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My Top 10 Design Business Failures
David Sherwin, frog
@changeorder / davidsherwin.com
06.24.13
PROPOSAL
RESEARCH
BRIEF
RESEARCH
REPORT
SITE
MAP
CONTENT
INVENTORY
CONTENT
STRATEGY
CONTENT
CREATION
MOOD
BOARDS
UI DESIGN
CONCEPTS
TEMPLATE
DESIGNS
THING
CLIENT
WANTS
BADLY
WIRE-
FRAMES
2
D’oh.
PROPOSAL
RESEARCH
BRIEF
RESEARCH
REPORT
SITE
MAP
CONTENT
INVENTORY
CONTENT
STRATEGY
CONTENT
CREATION
MOOD
BOARDS
UI DESIGN
CONCEPTS
TEMPLATE
DESIGNS
THING
CLIENT
WANTS
BADLY
WIRE-
FRAMES
3
Double d’oh.
PROPOSAL
RESEARCH
BRIEF
RESEARCH
REPORT
SITE
MAP
CONTENT
INVENTORY
CONTENT
STRATEGY
CONTENT
CREATION
MOOD
BOARDS
IDESIGN
ONCEPTS
TEMPLATE
DESIGNS
THING
CLIENT
WANTS
BADLY
WIRE-
FRAMES
4
Talked to a lot
of designers,
businesspeople
& frogs…
INTERVIEWS:
DERIN BASDEN
STEVE BATY
DAVID CONRAD
ABBY GODEE
ERICA GOLDSMITH
JENNY LAM
TED LEONHARDT
JUSTIN MAGUIRE
MATTHEW MAY
NANCY MCCLELLAND
STEFAN MUMAW
LUKE MYSEE
GABRIEL POST
FIONAROBERTSONREMLEY
MARY PAYNTER SHERWIN
WENDY QUESINBERRY
FEEDBACK & HELP:
CHRISTOPHER BUTLER
MATT CONWAY
TEAQUE LENAHAN
TOM MANNING
TIMOTHY MOREY
ANDREW OTWELL
NATHAN PERETIC
ANDY RUTLEDGE
MATT SCHOENHOLZ
LAUREN SEROTA
SEBASTIAN SCHOLZ
5My Top 10 Design Business Failures / David Sherwin
Client
Service
Accounting
Estimating
Studio
Capabilities
Business
Development
Studio
Culture
ProjectManagement
DesignLeadership
6
Realized
all of us had
the same
business
failures.
7My Top 10 Design Business Failures / David Sherwin
1	
2	
3	
4	
5	
6	
7	
8	
9	
10	 No quality control
8My Top 10 Design Business Failures / David Sherwin
Misteakes happen.
9My Top 10 Design Business Failures / David Sherwin
We fail in managing clients
when errors slip through,
and we can’t describe
how they’ll be resolved
to the client’s benefit.
“IT’S OKAY, WE’LL
FIX IT! DISCOUNT?
FREE SITE? AGH!”
“YOU
WHAT!!!!!”
10
1. Determine your role
in the error’s genesis.
a
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a:link { color: #FFFFFFUC
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	 font-family: Helvetica,
sans-serif;
	 font-weight: normal;
	 font-size: small;
	 line-height: 150%;
11My Top 10 Design Business Failures / David Sherwin
2. Gauge the impact of
the error to your client
and to your project team.
MARCH
21 –$2,100
12My Top 10 Design Business Failures / David Sherwin
3. Write a plan describing
how the error will
be mitigated.
Dearest client,
It is my duty to inform you that TuesAlso, the server room caught on firenothing left but a burnt hulk of metalThe backups all failed as well. Since wnot satisfied, seppuku is an option. Plelet me know i
13
4. Share your plan with
the client, ensuring that
conversation around
the error is constructive.
“DON’T JUST THROW
YOURSELF UNDER
THE BUS!”
14My Top 10 Design Business Failures / David Sherwin
5. Execute on the plan
as swiftly as you can—
without introducing
more errors.
“WE’RE ON IT
LIKE PB ON J.”
“HUSTLE!”
15
6. Record the error in
a public manner that’ll
help you assess future risk
and educate your peers.
RIP
WRONG
PHONE
NUMBER
2009
RIP
MISSING
HOME
PAGE
2007
16
1	
2	
3	
4	
5	
6	
7	
8	 Working without a deposit
9	 Working without a contract
10
17
“Accounts payable is getting your
information into our system…
Can’t we just start work?”
18
“Accounts payable is getting your
information into our system…
Can’t we just start work?”
19
UNTIL THE
CONTRACT
IS SIGNED AND
WE HAVE A
DEPOSIT
“Accounts payable is getting your
information into our system…
Can’t we just start work?”
20
“The trick is to turn down work but
to have the client remember you as
a positive person that they want to
work with in the future.”
—Fiona Robertson Remley
Director of PM, Wunderman
21
“The trick is to turn down work but
to have the client remember you as
a positive person that they want to
work with in the future.”
—Fiona Robertson Remley
Director of PM, Wunderman
“It can be advantageous to offer a conditional ‘no’
rather than a direct refusal… It’s easy to see a project
as a poor fit because one or more variables aren’t right.
