingency, slot in some money for printing costs if they need to create any supporting materials as part of their bid, and send it off to the client.

Today, I focus more closely on what the client needs before I think about how I'm going to create it -- even if I've done a similar type of project for them before. And I charge my client for this extra time spent on the estimate as part of my overhead and creative fee, because they're getting more than just a cost for creating a logo.

Let me try to break it down here.

There's data from your prospective or current client, relating to specific needs out of the project (looking for brand lift, increase in perception, greater sales, etc.), as well as competitive analysis and market research.

There's qualitative information that your client provides in the way of what customers and staffers think about the old logo, which adds up to an impression of why they need a new one. These elements shape up into a business problem, which must then meet your process.

This information can usually be teased out in a single phone call, with some follow-up via email. I recommend making a set of questions you always ask in the exploratory call and keeping them by your phone in case you're surprised by an opportunity.

Have a Consistent Process for Creating the Solution

Within that same exploratory phone call, you should delineate what standard steps the client would take through the project, and what they are given with regard to rounds of review per each deliverable as part of the scope of work. Get that on the table from your very first conversation, so they're aware that they will follow your working process, not vice-versa.

It should go without saying that all of your rounds of review and costs for work outside the scope of the proposal must be in writing to protect your interests. I also recommend providing an hourly estimate of your work for a project, not a flat fee. There is always risk in accepting a flat fee, as it places the onus on you for understanding all the ways a project could go sideways and accounting for them.

There's qualitative information that you control in forming your estimate, such as what kind of creative approach you think you'd take -- but I'd recommend articulating that in your creative brief. I wouldn't recommend writing the brief before getting a signature and a portion of your fee, but I generally have a glimmer of an idea of what approach I'd likely take. This thinking can sometimes provide some color in the estimate, but should never be doled out for free and can sometime be shared anecdotally if the client is looking for a detail to tip the scale in their choice of a designer.

In Part 3 of this series, we'll explore some of the incidental details that many designers overlook when estimating a new project.

Designers Hate Estimating, Pt. 1 of 3

Have you ever met a designer that likes to create time estimates for projects?

The process is fraught with peril no matter how you approach it. Estimate too many hours, the client balks at the price and you need to negotiate to a resolution. Estimate too few hours, the client gladly signs on the dotted line, and you end up taking it in the gut. Hit it bang on the nose once in a blue moon, and take yourself out for a double-tall latte to celebrate, before walking back to the office and rebalancing your books.

Well, I could alleviate some of your estimating stress by telling you that there is no perfect estimate...

...and then raise your blood pressure by venturing that your estimate could deviate as much as four times from your original figures, depending on the scale of the engagement. That is, if you don't properly define what you're delivering, and assess the risks appropriately.

Get out of the "Cone of Uncertainty"

For a quick lesson in estimation, take a page from the software development playbook, which doesn't really differ too much from the large-scale interactive estimation process -- and can be scaled down to apply to most design estimates.

Construx, a well-known software development consultancy here in the Seattle area, has an article on their Web site regarding the "cone of uncertainty" that's essential reading for any designer who is responsible for managing large-scale design engagements.

The "cone of uncertainty" is the zone in any project where a number of interrelated variables -- the details of the work to be done, your process of doing the work, who will be creating the work, etc. -- have not been defined. Any methods of reducing uncertainty can limit "scope creep" (or just plain "lack of scope"), and also create further clarity with your client over shared expectations for the life of the project.

The only way to escape from this scenario is to put all your information out on the table and determine what you don't know -- and get the answers -- before delivering your estimate. That'll be the subject of Part 2.