Grow or Plateau

Eventually, you’ll want to make more money for your time. That means you have to charge more, hire help, and find more ways to be profitable. You have to scale. Ben Chestnut, the founder of MailChimp, shared the gritty details of his company’s decision to move from services to a product in 2007. Ben shared how chasing large clients puts you at tremendous risk for falling very far and very fast when things go wrong. By shifting their focus to smaller, yet large in number, clients vs. single large clients they were much more profitable and able to weather ups and downs.¹ As a solo creative or a small team of three or four, your risk increases along with your rates. Once you become accustomed to a certain income or lifestyle, it’s hard to go back. Whether it’s staffing up, moving to a product or agency retainer model, or taking hold of value-based pricing, you will have to make a move.

It’s common for creative business owners to get so far away from the actual creative work that they take a full-time job or allow themselves to be acquired simply to get back to the craft. That’s not failure; that’s freedom. If you’re willing to walk away from the business you’ve built to get back to your creative roots, that’s a choice you will most likely be happy with. For those who stick with business ownership though, growth can be tough.

Don’t Mess Around

You can receive penalties and fines for not handling contractors properly. If you have to re-classify someone, you will have to reimburse them for overtime pay, any missing wages between their salary and actual hours worked, backed taxes, health insurance, and so on. There are entire organizations attempting to unionize and organize contract workers against unfair employment practices, so it’s unwise to ignore a contractor who may be getting close to the line. If a complaint is filed, tax authorities such as the IRS are the first to investigate. Your entire business can come under scrutiny, which isn’t something you want.

How to Tell the Difference

For you the individual or you the business owner who is hiring contractors, there are a few key questions to ask the person who’s doing the work to determine how to classify them:

• • Do you perform the same work for other clients? If so, then you’re a contractor.
• • How are hours set? Is the time that work starts and stops being dictated? For example, is a rule in place that states work must be conducted between 9am and 3pm on Tuesday and Thursday every week? As you dictate more than half of a person’s working hours, you are effectively controlling their schedule and acting as an employer.
• • Where can you work? Are you required to arrive at a particular office? While contractors can work on-site, combining location requirements with time requirements edges the relationship away from freelance toward employment.
• • Is overtime a requirement? If the work to be completed requires more than a standard workweek, the schedule has been dictated and is therefore employment.
• • Are you using your tools or supplied tools for the job? If the work is being done on your own equipment with your own software or tools, that’s typically free-lance. If equipment is being supplied and required, that’s more in line with employment. Additionally, if the manner in which the tools are used is being dictated, that isn’t really freelance.
• • Are you performing tasks that are also being done by employees of the company? If you’re a copywriter and five other copywriters work there as full-time employees, you probably can’t be a contractor for more than a temporary period of a few weeks or months. If, however, you perform a job that no one else there does you may be able to be a contractor indefinitely.

The circumstances, duration of work, and many other factors make it even more gray. You also have to consider which is best for you. As your business grows, and you need to add staff, you’ll be tempted to keep people freelance as long as possible. There will come a point when it’s cheaper to hire someone and pay them a salary vs. paying them hourly, so the decision may be made for you.

Managing Freelancers

When you are following the rules, use freelance help as long as you can. The biggest benefit to having freelance help is that you can comfortably remove or replace them if things aren’t working out. It’s easier to budget for freelancers than it is when you need to hire someone. You only have to consider their rate and the time they will work instead of insurance, taxes, equipment, and so on.

Hire freelancers with the same standards as employees. While they are easier to get rid of if they don’t work out, a bad contractor can still ruin your office and make your life hell. Make sure they’re a cultural fit. If they’re providing a critical skill for a key client, you may be forced to hire them if the work sticks around. If you’ve brought on someone who isn’t a good fit, you’ve just disrupted your culture. So don’t just hire them for skill, hire them for fit.

How to Hire People

If it’s clear you do need staff, here are the steps I recommend for finding the right fit for your team.

Apprentices and Interns

The best way to test the waters is to take creatives who haven’t been corrupted by the Sith Lords of agency world and mould them into creative thinkers. You can find raw talent that’s a cultural fit at a low cost and low risk. If you work with someone you love, you can build rapport with them and have them come aboard early in their career.

There are two types of education-level hires you can make: apprentices and interns. They’re similar but different in a few key ways.