The temptation in that case is to decline the project
outright. However it can be worthwhile to offer
a different solution that is more favorable to you…”
—Nathan Peretic
Co-founder, Full Stop Interactive
22
1	
2	
3	
4	
5	
6	
7	 Taking on spec work
8	
9	
10
23
DAMMIT
IT’S YET ANOTHER
PERSON THAT’S TELLING ME
NEVER EVER TO DO SPEC WORK
SO THEY CAN WIN THE PROJECTS
I WANT TO BE WORKING ON TODAY
SO I’M GOING TO DO SPEC WORK
SO I CAN WIN THAT PROJECT
WE ARE ALL BIDDING ON
AT THIS VERY MOMENT
RIGHT? RIGHT?
24
123
456
789
101112
131415
161718
192021
222324
252627
282930
313233
If you do spec work, you’re
gambling away future profit.
25
50%
bid/win ratio™
26
Spec work will distract you from paid work,
and reduce the value of every designer’s
effort. Even if you are an in-house group!
“WE DO NOT DO
DESIGN WORK
ON SPEC.”
“AS A CONDITION TO
HIRING YOU, MAY WE
SEE SOME ADVANCE
DESIGN WORK?”
27
Make smarter bets. Mature your business
from dealing in spec work:
1. Network yourself to clients that align
with your values
2. Move upstream in the client’s process
3. Use time under contention for work
you can gain from (money, project leads)
28
1	
2	
3	
4	
5	
6	 No client approval on milestones
7	
8	
9	
10
29
Did you leave wiggle room?
30
Did you leave wiggle room?
• Write narrow estimates and briefs.
• Be specific about quantities.
• Craft a process for reviews and approval.
• Set boundaries for late approval from a client.
• Actively remind clients about defined scope.
• Capture every major decision in writing.
• Get formal approvals in writing.
31
Shape deliverables for
your audience.
Creating an executive presentation
for the CEO can be a different
deliverable than what you
send to your regular contact.
Plan and bill time for it.
CEO
VP OF
STUFF
EVP OF
OTHER JUNK
OTHER VP
YOU DON’T
KNOW
MANAGERMANAGER MANAGERMANAGER
WORKERWORKER
WORKER
WORKERWORKER
WORKER
SHOW ME WHAT’S
IMPORTANT—WHOOPS,
GOTTA RUN!
DETAILS,
DETAILS,
DETAILS…
YOU WANT
TWO MEETINGS?
(ULP.)
32
Make your deliverables
self-contained.
Keep asking, “If I’m not here
to defend the work, will it
still make sense to another
potential stakeholder?” VP OF
STUFF
EVP OF
OTHER JUNK
OTHER VP
YOU DON’T
KNOW
MANAGERMANAGER MANAGERMANAGER
WORKERWORKER
WORKER
WORKERWORKER
WORKER
HAVE YOU TRIED
RED FOR THE LOGO
COLOR?
UH, WE HAVE
A FEW CHANGES
FOR YOU…
CEO’S
HUSBAND
CEO
OH BOY.
HEY ARTIE,
COME LOOK
AT THIS…
33
Always point back
to the strategy.
Clearly express how the
deliverables map back to
the stated client and user
needs, brief, etc.
CEO
VP OF
STUFF
EVP OF
OTHER JUNK
OTHER VP
YOU DON’T
KNOW
MANAGERMANAGER MANAGERMANAGER
WORKERWORKER
WORKER
WORKERWORKER
WORKER
GOOD, WE’RE
ALL SAYING THE
SAME THING
GOOD, WE’RE
ALL SAYING THE
SAME THING
GOOD, WE’RE
ALL SAYING THE
SAME THING
34My Top 10 Design Business Failures / David Sherwin
1	
2	
3	
4	
5	 Improper estimating
6	
7	
8	
9	
10
35My Top 10 Design Business Failures / David Sherwin
Estimating Process:
1. Project the number of hours
the project will require
2. Set a schedule that
accommodates those hours
3. Generate costs for resources,
based on hourly rates
4. Select a pricing model to match
your current business context
5. Translate your detailed estimate
into a cost estimate for your client
Here’s common mistakes that
cause estimates to deviate.
36My Top 10 Design Business Failures / David Sherwin
Estimates need breathing room.
All project estimates should include padding. It
allows space for the creative process. This padding
should be built into value-based and hourly estimates.
The designer wants 20 hours.
Give her 24 hours in the estimate.
CREATIVE PADDING IS 20% OF ESTIMATE IN THIS INSTANCE.
SOME DESIGNERS, WHEN SELF-ESTIMATING, CAN BE OFF
BY AS MUCH AS 50%–100% ON A NEW TASK.
37My Top 10 Design Business Failures / David Sherwin
Run numbers by teammates.
The surest way to piss off a designer or
developer: give them no control of the
estimate you provide to a client, then
ding them for not meeting the estimate.
Solicit their feedback on an estimate
before you submit it.
“WIRES IN TWO
HOURS #FAIL.”
38My Top 10 Design Business Failures / David Sherwin
Include a project markup.
This is usually between 10–20% of the total estimate.
This mark up is to cover the following:
• Possible increases in scope
• Shifts in schedule: all delays always cost the
agency money!
• Negotiation over price: to secure a contract
without hurting your bottom line
You can’t do interactive work without doing this.
Project markups are shared with the client.
Never cut them out.
39My Top 10 Design Business Failures / David Sherwin
Use actuals as a reference point.
If you’re bidding a project that is similar to ones that
you’ve designed in the past, always refer to the actual
time and money spent fulfilling those earlier projects
as a reference point in your estimation process.
Ideally, you’ll be able to review your final budget
for that project, itemized by task.
?
40My Top 10 Design Business Failures / David Sherwin
Price vendors with the
appropriate markup.
