04 Dec Assessing Your Creative Firm
How does your firm compare to others in the industry? This is a difficult question for owners to answer.
At RevThink, our experience advising a wide variety of creative firms led to this discovery: the characteristics that determine whether a business thrives or fails follow a pattern. This patter describes seven overall areas of business that we call the 7 Ingredients of a Creative Firm™.
Weakness in just a single Ingredient will eventually threaten a firm’s survival. But conversely, mastering all 7 Ingredients forms a recipe for long-term success for the business, its team and its owners.
MEASURING YOUR FIRM
A firm’s strength can be measured by determining which five best practices it has successfully implemented in each of the seven Ingredients. In the example below, this PUNCH SEASON production company scores a 26 out of a possible 35. The business is strong in Creative and Sales, but weak in Marketing and Operations:
FOR SMALL OR YOUNG FIRMS, LOW SCORES ARE NORMAL
When a young firm is in the PAINFUL SEASON (team size of 1-4 with annual revenue less than $1 MM) the business might score just 1 in each Ingredient, resulting in total score of 7. This is normal but does reveal where the business will need to mature to enable it to thrive over the long term.
In contrast, an established firm in the POWER SEASON (team size of 30-50 with annual revenue of $10+ MM) will likely score 4 or 5 in each Ingredient, resulting in a total score of 30-35.
ASSESSING YOUR FIRM
To assess your firm in the 7 Ingredients™, simply answer YES or NOT YET for each of the best practices below which you have implemented in your business. Add up all your YES answers to arrive at a total score between 0–35.
If your firm scores low, don’t be discouraged. Rather, take heart knowing there is a roadmap.
For a formal assessment, feel free to schedule a call with us.
LEADERSHIP, VISION, ASSET GROWTH & EXIT STRATEGY
1. Embraces the Entrepreneurial Formula: NEEDS + RESOURCES = SOLUTIONS
2. Leverages outside experts to grow and learn
3. Has a strong vision for the future
4. Adapts business model so resources evolve to meet changing needs in the marketplace
5. Exploits opportunities to convert value creation into long-term assets
THE CAPABILITY OF OUR TEAM & THE WORK WE PRODUCE
1. Produces outstanding work for which the firm is well-known and sought-after
2. Balances “creative must win” work with “bread-and-butter client” work
3. Wins national awards
4. Attracts top talent
5. Creative roles are separated from Sales roles
POSITIONING, PUBLICITY, OUTREACH, LAYING THE FOUNDATION FOR SALES
1. Performs cold outreach at scale attracting a steady stream of qualified leads
2. Carves out unique positioning in the marketplace
3. Creates awareness by consistently generating publicity
4. Avoids commoditization and commands premium prices
5. Is known as a category creator
SALES PIPELINE, WINNING NEW BUSINESS & STIMULATING REPEAT BUSINESS
1. Qualifies opportunities using The Three R’s
2. Maintains a Sales pipeline with 30+ deals at all times, based on the Creative Firm Sales Cycle
3. Sales not concentrated (gorilla clients) nor too diffused
4. Publishes weekly Sales Report (scorecard)
5. Retains clients and nurtures account-based relationships
GUIDING CLIENTS, MANAGING RESOURCES, ACTUALIZING & MAINTAINING ‘THE SPLITS’
1. Maintains healthy mix of talented permanent team and freelance resources
2. Has expert producer(s) on staff
3. Has clearly defined Production procedures: budget vs. estimated remaining vs. actuals
4. Publishes weekly Production Report for decision-making between owners and production teams
5. Retains >50% of clients (repeat business) thanks to excellent producers
MEASURING, REPORTING & PROJECTING MONEY
1. Pays owners reasonable salaries plus regular distributions
2. Divides revenue via The Splits between direct and indirect costs
3. Influences the future via Cash Flow report
4. Budgets for Calculated Losses
5. Allocates profits for distributions, investments, savings and taxes
ONGOING LEGAL, FACILITIES, TAXES, RECRUITING & TALENT RETENTION
1. Runs a stable facility with up-to-date hardware and software
2. Continually attracts fresh talent, retains top talent and sheds unfit talent
3. Avoids legal, financial, tax, personnel and partnership messes
4. Promotes a positive, infectious and defined company culture
5. Plans ahead for large and long-term purchases