Good Employees Leave

Talented creatives will leave your business. That’s part of it; we all start somewhere and then we grow into our own. You’re moving from player to coach, and players graduate. It hurts to lose people you’ve invested in, but never make employees sign ridiculous non-compete agreements that keep them from moving on to the next destination in their career.

And let them take the work they’ve done for you with them. Sure, they need to credit your business for the work, but don’t block them from telling the stories to their future clients or employers.

The Speed of Growth

Growing too quickly can stretch you too far. In my first two years of business, I went from being solo to having five full-time employees. As we added clients, we added staff. Over a matter of months, not years, our clients’ needs changed but our skills didn’t. The biggest failure was a massive website project we took on that called for one particular type of development. No one on my team had any idea how to work with this particular technology, but we still took on the client.

I had two developers on my team with nothing to do and a subcontractor eating up 70 percent of the project budget. This wasn’t the last time I made this mistake and I ended up with a team that couldn’t do the work I was selling. In retrospect, this was what destroyed my small business and took me all the way back down to a solo practice. That’s not a bad thing, but it wasn’t my plan at the time.

The second time around, after the incidents in 2010 and 2011, I took the lessons learned and grew at scale. I hired freelancers for specific skills or projects. I layered in complementary services and subcontracted it to partners at a profit. After a while, I would transition them to full-time hires. Some of my most trusted “employees” are small development shops and illustrators that I continue to partner with today. They either weren’t interested in becoming full-time employees or they weren’t doing enough work with me on a monthly basis to justify making them a part of the team permanently. Eventually, I merged my company and took on a partner. Our skills complemented one another’s, and we had the right mix of capabilities between our respective teams. I believe we’ve grown the right way.

The process for hiring that we just covered in our hiring help section has worked well. We’re now a dozen salaried employees but have up to thirty people working at any given time on projects we lead. We’re able to serve clients who would typically hire forty-person agencies without the hassle of running a forty-person agency.

The Scale of Growth

There are two simple ways to grow: charge more for each project or increase the amount of projects. There are also two ways to go about it: retention and acquisition. Getting repeat business from existing clients (retention) is usually easier than generating new business from new clients (acquisition).

Scaling Costs

You’ve got to spend money to make money. It’s not just hiring people; you’ll have to buy things and find places to put those people and things. You have to be smart about what you buy and sell. The best way to go about it is to scale costs, layering your time for dollar services with profitable endeavors.

A layered approach means adding in complementary services and offerings alongside your core. If your core service is graphic design, then adding in web template design makes a lot of sense. You don’t have to be a top-notch web designer to sell it to your existing clients. For many small businesses, they just need design direction on a drag and drop website builder. If your core service is web design, you may add in web development and subcontract the development work to a partner or freelancer. Yes, you can add more volume with your core service and sell more of the same. But I’ve found that adding in complimentary services that you can scale at their pace doesn’t force you to increase your staff as quickly.

No Rush

Some shops won’t have the luxury of waiting; they have to hire as fast as they can find the talent. This type of growth isn’t always bad, but it’s a bit like speeding down a highway. Your risk of crashing increases as you accelerate. One bad apple can spoil the whole bunch, and it’s hard to get rid of the bad ones. Here’s a few quick tips on dealing with fast hires:

• • Use staffing agencies to protect yourself. You will pay a fee to hire them if they work out, but it may be worth it. The last thing you want is an unfit hire that you can’t remove. By going through a staffing firm they can get benefits and other full-time job perks, but you can still let them go without reason if they aren’t working out. It also protects you if the pace of growth suddenly slows and you don’t need all of the help you had brought on.
• • Use freelancers. Again, this is how I scale. If someone can’t possibly freelance for us because they want to go from full-time job to full-time job, then we won’t hire them in a hurry. I’d rather pass on top-notch talent than rush a hire.
• • Go part-time. See if you can get someone to come on part-time with you while they are still working with their own clients. Have them work three days a week or every other week.
• • Try to stay project-based. The smartest way to grow is to do it with each client or project. Hire people as you need them to complete work. Get long-term agreements from clients and hire people under those same agreement timelines.

No Means Grow

One of the signs of a healthy creative business is commonly saying “no” to an RFP, an actual request for work, or when an existing client asks you to take on additional tasks. If you’re in a position to pick and choose who you work with and what you work on, your business is probably healthy.