Depending on how much time you have to pull
together an estimate, you may not be able to
incorporate hard costs:
• Stock photography
• Front- or back-end development
• QA/testing
• Custom photography or illustration
• User research honoraria
Such services should be listed in your contract
as outside the scope of the project and to be
invoiced at an additional cost.
41My Top 10 Design Business Failures / David Sherwin
Be paid for managing vendors.
Fully consider costs that you will incur, on an hourly
basis, to manage the sourcing and fulfillment of services.
Include these as part of your estimated hours.
Simple example: Quality assurance for site
• Soliciting three bids
• Negotiating and selecting a bid
• Setting up a PO for the costs
• Getting the testers access to the site
• Communicating and tracking fixes
• Billing for the work
42My Top 10 Design Business Failures / David Sherwin
Know the value of a discount.
Clients will ask for discounts. The conversation
begins like this:
• “I can’t afford $2,000. I can pay $1,500.”
• “What about a ‘friends and family’ discount?”
• “You are far too expensive. Can you do me
a favor and reduce the cost?”
• “Can you throw in a brochure for free?”
Clients ask for discounts all the time. Don’t be
offended by these requests—just know how to handle
them. This is how you learn to negotiate money.
43My Top 10 Design Business Failures / David Sherwin
When should I give a discount?
Rarely, and only once with any client as part of a
negotiation. Giving discounts can dilute the perceived
value of your services, and should never be standard
operating procedure.
Some believe discounts apply when you want to:
• Win a new client
• Win a client’s trust to gain bigger/better projects
• Win back a client’s trust if it has been lost through
poor prior performance (a slippery slope)
However, a discount can only be yielded when you are
sure that you can still deliver a strong product that
will be successful, on time, and on budget and at profit.
44My Top 10 Design Business Failures / David Sherwin
They want it for less?
Then deliver less.
If the client keeps trying for a discount, reduce
what you are fulfilling for them:
• Reduced deliverables
• Reduced scope inside deliverables
• Direct-to-bill vendors
• Revised schedules
45My Top 10 Design Business Failures / David Sherwin
1	
2	
3	
4	 No cashflow
5	
6	
7	
8	
9	
10
46My Top 10 Design Business Failures / David Sherwin
Do you have enough money in the bank?
You need at least 3 months
of income banked for
operating expenses.
Running a business off credit instead of cash is
a recipe for disaster. You should save as much money
as possible before starting any business venture.
Nothing that you do as a business owner will give
you more peace of mind than a large savings account.
47My Top 10 Design Business Failures / David Sherwin
Client Name Projected Revenue
New Project for MegaCo $2,000
Updates to last year’s LittleCo project $800
Total $2,800
You need to know where potential future revenue
will impact your backlog and billings.
Remember that this is theoretical! You won’t
close every opportunity that’s presented to you.
Do you track your project pipeline?
48My Top 10 Design Business Failures / David Sherwin
Do you keep a backlog of work?
Try to maintain a
3 to 4 week backlog.
This is the amount of time you are booked for,
running at full capacity.
You should always factor time into each week’s
schedule to pursue future business and manage
a consistent pipeline.
49My Top 10 Design Business Failures / David Sherwin
Do you extend credit too far?
Client Name 0–30 Days 31–60 Days 61–90 Days Over 90 Days
MegaCo $100 $500 $1,000
LittleCo, LLC $50 $50
Mom-n-Pop $25 $25 $500
Total $175 $575 $1,000 $500
Why aren’t you asking for payment up front?
Withholding credit if the client has major invoices past due?
Providing a discount if the client pays within 30 days?
50My Top 10 Design Business Failures / David Sherwin
Dear MegaCo,
For your records, below you will find a current account statement.
Current Account Balance Invoice Project Due Date Amt Due
31–60 DAYS PAST DUE
January 1, 2009
Invoice
724
Website
Design
Due:
January 31, 2009
$100
61–90 DAYS PAST DUE
December 1, 2008
Invoice
721
Website
Design
Due:
December 31, 2008
$100
Outstanding Balance $200
Do you chase accounts past due?
51My Top 10 Design Business Failures / David Sherwin
Do you depend on just one client?
No single client should
account for more than 25%
of a studio’s business.
When it happens—and it will!—immediately
draw up a list of new potential clients to call…
52My Top 10 Design Business Failures / David Sherwin
1	
2	
3	 Inaccurate rates
4	
5	
6	
7	
8	
9	
10
53My Top 10 Design Business Failures / David Sherwin
		 52 WEEKS PER YEAR
	 –	 2 WEEKS SICK-LEAVE
	 –	 5 WEEKS OF HOLIDAY (!)
	 = 	 45 WEEKS PER YEAR
	 x	 40 HOURS A WEEK
	 =	 1,800 HRS/YEAR
	 /	 60% UTILIZATION RATE
	 1,080 HOURS PER YEAR
YOU CAN ACTUALLY
CHARGE YOUR CLIENTS
Do you know your real billing rate?
54My Top 10 Design Business Failures / David Sherwin
YOU CAN’T BILL
100% OF YOUR TIME!
Do you know your real billing rate?
80%	Creative direction
80%	Design
80%	Production
80%	Project Management
30%	Marketing  Self-Promotion
10%	 Administration
60%	Blended rate
		 52 WEEKS PER YEAR
	 –	 2 WEEKS SICK-LEAVE
	 –	 5 WEEKS OF HOLIDAY (!)
