Protect Your Bank Balance While Repositioning
You’ve decided to reposition your studio towards a more refined direction. You’re not stoked to get just any client anymore like in the early days – they need to be the right clients within the right balance of creative challenge & skillset. You’ve created a new focus and service approach and feel that the new positioning strategy is tight. You’re lying in bed with visions of a studio full of great projects from better clients. What’s next?
One of our favorite clients – an up and coming design studio – signed onto the Measure Business Design process in the midst of the festive December season with their bank balance in the shit. The founders were in the process of implementing a pivot toward a new service direction and market focus. Their current client base was funding the new pivot direction when business dropped off a cliff. The bank balance was falling suddenly and forecasted to drop even more into their credit line the next few months. Why? They started saying a “sorry, no” to all potential clients that didn’t fit within the new positioning focus. It was an all or nothing approach.
January brought a different situation altogether. With a clear view on this crap bank balance forecast, they got on the business development hustle hard to drum up clients. It worked…all too well: 400% revenue growth month over month. Yikes. The founders faced a whole new challenge overnight: too much work. Some would call this a good problem; however, in the long-term that is rarely the case. Wild swings cause wild chaos.
The reason a pivot towards higher value clients was necessary in the first place was because the studio took on a wide spectrum of lower value clients in the early days. This is a great way to get a business up and running; however, these projects breed through referrals – price sensitive/low budget clients that can’t sustain a growing studio. They struggled to make money and generate a positive bank balance as they attempted to grow. Sound familiar? This is the case with almost every design business that we’ve known. In order to stay sane and build a solid business it was necessary to choose a focus, refine the service model, develop expertise and gain a higher value client mix.
When they drummed up that 400% growth in January – it was with the wrong clients: a wide variety of smaller budget clients they were attempting to move away from. Now they had little time to fulfill these committed projects let alone work on anything else. The new positioning strategy ground to a halt and they found themselves locked in a self-defeating cycle.
We needed to break this cycle. Keep moving forward toward better projects from higher value clients. But how?
Create a Target Client Mix
Creating a target client mix over the next 12 – 24 months is a great way to set manageable pivot goals. Here’s how: Tools – Client Mix Table
Break your current clients into 4-5 distinct categories.
- Type of Work: (i.e. Packaging or Digital or Industrial or Lifestyle)
- A defining description (i.e. high value, fully integrated or crap for culture)
- Revenue $ per client
- Number of clients per category
- Total annual revenue as a $ and %
– Which clients should you continue to service to “fund” your pivot into the future
– Which clients add the least revenue/client to your studio (aim to drop this crew)
– Which clients suck time/energy/culture from your studio (aim to drop this crew)
– Rebuild a new client mix table for the next 12 months
– Have 4-5 new categories with the same labels:
1. Focus – clients in our new pivot direction:
2. Yes #1 – current clients you’ll continue to bring on
3. Yes #2 – current clients you’ll continue to bring on
4. Maybe – current clients you’ll asses on a 1 by 1 basis
5. No – current clients you’ll most definitely say no to
Transition: Replace Revenue
Don’t throw your current business under the bus. We’ve never met any business that can survive this. It’s just not possible. We believe that every business is always 6-18 months away from the result of any decision made today. This being the case, you’re going to need a base of current clients to get you to the promise land. Especially since your first win is the hardest. You’ve got a lot of work to do: Declare your positioning, create expert content, revise your service approach, market yourself, engage sales efforts toward your focus and receive a deposit from that difficult-to-land first client.
Protect your bank balance. Remove your “No” clients one at a time until they are all off the list. Once you start landing focus clients, start moving your “Maybes” off the list. Then next year, review the target client mix again and repeat. A few years of this and you’ll be the recognized expert in your category with a healthy bank balance along the way. Patience is key.
Allocate Internal Time for Repositioning:
You simply cannot move a positioning strategy forward if you don’t allocate internal, non-billable time to getting it done. It proves to be immensely difficult for a creative design business to work on its own positioning strategy. Our Recommendations:
Treat this as a client project. Open a project in your software, create a brief, assign resources and deadlines, and keep the project rolling even when it’s busy.
Engage your team. Get everyone on board and playing a role in the project. It’s a great way to move it forward and get buy-in.
Allocate specific time in your week for this project. An effective approach we’ve seen a client use was allocating Friday morning each week for team members to work on the project. The schedule was always cleared and expectations set: work on this internal project at this specific time. This way progress is made each week.
Repositioning is a challenge – one that all design studios will face. Protect the bank balance and take anxiety out of the process by having a transition plan. You’ll need a solid base of current clients to fund your way to the best version of your business.