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Why Design Firms Fail

Why design firms fail is rarely spectacular. Much like the batteries in a flashlight running down, things get dimmer, less clear then it just runs out. Business failure doesn’t often end in bankruptcy but in a return to the workforce, savings lost, family disappointed and ego savaged.

Over 50% of start-ups end within 5 years. 

The statistics are harsh, but the reasons more so, according to Small Business Trends Magazine:

• Incompetence – 46 %;
• Unbalanced experience or lack of managerial experience – 30%.

Democratization and Commoditization of Design

Design has become democratized, by that I mean the general public has access to more and more DIY design options than ever before.  Canva, Pablo, Snappa and Piktochart eat into graphic designers market and web developers are even harder hit; Wix, SquareSpace, SiteBuilder and free or really cheap WordPress templates.

Fivrr and 99 Designs, DesignCrowd and many others have reduced design to a bidding war where understanding and more importantly analysing a client’s needs are unnecessary steps in taking their money. Give them what they want NOT what they need.

As the market becomes more competitive there is pressure on price and firms, young and old, are having to adjust downwards if they want to compete. But should they? Are there alternatives to cutting prices?

YES – Become Competitive

Competitive Advantage*, why businesses succeed and others fail, can be broken down into two very simplistic elements:

What you do

• Best Ideas
• Philosophy
• Lead not follow
• Attitude
• Ethics

How you do it

• Best Practice
• Be the best you can be
• Get better every day

Most design firms fail because they do neither particularly well. What you do can be called positioning, who you serve, what you offer and how you approach it. Boasting of being a “full service” firm may just as well say “We’ll be gone in 3 years”. Focus and niche specialization is the key to success. Who you serve: realtors, retail, real estate developers, brewers, non profits, government or start-ups and what you do for them: SEO, SEM, branding, web design, marketing collateral or signage have to be excellent, relevant and add value.

How you do it is the systems side of your business. How you run your business from finding clients to financial reporting.  It’s the unglamorous side to any business. Documenting processes so you aren’t continually reinventing the wheel. Having reliable useful financial and metric data to make decisions on, are vital but often overlooked until it’s too late.

The secret of your success is determined by your daily agenda.”

John C. Maxwell

Incompetence (46% failure rate) is not having a plan for how you do it and not implementing it. It is being too lazy or scared to focus on a niche, to develop expertise for fear of missing ‘opportunities’.

Lack of or unbalanced management experience (30% failure rate) can be compensated for by simple education.  Take a course or three.  Sign up online or at your local adult education college to learn basic business skills. Find a mentor or hire a business coach who can advise you. At the very least read a business book every month or subscribe to business related podcasts or blogs.

You have it in your control to significantly increase the chance of having a successful business. Now is the time to take stock of where you are and then TAKE ACTION to secure your future.

*A must read for MBA students is Competitive Advantage by Michael Porter, the Harvard Business School professor. Frankly I’d only read it if you suffer from insomnia:)