	 = 	 45 WEEKS PER YEAR
	 x	 40 HOURS A WEEK
	 =	 1,800 HRS/YEAR
	 /	 60% UTILIZATION RATE
	 1,080 HOURS PER YEAR
YOU CAN ACTUALLY
CHARGE YOUR CLIENTS
55My Top 10 Design Business Failures / David Sherwin
Labor cost
Fixed overhead
Debt
Taxes
	 $50,000 	 PER YEAR
+	 $14,400 	 ($1,200 / MONTH STUDIO EXPENSES)
+	 $10,000 	 ($100,000 DUE PAID BACK IN 10 YEARS)
+	 $7,900 	 (MINUS 15.8% OF SALARY PER YEAR)
=	 $82,300	 PER YEAR TO EMPLOY THIS PERSON
/	 1,080 	 HOURS
=	 $76 PER HOUR IDEAL BASE RATE FOR AN EMPLOYEE
Estimate labor costs like you are hiring an outside employee.
Do you know your real billing rate?
But… Where does profit fit in?
What if I can’t find enough work to fill 1,080 hours?
56My Top 10 Design Business Failures / David Sherwin
Labor cost
Fixed overhead
Debt
Taxes
Contingency
	 $50,000 	 PER YEAR
+	 $14,400 	 ($1,200 / MONTH STUDIO EXPENSES)
+	 $10,000 	 ($100,000 DUE PAID BACK IN 10 YEARS)
+	 $7,900 	 (MINUS 15.8% OF SALARY PER YEAR)
=	 $82,300	 PER YEAR TO EMPLOY THIS PERSON
/	 1,080 	 HOURS
=	 $76 PER HOUR IDEAL BASE RATE
x	 1.5 OF BASE RATE
=	 $115 PER HOUR “REAL” BASE RATE
Estimate labor costs like you are hiring an outside employee.
Do you know your real billing rate?
What happens when you run the numbers?
57My Top 10 Design Business Failures / David Sherwin
Yr biz says:
Creative Direction	 $200/hr
User Experience	 	 $120/hr
Visual Design			 $120/hr
Development	 		 $180/hr
THESE ARE NOT ALL OF
YOUR CAPABILITIES, ESP. IF
YOU HIRE CONTRACT HELP.
What capabilities are you really billing?
Accurate billing is also about future capabilities you might fulfill.
58My Top 10 Design Business Failures / David Sherwin
What are your current capabilities?
Write all the tasks you can fulfill with your current skill set.
Note what you’re really good at, and what areas you
want to grow into. Map them by project lifecycle.
Project
Commission
Resource
Allocation
VIsual
Design
Coding 
Scripting
Compat-
ability
Testing
Launch
Accessibility
Content
Population
Database
Design
Functional
Specification
Copywriting
+ Editing
Concept
Development
Business
Analysis
Content
Strategy
Information
Architecture
Asset
Preparation
Technical
Specification
Usability
Testing
Code
Debugging
Search Engine
Optimization
Acceptance
Testing
Accounting
Maintenance
+Improvement
SWEET SPOT GROWTH AREA NOT A JOB FUNCTION
START FINISH
59My Top 10 Design Business Failures / David Sherwin
1	
2	 Not trusting your gut
3	
4	
5	
6	
7	
8	
9	
10
60My Top 10 Design Business Failures / David Sherwin
1	 Faking it
2	
3	
4	
5	
6	
7	
8	
9	
10
61My Top 10 Design Business Failures / David Sherwin
Now, for something completely different…
PROPOSAL
RESEARCH
BRIEF
RESEARCH
REPORT
SITE
MAP
CONTENT
INVENTORY
CONTENT
STRATEGY
CONTENT
CREATION
MOOD
BOARDS
UI DESIGN
CONCEPTS
TEMPLATE
DESIGNS
THING
CLIENT
WANTS
BADLY
WIRE-
FRAMES
62My Top 10 Design Business Failures / David Sherwin
My Top 10 Design Business Successes
David Sherwin, frog
@changeorder / davidsherwin.com
06.24.13
PROPOSAL
RESEARCH
BRIEF
RESEARCH
REPORT
SITE
MAP
CONTENT
INVENTORY
CONTENT
STRATEGY
CONTENT
CREATION
MOOD
BOARDS
UI DESIGN
CONCEPTS
TEMPLATE
DESIGNS
THING
CLIENT
WANTS
BADLY
WIRE-
FRAMES
63My Top 10 Design Business Failures / David Sherwin
1	 Learning from failure + success	
2	
3	
4	
5	
6	
7	
8	
9	
10
64My Top 10 Design Business Failures / David Sherwin
“live your
life as an
experiment.”
—Chögyam Trungpa Rinpoche
65My Top 10 Design Business Failures / David Sherwin
My formula for business experimentation
HYPOTHESIS
If I take an action for my business,
planned results will happen for specific reasons.
THEORY
When I take that action, I will confirm
what results happened and why they happened.
PRACTICE
After I’ve had the same result happen multiple times
for similar reasons, I can operationalize it.