My friend Greg Hoy, head of Happy Cog, said in an article for A List Apart, “I used to think the hard part was ‘getting to yes,’ but over time, I’ve learned that the hardest part isn’t closing the deal, but figuring out which deals are actually worth closing. It all begins with taking a hard look at the prospect you’re talking to, and keeping an eye on early behaviors that all too frequently lead to problems.”²

What’s in a Name?

To some, this may sound trivial, but what if your business is “you,” as in your business is called John Smith, Incorporated? There have been heated debates over the need to change the name once you have partners or lots of employees because being named after a person makes a business seem small. If being “small” does bother you, then you can always just shorten the name to Smith, Inc. Likewise, if you have a partner, such as Smith-Williams, Inc. and Williams leaves, changing to Smith, Inc. may not be appealing. Rebranding can be good, especially if you’ve significantly changed, but it’s okay if you want to stick with your name forever. You’ve hopefully established yourself as a thought leader, so why not be recognized for it?

Change in Lifestyle

If you grow beyond just yourself, the lifestyle shift is significant. Working from home, whenever you want, and however you want, is why many creatives started. As you grow into more meetings and more team members, this tends to go away. There’s something about having even a single partner or peer that completely changes the dynamic of how you work. You feel an obligation to work a bit more, have a stricter schedule, or take less time off. You can fight that by creating the right culture, but there is a tendency to test one another out at first to see how loose things will be. It’s up to you to set the tone for how you and everyone on your team works. So set the tone and culture that you want; there is no right or wrong at any size. If your goal is to build a few websites here and there and also teach yoga a few nights a week, you probably want to stay solo.

You’ll Lose Some Control

You’re going to give up control as you grow. Whether it’s taking on partners or having to hire administrative staff, you won’t be able to manage every aspect of the business if you grow beyond work that you can execute on your own. That may be appealing or terrifying, it depends on what you envision for your business. If you have a product or have gotten large, you may even need investors who aren’t creatives. They’re going to want a return on their investment; they’re not philanthropists, and you’re no charity, so it will change how you work.

Taking the layered cost–profit approach means you may have to diversify your offerings. It’s tough to do one thing, such as editorial illustration, and do it at scale for more and more clients. You can charge more and be more profitable, but if you want to grow in the traditional sense of hiring staff, you’ll probably have to offer additional services, which you may not want to do. It also means you’ll be working in areas where you’re less competent and rely on staff or partners. I never felt more out of control than when my business was delivering solutions that I couldn’t produce myself.

You Won’t Only Be Hiring Creatives

Adding more creatives means they have to be managed and need operational support. So it’s not just about adding another writer or designer, it also means adding project managers and sales people. The more you have non-creative staff on board, the less your company feels like a creative endeavor. Finding this type of talent isn’t as easy as finding creatives. It’s hard to review someone’s project management portfolio. You do have to hire based on experience and recommendations for these roles. They can still be brought on by staffing firms or be freelance, so if that’s an option you should take it.

Small Batch

You can stick to the “boutique” or “craft” style business. This simply means you’re a single location, small-batch business that limits the amount of output (client work) done in a given period. Just like craft whiskey or high fashion, boutique businesses can demand much higher prices and drive demand.

People line up to work with the best tattoo artists, illustrators, and songwriters. Top-notch solo creatives can’t scale themselves. What they can do is sell their work as a product, share their secrets and process through workshops, or hire apprentices to work in their studio. When you hire these high-end creatives, you pay a premium to get them to work on your project instead of one of their employees. It could allow you to charge high rates, sometimes $500 an hour or more. People will pay it because you’re price anchoring or price bracketing inside of your business. They see the benefit of getting the best person and are willing to pay for it in comparison with the lesser known talent. You can also fill up your work pipeline for quite some time this way because people are willing to wait to work with the master creative.

Specialization and Generalization Without Intention

Vertical and horizontal marketing are a big part of your growth strategy. As we covered in Chapter 3, there are risks and rewards. As you grow, you may not realize you’re specializing until it’s too late. You might have also fallen into generalization if you layered in far more complementary services than you intended.

The good thing about scaled growth is that you can cut off any parts of your business that you don’t like. If you’ve gotten into a vertical niche that you aren’t enjoying but you’re diversified in your client base, you can grow the other clients and reduce your commitment to the niche. If you’re doing the same highly specialized task for several clients but you have a large team, you can leverage other skills from your team members to experiment in new horizontals and sell those skills.

