09 Nov [Diagram] Seasons of the Creative Firm™
Common Growth Patterns
RevThink has been developing a theory based on our years of experience – both running and consulting creative businesses – we call Seasons of the Creative Firm™. This theory describes how studios typically evolve: they are launched, they find their identity, they garner success, they peak and eventually they come to an end. Unlike the seasons of a human life which are measured in years, the Seasons of the Creative Firm™ correspond to annual revenue and team size.
The goal of the theory is to provide you as an owner with knowledge – which itself does not lead to change, but does give you options – to move towards a future consistent with your long-term goals. It may also offer insights to help you avoid repeating the mistakes of other firms that have preceded you.
How the Seasons and Ingredients Interact
It’s worth nothing how our Seven Ingredients of the Creative Firm™ concept has been integrated into Seasons of the Creative Firm, adding another layer of valuable information. As firms grow and evolve, they tend to master specific Ingredients along the way. For example, growing from the Push to the Punch Season is generally when a firm masters the Ingredient of Production.
What to Expect in the Seasons
The Painful Season
- Annual Sales below $1MM, Permanent Team Size: 1-5
- Pros: One or more creative entrepreneurs launch a creative firm and establish a brand name.
- Cons: Fear drives the owner(s) to accept all projects, wear all hats, and enter into inappropriate partnerships.
In this Season, the owner has mastered the sole Ingredient of Creative (a.k.a. The Work) and is motivated by freedom, both creatively and professionally. But the firm is run more like a series of projects than a business. The owner’s habits bring quick success but become the very habits which hold the studio back from reaching the next Season. Most owners burn out.
The Push Season
- Annual Sales: $1MM+, Permanent Team Size: 5-10
- Pros: Firm establishes a reputation and gets its first taste of its potential.
- Cons: Too few staff covering too many responsibilities can lead to owner exhaustion.
The jump up to this Season is the most difficult of them all as the owner(s) must master the Ingredients of Entrepreneurship, Marketing and Sales, all at once. With growth comes the first taste of strong reputation… and strong revenue. Here the owner begins the lifelong process of letting go and focusing on his/her genius.
- Annual Sales: $2MM+, Permanent Team Size: 10-15
- Pros: Firm starts getting “over the hump” and forms a dedicated sales function.
- Cons: Owners often pay top talent more than they pay themselves.
In this Season the magic formula of expert Creative paired with expert Sales (e.g. Creative Director + Executive Producer) enables the studio to “punch” beyond the Push Season and produce its most brilliant work to date. But this Season also requires the studio master the critical Ingredient of Production. The result is a firm finally capable of tackling sizable – yet consistently profitable – projects.
The Perform Season
- Annual Sales: $4MM+, Permanent Team Size: 15-30
- Pros: Firm becomes well-known in the industry and produces its best work.
- Cons: Owners focus on running the business and miss the days of doing creative work.
The firm hits its stride in the Perform Season as it masters the Ingredient of Finance. Thanks to consistent, healthy revenue the firm’s staff expands well beyond creative and production roles and now includes full-time Finance, Production, Operations and support staff. The owner becomes increasingly focused on his/her genius which empowers the studio to produce influential work which impacts not just its clients, but the industry at large.
The Power Season
- Annual Sales: $10MM+, Permanent Team Size: 30-50
- Pros: Large client concentration brings more projects and profits. Owner(s) consider selling the business.
- Cons: Morale suffers as the rise of departments and managers poisons the creative culture.
Only a few of the most ambitious, tenacious, patient and lucky firms arrive at the Power Season where complete mastery in the Ingredient of Operations is a must. In this Season, the owner rarely plays a creative role but rather is focused on running the business and personally mentoring the studio’s leadership team.
With this level of success comes a new level of risk: studios that reach this Season in a “best year ever” scenario are more likely to fail in the following year.
By doing some simple math, you will notice an interesting metric: each permanent staff in your firm should generate an average of $200K-250K in annual revenue. If your average revenue per staff is $150K or less, you are not charging enough, upselling and/or capturing every client opportunity. If your average revenue per staff is $300K+ and your margins are not healthy, your production costs (a.k.a. The Splits”) and/or expenses are way out of control.
Let the Seasons Be Your Guide
Do you want your firm to grow to the next Season? Probably. But here you may realize for the first time that moving forward from your present Season into the next season involves very real tradeoffs. A far better approach is to identify which Season possesses the tradeoffs that align with your values. Work deliberately to reach it, then tenaciously stay there.'Seasons of a Creative Firm™' – moving from your present season into the next involves tradeoffs. Click To Tweet
What does RevThink recommend? Align ownership and your core team around entering either the Punch or Perform Season, then design a long-term plan to remain there.
Only grow into the Power Season if you have taken a company into that Season before and with plenty of expert guidance. Ominously, most firms fail in the year following their celebrated “best year ever.”
Insight #1: the Punch Season is more fun but less financially rewarding. In this season, it’s all about Creative (The Work). If you are a true creative at heart, this is where you will thrive.
Insight #2: the Perform Season is more financially rewarding but less about Creative (The Work). This season will require you transition your role from creative to business. If you are an entrepreneur at heart, this is where you belong.
In which Season is your creative firm presently? More importantly, which Season do you aspire to reach?