66My Top 10 Design Business Failures / David Sherwin
WORKING WITH CUSTOMERS
CLIENT SERVICE
BUSINESS DEVELOPMENT
PROPOSALS
CONTRACTS
SPEC WORK
POLITICS
NEGOTIATION
DISCOUNTS
EXPECTATIONS
DESIGN BRIEFS
DELIVERABLES
MEETINGS
PRESENTATIONS
FEEDBACK
NETWORKING
COMPETITION
STRATEGY
MANAGING YOUR PROJECTS
PROJECT MANAGEMENT
PROCESS
ESTIMATING
BUDGETS
SCHEDULES
RISK
STAKEHOLDERS
CHANGE ORDERS
TIME SHEETS
PROOFREADING
ERRORS
POSTMORTEMS
OPERATING YOUR STUDIO
MONEY
HOURLY RATES
INSURANCE
SUSTAINABILITY
LEGAL
CONFIDENTIALITY
CULTURE
LEADERSHIP
ACCOUNTING
HIRING
FREELANCE
VACATION
BRINGING IT ALL TOGETHER
PRODUCT
MARKET NEED  CAPABILITIES
PROCESS  CULTURE
CUSTOMERS  STAFF
PHILOSOPHY
There’s more
where this
came from…
67
David Sherwin
david@changeorderblog.com
@changeorder
More about Success by Design:
davidsherwin.com/success
amzn.to/successbydesign
More about business + process of design:
changeorderblog.com
©2013 David Sherwin. All rights reserved. No duplication without written
permission of the author. Examples shown are for illustrative purposes
only, and should not be substituted for hiring professionals forthings like
accounting, bookkeeping, and other critical stuff. Be well and let me
know how it goes.
Thanks!

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Top 10 Design Business Failures Insights

  • 1. 1 My Top 10 Design Business Failures David Sherwin, frog @changeorder / davidsherwin.com 06.24.13 PROPOSAL RESEARCH BRIEF RESEARCH REPORT SITE MAP CONTENT INVENTORY CONTENT STRATEGY CONTENT CREATION MOOD BOARDS UI DESIGN CONCEPTS TEMPLATE DESIGNS THING CLIENT WANTS BADLY WIRE- FRAMES
  • 4. 4 Talked to a lot of designers, businesspeople & frogs… INTERVIEWS: DERIN BASDEN STEVE BATY DAVID CONRAD ABBY GODEE ERICA GOLDSMITH JENNY LAM TED LEONHARDT JUSTIN MAGUIRE MATTHEW MAY NANCY MCCLELLAND STEFAN MUMAW LUKE MYSEE GABRIEL POST FIONAROBERTSONREMLEY MARY PAYNTER SHERWIN WENDY QUESINBERRY FEEDBACK & HELP: CHRISTOPHER BUTLER MATT CONWAY TEAQUE LENAHAN TOM MANNING TIMOTHY MOREY ANDREW OTWELL NATHAN PERETIC ANDY RUTLEDGE MATT SCHOENHOLZ LAUREN SEROTA SEBASTIAN SCHOLZ
  • 5. 5My Top 10 Design Business Failures / David Sherwin Client Service Accounting Estimating Studio Capabilities Business Development Studio Culture ProjectManagement DesignLeadership
  • 6. 6 Realized all of us had the same business failures.
  • 7. 7My Top 10 Design Business Failures / David Sherwin 1 2 3 4 5 6 7 8 9 10 No quality control
  • 8. 8My Top 10 Design Business Failures / David Sherwin Misteakes happen.
  • 9. 9My Top 10 Design Business Failures / David Sherwin We fail in managing clients when errors slip through, and we can’t describe how they’ll be resolved to the client’s benefit. “IT’S OKAY, WE’LL FIX IT! DISCOUNT? FREE SITE? AGH!” “YOU WHAT!!!!!”
  • 10. 10 1. Determine your role in the error’s genesis. a { text-decoration: none; } a:link { color: #FFFFFFUC a:visited { color: #3c4490 a:hover { color: #5360D8; a:active { color: #3c4490 /* layout */ body { margin: 0; color: #222222; background: #FFFFFF font-family: Helvetica, sans-serif; font-weight: normal; font-size: small; line-height: 150%;
  • 11. 11My Top 10 Design Business Failures / David Sherwin 2. Gauge the impact of the error to your client and to your project team. MARCH 21 –$2,100
  • 12. 12My Top 10 Design Business Failures / David Sherwin 3. Write a plan describing how the error will be mitigated. Dearest client, It is my duty to inform you that TuesAlso, the server room caught on firenothing left but a burnt hulk of metalThe backups all failed as well. Since wnot satisfied, seppuku is an option. Plelet me know i
  • 13. 13 4. Share your plan with the client, ensuring that conversation around the error is constructive. “DON’T JUST THROW YOURSELF UNDER THE BUS!”
  • 14. 14My Top 10 Design Business Failures / David Sherwin 5. Execute on the plan as swiftly as you can— without introducing more errors. “WE’RE ON IT LIKE PB ON J.” “HUSTLE!”
  • 15. 15 6. Record the error in a public manner that’ll help you assess future risk and educate your peers. RIP WRONG PHONE NUMBER 2009 RIP MISSING HOME PAGE 2007
  • 16. 16 1 2 3 4 5 6 7 8 Working without a deposit 9 Working without a contract 10
  • 17. 17 “Accounts payable is getting your information into our system… Can’t we just start work?”
  • 18. 18 “Accounts payable is getting your information into our system… Can’t we just start work?”
  • 19. 19 UNTIL THE CONTRACT IS SIGNED AND WE HAVE A DEPOSIT “Accounts payable is getting your information into our system… Can’t we just start work?”