Passive Income

Making money while you sleep or while lying on the beach sounds great, right? While hiring staff and delegating work will free you up to a degree, you’re still responsible for managing it all. Passive income is simply a product or service that you’ve created once and can sell to multiple buyers over and over again without your involvement.

Unless you build a product that reaches critical mass, it’s probably not going to replace your services business. But it can supplement your income enough to allow you to take on fewer clients or say “no” a bit more often.

The fastest way to develop products is to reproduce one or more of the services you are already offering. For example, if you conduct a workshop with clients, hold it as a group event and record the audio or video, then sell the recordings online. If you’re a designer who makes brochures, create basic templates for everyday customers like flower shops or boutique hotels and sell them on creative marketplaces and stock sites. Or if you tend to do some concepts for clients but only use one, resell the concepts on marketplaces or stock sites.

Even if your skill set can’t be reproduced effectively for resale, you can leverage your knowledge or process into informational products that can sell at scale.

• • If you’ve developed custom tools for your workflow, such as templates or code, you can resell it.
• • Document your process and research and turn it into paid writing gigs.
• • Write an eBook or guide, even if you give it away it can serve as a lead-generation tool.
• • Teach an online course or tutorial and charge for it.
• • Develop a blog or website that has advertising space that you sell through a marketing network.

Taking Your Talents to South Beach

You’ve run the business long enough on your own, and you long for someone to help carry the weight. It may be time to look for a partner. You may be consistently partnering with another business that you want to join forces with or you may make or receive an offer to acquire or be acquired by another business.

Taking on a partner isn’t something you’ll take lightly. If you’ve built the business on your own and had total control, the idea of giving up that autonomy will probably make you nervous. You’ve always been your boss, doing whatever you want, whenever you want, and now someone else will be there. Even though they’ll be your peer, the idea of having someone else looking at the bank account (and some questionable purchases), the way you work, and what you’ve actually been doing all this time is a bit like opening up your underwear drawer or journal.

Only partner with someone that you would go on vacation with and share a house or hotel room. First, because that’ll likely happen due to the cut in pay you’re both about to take so that you can save money when you travel. You’re going to be talking to this person at 3am about your sick kid and a fight you had with your spouse. They’re going to know about your debt, your health, and your habits. You’re sharing bank accounts and tax bills. You’ll have to agree to hire and fire people and which clients you’ll take. They will make decisions that affect you and your family.

Just like a personal relationship, you’ll want to partner with someone who complements you and isn’t your clone. You’ll need shared interests and a similar outlook on important issues, but you want to be different enough that you can be yourselves. It may be someone with your same skills, such as two web designers, or it may be a designer and developer. It may be that you’re the creative, and she’s the business brain. It may be someone who’s coming from a corporate or agency job and bringing a client base or set of connections to the small business world. Whoever it is, make sure that you have enough differences to not get sick of each other but are similar enough to be able to understand one another.

Mergers

If someone wants to acquire your business and fold your team in with them, you’ve got a lot of choices to make. You’re likely giving up the freedom you set out to build when you started. You’ll be moving offices, changing your schedule, and working with people you didn’t get to choose. It’s not all bad, and many people have been thrilled with this decision.

Tips on mergers:

• • Involve attorneys. No merger should be done without attorneys involved that represent each party. Do not use the same attorney. There are entire books and websites dedicated to this process, so if the time comes, check the website for resources.
• • Involve accountants. There are serious tax and operational implications of mergers. You have to have someone determine your individual tax basis, your cash contributions, and your percentage of ownership. Things are rarely as simple as half and half ownership of a business. Someone has to lead in some capacity financially.
• • Date before you wed. Work together on projects if you can before you jump into bed together. If you’re being acquired by a large agency, try to work with them on a project to determine if it’s where you want to work.

Take It Easy

Be willing to ease into your office; don’t feel the need to compete with agencies you see with these amazing lobbies and game rooms. While it’s fun to work in a place like that, the overhead can cause tremendous stress. My first office was featured on numerous websites for cool workspaces and clients were blown away when they came in. Did it get us one more client or close a deal that wouldn’t have otherwise? No. So was it worth it? No. The reason you should invest in impressive office space is for your people so that they have a working environment that they love. Place your focus on amenities and features that help your team more than trying to impress your clients.

