Chapter 8
Profitability
Being Profitable in Graphic Design
Although many people get into graphic design for the joy of creating things, they remain in it because they become at least workably good at all the business aspects of design. They learn to handle projects with quality, ingenuity, and accuracy; develop interesting and fruitful collaborative relationships; and subsequently are compensated fairly for all of these activities. One thing that keeps designers in businesses that are thriving is to understand and monitor the profitability of their client relationships.
Profitability is the income generated from your work minus the expenses incurred to make that income. The difference in those two numbers is called profit, and the measurement ratio of profits is called profitability. In addition to the many creative and client requirements, the goal of every design project should be to manage it with profitability in mind.
There are a few ways to look at profitability that are useful for graphic designers:
• By project: How did you do on a particular assignment?
• By client: Over the course of your working relationship, are you profitable on this client’s projects?
• By employee: Does this person deliver great work in less time than estimated? On every client’s jobs? What types of projects are best?
• By task: Are you better at and more profitable with logo design or web animation? What activities and services give you the highest return on your time?
• By time: Is there a time of the year when we do business that is at higher earnings?
• Overall: Looking at an entire month (or quarter, or year), are we actually losing or making money?
What Impacts Profitability
Many things impact a designer’s profitability. Some can be easily controlled, and others are more difficult to alter. Here are a few factors to consider:
• Your clients: Certain categories of clients pay more. Some industries are not as lucrative as others. For example, a publishing company pays less than a Fortune 100 consumer product corporation. Also, do they make endless revisions? Do you let them?
• Your pricing structure: Are you competitive in the marketplace? Are you charging too little? Are your calculations off?
• Your estimating: Are you pricing accurately? Do you allow enough time? Do you include all fees and expenses you’re entitled to?
• Your project management: Are you consistently reviewing, monitoring, and managing team work flow according to your plan? What areas are strong? What are weak?
• Your work: Some forms of graphic design do pay more—for example, animation bills out more than newsletters. Do you make more money with particular delivery media than others?
• Your productivity: Do you work efficiently and make decisions quickly? Are you mindful of budgets?
Do It Better Next Time
Learn from current projects so that you can increase profitability in the future. In addition to the postmortem, look at the following financial reports, which you or your bookkeeper can generate from accounting software and, in some cases, from project management software:
• Actual sales (open jobs) versus forecasts or projected sales (list of proposals): This helps you understand if you are priced properly in the marketplace, among other things.
• Estimates versus actual costs: This lets you know how good your estimating, project management, and productivity are.
• Gross margin versus overhead: This shows if your investment in overhead (people and facilities) is paying off and helping you make money (or not).
Through these hard-core evaluations, designers can get set aside emotional attachments to clients and projects and look at what they do best in terms of financial gain. Money isn’t everything, but it does affect a designer’s creative output, working relationships, and general enjoyment of his or her work. Loving what you do is important, but you must balance that with making a viable income.
Eight Things That Help Increase Profitability
And Partners / New York, New York USA
Acting on his desire to create the core brand itself, David Schimmel founded And Partners in 1999 to provide brand strategy, corporate identity, advertising, websites, graphics for mobile devices, and marketing collateral for up-market consumer and professional-service companies. The firm has enjoyed steady growth and recognition while increasingly expanding into multimedia and environments. “We believe in design,” says Schimmel. “Not only in its capacity to make an entity attractive and accessible, but also for its ability to build business, create and differentiate brands, and command a premium.”
Neenah Paper Think Ink
And Partners brought an unconventional idea to Neenah Paper this spring: Sell paper by writing software. Schimmel and team co-conceived and designed an iPhone application to coordinate with Neenah’s longstanding paper information resource called Think Ink. The extension into the world of mobile applications was natural for Neenah, as it had already developed BlackBerry apps for its business partners. The entry into the world of iPhone apps evolved as a means to peruse color combinations to create unique palettes. This powerful interactive tool includes shade and hue variations and has a built-in sample paper ordering capability.
OPPOSITE
Think Ink is a free iPhone application that enables users to identify colors via the Dewey Color System, the world’s only scientifically validated color-based personality testing instrument. It empirically predicts the recognized major psychometric personality factors without language—its practical application is a reliable and quick reference tool for the correlated brand attributes of colors.
BELOW
Since inspiration can strike anywhere and at any time, designers now have the freedom to capture their inspiration in real time, via photography using the iPhone, and then select an instantaneous color palette with a full range of paper assortments for a design project or idea.
“More than anything, it’s always been about people. It’s not necessarily the best designers who have all of the opportunities. Sometimes, it’s about personality and temperament. People work with who they want to work with—not always who is best for a particular job. It’s wonderful because it fosters a level of loyalty from clients and makes it rewarding because when they appreciate what you do, they come back to you again and again.”
—David Schimmel, creative director, And Partners
And Partners / New York, New York USA
THIS PAGE AND OPPOSITE
“We wanted to give designers and printers the ability to pull inspiration from a variety of resources—be it a vibrant green on a blade of grass or a pale shade of butter yellow—to create perfect color palettes for their projects,” says Tom Wright, senior director of advertising and design for Neenah Paper. “This application is unlike anything on the market. Users can translate the source of their inspiration into an immediate color palette and select a paper that best enhances their design.”
Profit and Loss Statements, also known as P&Ls, are a standard financial document that shows a business’s economic health—or lack thereof. The document summarizes revenue and expenses for a specific period of time, such as a quarter of the year (three months) or the entire year. When looked at for the entire company finances, a P&L may also be referred to as an Income Statement or Earnings Statement. It’s a good idea for a design firm to have their bookkeeper create one of these documents so that the state of the firm’s finances can be assessed.