  • 20. 20 “The trick is to turn down work but to have the client remember you as a positive person that they want to work with in the future.” —Fiona Robertson Remley Director of PM, Wunderman
  • 21. 21 “The trick is to turn down work but to have the client remember you as a positive person that they want to work with in the future.” —Fiona Robertson Remley Director of PM, Wunderman “It can be advantageous to offer a conditional ‘no’ rather than a direct refusal… It’s easy to see a project as a poor fit because one or more variables aren’t right. The temptation in that case is to decline the project outright. However it can be worthwhile to offer a different solution that is more favorable to you…” —Nathan Peretic Co-founder, Full Stop Interactive
  • 22. 22 1 2 3 4 5 6 7 Taking on spec work 8 9 10
  • 23. 23 DAMMIT IT’S YET ANOTHER PERSON THAT’S TELLING ME NEVER EVER TO DO SPEC WORK SO THEY CAN WIN THE PROJECTS I WANT TO BE WORKING ON TODAY SO I’M GOING TO DO SPEC WORK SO I CAN WIN THAT PROJECT WE ARE ALL BIDDING ON AT THIS VERY MOMENT RIGHT? RIGHT?
  • 26. 26 Spec work will distract you from paid work, and reduce the value of every designer’s effort. Even if you are an in-house group! “WE DO NOT DO DESIGN WORK ON SPEC.” “AS A CONDITION TO HIRING YOU, MAY WE SEE SOME ADVANCE DESIGN WORK?”
  • 27. 27 Make smarter bets. Mature your business from dealing in spec work: 1. Network yourself to clients that align with your values 2. Move upstream in the client’s process 3. Use time under contention for work you can gain from (money, project leads)
  • 28. 28 1 2 3 4 5 6 No client approval on milestones 7 8 9 10
  • 29. 29 Did you leave wiggle room?
  • 30. 30 Did you leave wiggle room? • Write narrow estimates and briefs. • Be specific about quantities. • Craft a process for reviews and approval. • Set boundaries for late approval from a client. • Actively remind clients about defined scope. • Capture every major decision in writing. • Get formal approvals in writing.
  • 31. 31 Shape deliverables for your audience. Creating an executive presentation for the CEO can be a different deliverable than what you send to your regular contact. Plan and bill time for it. CEO VP OF STUFF EVP OF OTHER JUNK OTHER VP YOU DON’T KNOW MANAGERMANAGER MANAGERMANAGER WORKERWORKER WORKER WORKERWORKER WORKER SHOW ME WHAT’S IMPORTANT—WHOOPS, GOTTA RUN! DETAILS, DETAILS, DETAILS… YOU WANT TWO MEETINGS? (ULP.)
  • 32. 32 Make your deliverables self-contained. Keep asking, “If I’m not here to defend the work, will it still make sense to another potential stakeholder?” VP OF STUFF EVP OF OTHER JUNK OTHER VP YOU DON’T KNOW MANAGERMANAGER MANAGERMANAGER WORKERWORKER WORKER WORKERWORKER WORKER HAVE YOU TRIED RED FOR THE LOGO COLOR? UH, WE HAVE A FEW CHANGES FOR YOU… CEO’S HUSBAND CEO OH BOY. HEY ARTIE, COME LOOK AT THIS…
  • 33. 33 Always point back to the strategy. Clearly express how the deliverables map back to the stated client and user needs, brief, etc. CEO VP OF STUFF EVP OF OTHER JUNK OTHER VP YOU DON’T KNOW MANAGERMANAGER MANAGERMANAGER WORKERWORKER WORKER WORKERWORKER WORKER GOOD, WE’RE ALL SAYING THE SAME THING GOOD, WE’RE ALL SAYING THE SAME THING GOOD, WE’RE ALL SAYING THE SAME THING
  • 34. 34My Top 10 Design Business Failures / David Sherwin 1 2 3 4 5 Improper estimating 6 7 8 9 10
  • 35. 35My Top 10 Design Business Failures / David Sherwin Estimating Process: 1. Project the number of hours the project will require 2. Set a schedule that accommodates those hours 3. Generate costs for resources, based on hourly rates 4. Select a pricing model to match your current business context 5. Translate your detailed estimate into a cost estimate for your client Here’s common mistakes that cause estimates to deviate.
  • 36. 36My Top 10 Design Business Failures / David Sherwin Estimates need breathing room. All project estimates should include padding. It allows space for the creative process. This padding should be built into value-based and hourly estimates. The designer wants 20 hours. Give her 24 hours in the estimate. CREATIVE PADDING IS 20% OF ESTIMATE IN THIS INSTANCE. SOME DESIGNERS, WHEN SELF-ESTIMATING, CAN BE OFF BY AS MUCH AS 50%–100% ON A NEW TASK.
  • 37. 37My Top 10 Design Business Failures / David Sherwin Run numbers by teammates. The surest way to piss off a designer or developer: give them no control of the estimate you provide to a client, then ding them for not meeting the estimate. Solicit their feedback on an estimate before you submit it. “WIRES IN TWO HOURS #FAIL.”
  • 38. 38My Top 10 Design Business Failures / David Sherwin Include a project markup. This is usually between 10–20% of the total estimate. This mark up is to cover the following: • Possible increases in scope • Shifts in schedule: all delays always cost the agency money! • Negotiation over price: to secure a contract without hurting your bottom line You can’t do interactive work without doing this. Project markups are shared with the client. Never cut them out.
  • 39. 39My Top 10 Design Business Failures / David Sherwin Use actuals as a reference point. If you’re bidding a project that is similar to ones that you’ve designed in the past, always refer to the actual time and money spent fulfilling those earlier projects as a reference point in your estimation process. Ideally, you’ll be able to review your final budget for that project, itemized by task. ?
  • 40. 40My Top 10 Design Business Failures / David Sherwin Price vendors with the appropriate markup. Depending on how much time you have to pull together an estimate, you may not be able to incorporate hard costs: • Stock photography • Front- or back-end development • QA/testing • Custom photography or illustration • User research honoraria Such services should be listed in your contract as outside the scope of the project and to be invoiced at an additional cost.