Get Help

Hire a leasing agent or realtor that is property-agnostic. Don’t ever rely on the realtors assigned to you by properties you may be interested in; they are not in the business of protecting your interests. Whether you should buy or lease is a subject worthy of its own short book. It depends on what you can do with the space and where you believe your company is headed. Always give yourself plenty of space to grow; choose a space larger than you think you need and be willing to bring in another creative firm to split it with you if you can’t fill it up.

Share the Burden

Partnering with a complementary creative or agency, or someone in an entirely different line of work such as accounting or insurance, is an excellent way to get your space. Maybe you have a friend or family member with their own small business in need of space, but neither of you wants to take on your desired location on your own. Partnering with someone to share space can ease some of the burdens and make you appear larger to visiting clients.

Take a Hybrid Approach

Our company has always taken the hybrid approach: we keep a permanent space at managed office spaces such as co-working and incubators. There are downsides such as privacy and access to certain resources, but the benefits heavily outweigh them. The lower risk of not having a long-term lease, the support that comes from someone else managing the property, and the connections made with others in the building are well worth any shortcomings. Best of all, you’re sharing the things that typically make an office cool like video games and lounge areas without the expense.

You May Never Be Able to Charge What You’re Worth

You may reach a point in your creative career where your income isn’t commensurate with your skills. You may be such a good designer or writer that there is no way to find enough direct clients, and manage them, to pay you enough. The sales side of things just never worked out for you. So, you continue to get job offers, and they start to look attractive. If a job offer seems perfect, and it’s something you’d like to try, then it’s okay to walk away from your business and give it a shot. You can always go back to your creative business. Keeping it open requires a few tax and corporation filings each year, and you’ll probably do a side project here and there. It takes just as much courage to stop as it does to start.

How You Can Let It Go

If the time arrives where it’s clear you need to move on, what should you do? First, take care of your clients. If you still owe them work, then you need to either find a way to refund their money in payments or find a way to finish the work. If they’re depending on you for upcoming deliverables, it’s best that you help them find a replacement agency. If you have employees, giving them as much notice is possible is the right thing to do. That may only be a matter of days; just don’t end a relationship with a text message. Also, work with your accountant and attorney to make sure everything has been done correctly. You may have obligations to address such as a lease, bills, or equipment that no longer has a home. That will take the time to sort out. I sold my office off piece by piece out of my garage.

Exit with grace. Don’t burn any bridges, do the right thing, and keep the door cracked for future opportunities. You may not shut down your business, you may just downsize to yourself or just your leadership team. I’ve been offered full-time jobs with amazing brands numerous times and it has crossed my mind to take my business all the way back down to a side hustle. I can’t say that I won’t take that chance if the right one comes along. There is no right and wrong when it comes to a creative life, only what brings you closer to your goals.

How I Let It Go

My first creative business, at least the iteration I’d set out to create, didn’t survive. I had to let everyone go and sell almost everything but my laptop and chair. I like to call it my 98 percent downsizing to life support. I had to pay my remaining lease off over the next two years, take on the business credit card debt in my personal name, and pay backed payroll to my ex-employees out of my own earnings on future freelance projects. It wasn’t pretty.

I’m glad I didn’t completely shut down my business, and that may be where you can land. Maybe it’s a 98 percent downsizing for you as well instead of an all-out stop. Maybe it means taking a contract position or full-time job for the next year while you try to rebuild your business on the side. Maybe there’s an awesome opportunity to work full-time with a brand you admire, and you can’t pass up the chance. Whatever your circumstances may be, just remember that it’s okay to stop.

When You’re Sixty-four

Once Spiderman was bitten, he was Spiderman for life. He may hang up the mask and web shooters, but he’ll always be Spiderman. Once you’ve been bitten by the creative bug, the infection never goes away. You may move beyond your creative business and go live on a farm, but you’ll always be a creative. There is no single trajectory for growth. In fact, no two creatives have the same trajectory. We’re not lawyers or stockbrokers; there are no standard paths our parents took before us.

Growth simply means to increase and spread; the metric isn’t always company size or wealth. If you’re enjoying what you do and can continue making a living, then you’re growing. You’re flat and stagnant when you stop learning and stop taking chances. There is no gold watch at the end of most creative careers; you simply stop making money for your creative work. I don’t think that means you stop creating. Honestly, I don’t know how I’ll ever stop. Maybe the same holds true for you.