It’s also a very good idea to have the project manager pull a similar report on projects as they are completed. This allows a project post-mortem to include not just a review of the overall design, and a look back at the client–designer relationship, but also a clear financial analysis as well. These kinds of reviews help designers to understand what profitability is for them and how best to achieve it on a project-by-project basis.
Here’s a basic formula to follow to create a project P&L:
2. Look at Expenses:
Actual Expenses = ______________
Markup on Expenses = ______________ ( = Profit on Expenses)
Just reviewing these figures on a continual basis keeps managers on top of the financial picture. These P&Ls also begin to create an outline of client relationships, employee productivity, and estimating acumen, as well, by revealing discrepancies between what was anticipated and what actually occurred.
The Importance of Ongoing Design Management
Design management is challenging. Running a graphic design business is, for the most part, exceptionally challenging. Being successful at a service-oriented consulting profession such as graphic design is difficult to accomplish consistently year after year, all while maintaining creative excellence.
Just as designers constantly strive to improve their creative and technical skills, they also need to work on growing their communication and business skills. This is the ongoing practice of design management that has been the subject of this book. And it is the essence of building great client relationships. Finding and attracting those great client relationships is an ongoing game worth engaging in.
Profit from Good Relationships
Clients have difficulty sometimes understanding the difference between one designer and another. They review their portfolios, ask a few questions about their process, but rarely get at some of the key issues that will determine whether the designer–client relationship will be effective and enjoyable. Yes, many designers can make great work for their clients, but the central question a client should be asking is: Can this designer make great work for us?
By the same token, a designer should be looking long and hard at a prospective client and asking: Can we really work for this client? Will we be happy? Will they let us do great work? Will we be paid fairly? Are we going to make or lose money on this client? The answers will change day to day.
Profitability is just one indicator to a design firm that it is on the right track and is successful in its practice. There are many other indicators, but at the end of the day, designers can’t stay in business if they can’t run their practice in a profitable manner and do excellent creative. A designer can’t make great work in a chaotic, unprofitable context. It’s all about order, insight, and design management.
LUST / The Hague, Netherlands
Thomas Castro, Dimitri Nieuwenhuizen, and Jeroen Barendse are the principals of the Dutch design firm, LUST. Coincidence, process, context, and essence characterize the working methods of LUST. Information design and manipulation plays an important role in all of their projects, whether they are creating books, websites, interactive screens, exhibitions, environmental graphics, art performances, or guerilla marketing and advertising campaigns. The Walker Art Museum in Minneapolis writes, “The trio likens their activity to the moment when you realize that the last piece of a jigsaw puzzle is missing. To them, this sense of incompleteness and indeterminacy is ‘a thousand times more interesting than the moment when the puzzle is finished because when that happens, there is nothing more.’”
At Random: Iris
At Random is an ongoing series of unconventional lectures, screenings, debates, workshops, and performances, each with its own character. Artists, designers, scientists and other guest speakers are encouraged to address topics associated with the corresponding exhibition, This edition, created by LUST, was tied to the exhibition At Random? Netwerken en kruisbestuivingen (Networks and Cross-Pollinations), which is an investigation into the creative processes within our present-day networking society.
LUST / The Hague, Netherlands
LUST has developed a design methodology that has been described as process-based or generative-systems-based design. This entails developing an analytical process, which leads eventually to an end product that designs itself. Moreover, LUST is deeply interested in exploring new pathways for design at the cutting edge where new media and information technologies, architecture and urban systems, and graphic design overlap.
The piece that LUST calls Iris was a site-specific project for Museum de Paviloens in Almere, Holland. The concept of randomness is shown via a print-on-demand installation. The name Iris comes from the Dutch word for a printing technique referred to as split fountain printing, whereby two inks are mixed directly onto one roll on a printing machine during the printing process. This causes the inks to gradually flow together, creating a smooth gradient from one color to the other on the paper.
“We selected a spectrum of colors to represent the timeline of the six-month exhibit,” explains Castro. “The idea was to print, ahead of time, all the collateral needed for the show, including posters, invitations, and catalogs. This resulted in 80,000 A3-size papers stacked in eight columns in the space.” Included in the exhibition space was a Docutech printer capable of printing and saddle-stitched binding. This laser printer produced all the print work of the show. The idea was to feed the printer from the colored stacks.
LUST / The Hague, Netherlands
The printer was connected to a database of all the catalog text, including the images of the artists’ works and the descriptions. Also included were essays and the curator’s texts. The exhibition’s images were tagged by certain keywords, and each time the button on the printer was pressed it produced a sixty-four-page bound booklet that served as the exhibition catalog. Each time a booklet was printed, the database would decide which image to use with certain words also making each catalog unique.
LUST’s ad hoc solution mixes high and low technologies with high concept to maximum effect, as seen in this Title wall for the exhibition.
A timeline was created by the color of the invitation or catalog. As the show went on, the paper dwindled.
BELOW
Descriptions of the works were posted to a wall that tracked the data that was printed. This represented the exhibition’s network. Each week, new text and new image information updates were made to the network database, which then randomly added this new material to the print material for the show.
BELOW RIGHT
For the exhibition posters, LUST used circles to represent the time printed in hours, minutes, and seconds the show was on exhibit. Because of the low resolution of the Docutech printer, the moiré patterns created added another random factor to the piece.
“Today, questions from clients to designers are not always clear. In the design, form and content are no longer strictly separated areas, and there is a continuous interaction between client, designer, and user.”
—Thomas Castro, designer, LUST