  • 41. 41My Top 10 Design Business Failures / David Sherwin Be paid for managing vendors. Fully consider costs that you will incur, on an hourly basis, to manage the sourcing and fulfillment of services. Include these as part of your estimated hours. Simple example: Quality assurance for site • Soliciting three bids • Negotiating and selecting a bid • Setting up a PO for the costs • Getting the testers access to the site • Communicating and tracking fixes • Billing for the work
  • 42. 42My Top 10 Design Business Failures / David Sherwin Know the value of a discount. Clients will ask for discounts. The conversation begins like this: • “I can’t afford $2,000. I can pay $1,500.” • “What about a ‘friends and family’ discount?” • “You are far too expensive. Can you do me a favor and reduce the cost?” • “Can you throw in a brochure for free?” Clients ask for discounts all the time. Don’t be offended by these requests—just know how to handle them. This is how you learn to negotiate money.
  • 43. 43My Top 10 Design Business Failures / David Sherwin When should I give a discount? Rarely, and only once with any client as part of a negotiation. Giving discounts can dilute the perceived value of your services, and should never be standard operating procedure. Some believe discounts apply when you want to: • Win a new client • Win a client’s trust to gain bigger/better projects • Win back a client’s trust if it has been lost through poor prior performance (a slippery slope) However, a discount can only be yielded when you are sure that you can still deliver a strong product that will be successful, on time, and on budget and at profit.
  • 44. 44My Top 10 Design Business Failures / David Sherwin They want it for less? Then deliver less. If the client keeps trying for a discount, reduce what you are fulfilling for them: • Reduced deliverables • Reduced scope inside deliverables • Direct-to-bill vendors • Revised schedules
  • 45. 45My Top 10 Design Business Failures / David Sherwin 1 2 3 4 No cashflow 5 6 7 8 9 10
  • 46. 46My Top 10 Design Business Failures / David Sherwin Do you have enough money in the bank? You need at least 3 months of income banked for operating expenses. Running a business off credit instead of cash is a recipe for disaster. You should save as much money as possible before starting any business venture. Nothing that you do as a business owner will give you more peace of mind than a large savings account.
  • 47. 47My Top 10 Design Business Failures / David Sherwin Client Name Projected Revenue New Project for MegaCo $2,000 Updates to last year’s LittleCo project $800 Total $2,800 You need to know where potential future revenue will impact your backlog and billings. Remember that this is theoretical! You won’t close every opportunity that’s presented to you. Do you track your project pipeline?
  • 48. 48My Top 10 Design Business Failures / David Sherwin Do you keep a backlog of work? Try to maintain a 3 to 4 week backlog. This is the amount of time you are booked for, running at full capacity. You should always factor time into each week’s schedule to pursue future business and manage a consistent pipeline.
  • 49. 49My Top 10 Design Business Failures / David Sherwin Do you extend credit too far? Client Name 0–30 Days 31–60 Days 61–90 Days Over 90 Days MegaCo $100 $500 $1,000 LittleCo, LLC $50 $50 Mom-n-Pop $25 $25 $500 Total $175 $575 $1,000 $500 Why aren’t you asking for payment up front? Withholding credit if the client has major invoices past due? Providing a discount if the client pays within 30 days?
  • 50. 50My Top 10 Design Business Failures / David Sherwin Dear MegaCo, For your records, below you will find a current account statement. Current Account Balance Invoice Project Due Date Amt Due 31–60 DAYS PAST DUE January 1, 2009 Invoice 724 Website Design Due: January 31, 2009 $100 61–90 DAYS PAST DUE December 1, 2008 Invoice 721 Website Design Due: December 31, 2008 $100 Outstanding Balance $200 Do you chase accounts past due?
  • 51. 51My Top 10 Design Business Failures / David Sherwin Do you depend on just one client? No single client should account for more than 25% of a studio’s business. When it happens—and it will!—immediately draw up a list of new potential clients to call…
  • 52. 52My Top 10 Design Business Failures / David Sherwin 1 2 3 Inaccurate rates 4 5 6 7 8 9 10
  • 53. 53My Top 10 Design Business Failures / David Sherwin 52 WEEKS PER YEAR – 2 WEEKS SICK-LEAVE – 5 WEEKS OF HOLIDAY (!) = 45 WEEKS PER YEAR x 40 HOURS A WEEK = 1,800 HRS/YEAR / 60% UTILIZATION RATE 1,080 HOURS PER YEAR YOU CAN ACTUALLY CHARGE YOUR CLIENTS Do you know your real billing rate?
  • 54. 54My Top 10 Design Business Failures / David Sherwin YOU CAN’T BILL 100% OF YOUR TIME! Do you know your real billing rate? 80% Creative direction 80% Design 80% Production 80% Project Management 30% Marketing Self-Promotion 10% Administration 60% Blended rate 52 WEEKS PER YEAR – 2 WEEKS SICK-LEAVE – 5 WEEKS OF HOLIDAY (!) = 45 WEEKS PER YEAR x 40 HOURS A WEEK = 1,800 HRS/YEAR / 60% UTILIZATION RATE 1,080 HOURS PER YEAR YOU CAN ACTUALLY CHARGE YOUR CLIENTS
  • 55. 55My Top 10 Design Business Failures / David Sherwin Labor cost Fixed overhead Debt Taxes $50,000 PER YEAR + $14,400 ($1,200 / MONTH STUDIO EXPENSES) + $10,000 ($100,000 DUE PAID BACK IN 10 YEARS) + $7,900 (MINUS 15.8% OF SALARY PER YEAR) = $82,300 PER YEAR TO EMPLOY THIS PERSON / 1,080 HOURS = $76 PER HOUR IDEAL BASE RATE FOR AN EMPLOYEE Estimate labor costs like you are hiring an outside employee. Do you know your real billing rate? But… Where does profit fit in? What if I can’t find enough work to fill 1,080 hours?
  • 56. 56My Top 10 Design Business Failures / David Sherwin Labor cost Fixed overhead Debt Taxes Contingency $50,000 PER YEAR + $14,400 ($1,200 / MONTH STUDIO EXPENSES) + $10,000 ($100,000 DUE PAID BACK IN 10 YEARS) + $7,900 (MINUS 15.8% OF SALARY PER YEAR) = $82,300 PER YEAR TO EMPLOY THIS PERSON / 1,080 HOURS = $76 PER HOUR IDEAL BASE RATE x 1.5 OF BASE RATE = $115 PER HOUR “REAL” BASE RATE Estimate labor costs like you are hiring an outside employee. Do you know your real billing rate? What happens when you run the numbers?
  • 57. 57My Top 10 Design Business Failures / David Sherwin Yr biz says: Creative Direction $200/hr User Experience $120/hr Visual Design $120/hr Development $180/hr THESE ARE NOT ALL OF YOUR CAPABILITIES, ESP. IF YOU HIRE CONTRACT HELP. What capabilities are you really billing? Accurate billing is also about future capabilities you might fulfill.
  • 58. 58My Top 10 Design Business Failures / David Sherwin What are your current capabilities? Write all the tasks you can fulfill with your current skill set. Note what you’re really good at, and what areas you want to grow into. Map them by project lifecycle. Project Commission Resource Allocation VIsual Design Coding Scripting Compat- ability Testing Launch Accessibility Content Population Database Design Functional Specification Copywriting + Editing Concept Development Business Analysis Content Strategy Information Architecture Asset Preparation Technical Specification Usability Testing Code Debugging Search Engine Optimization Acceptance Testing Accounting Maintenance +Improvement SWEET SPOT GROWTH AREA NOT A JOB FUNCTION START FINISH
  • 59. 59My Top 10 Design Business Failures / David Sherwin 1 2 Not trusting your gut 3 4 5 6 7 8 9 10
  • 60. 60My Top 10 Design Business Failures / David Sherwin 1 Faking it 2 3 4 5 6 7 8 9 10
  • 61. 61My Top 10 Design Business Failures / David Sherwin Now, for something completely different… PROPOSAL RESEARCH BRIEF RESEARCH REPORT SITE MAP CONTENT INVENTORY CONTENT STRATEGY CONTENT CREATION MOOD BOARDS UI DESIGN CONCEPTS TEMPLATE DESIGNS THING CLIENT WANTS BADLY WIRE- FRAMES
  • 62. 62My Top 10 Design Business Failures / David Sherwin My Top 10 Design Business Successes David Sherwin, frog @changeorder / davidsherwin.com 06.24.13 PROPOSAL RESEARCH BRIEF RESEARCH REPORT SITE MAP CONTENT INVENTORY CONTENT STRATEGY CONTENT CREATION MOOD BOARDS UI DESIGN CONCEPTS TEMPLATE DESIGNS THING CLIENT WANTS BADLY WIRE- FRAMES
  • 63. 63My Top 10 Design Business Failures / David Sherwin 1 Learning from failure + success 2 3 4 5 6 7 8 9 10
  • 64. 64My Top 10 Design Business Failures / David Sherwin “live your life as an experiment.” —Chögyam Trungpa Rinpoche
  • 65. 65My Top 10 Design Business Failures / David Sherwin My formula for business experimentation HYPOTHESIS If I take an action for my business, planned results will happen for specific reasons. THEORY When I take that action, I will confirm what results happened and why they happened. PRACTICE After I’ve had the same result happen multiple times for similar reasons, I can operationalize it.
  • 66. 66My Top 10 Design Business Failures / David Sherwin WORKING WITH CUSTOMERS CLIENT SERVICE BUSINESS DEVELOPMENT PROPOSALS CONTRACTS SPEC WORK POLITICS NEGOTIATION DISCOUNTS EXPECTATIONS DESIGN BRIEFS DELIVERABLES MEETINGS PRESENTATIONS FEEDBACK NETWORKING COMPETITION STRATEGY MANAGING YOUR PROJECTS PROJECT MANAGEMENT PROCESS ESTIMATING BUDGETS SCHEDULES RISK STAKEHOLDERS CHANGE ORDERS TIME SHEETS PROOFREADING ERRORS POSTMORTEMS OPERATING YOUR STUDIO MONEY HOURLY RATES INSURANCE SUSTAINABILITY LEGAL CONFIDENTIALITY CULTURE LEADERSHIP ACCOUNTING HIRING FREELANCE VACATION BRINGING IT ALL TOGETHER PRODUCT MARKET NEED CAPABILITIES PROCESS CULTURE CUSTOMERS STAFF PHILOSOPHY There’s more where this came from…
  • 67. 67 David Sherwin david@changeorderblog.com @changeorder More about Success by Design: davidsherwin.com/success amzn.to/successbydesign More about business + process of design: changeorderblog.com ©2013 David Sherwin. All rights reserved. No duplication without written permission of the author. Examples shown are for illustrative purposes only, and should not be substituted for hiring professionals forthings like accounting, bookkeeping, and other critical stuff. Be well and let me know how it goes. Thanks!