For any creative industry, success will depend on both outputs from creators as well as intimate financial knowledge of their business. To be profitable, not only do they have to produce quality work, but they also need to know how to maximize their billable hours and fees to keep their business afloat.
In this article, we will cover some of the main strategies that we have seen successful creatives use to find that sweet spot between efficiency and profitability, and the tools you can use to do the same.
Finding the Balance
For creatives, the balance between work and billing is always tricky. Finances can’t be the only aspect guiding how you manage your projects, but creative output can’t lead everything either. If you are ever going to find the balance needed to build a creative agency with true, long-term success and financial stability, these two aspects of business need to work in tandem.
Quality Over Quantity
A common pitfall in creative agencies is taking on too many projects at once. When you are in the moment, having lots of work seems like a blessing. Your revenue increases and you get to expand your portfolio - what’s not to love?
The problem is that taking on too much work can very quickly lead to creative burnout, which, in turn, will have consequences on the quality of your work. If you are juggling more projects than you can feasibly handle, you are likely to rush things and make more errors. With creative agencies, you’re only as good as your portfolio, and if you start making duds, it brings down the value of your entire business.
Also, being overloaded can lead to paying overtime to staff or hiring contractors to pick up the slack. Both will eat into your profit.
On the opposite end of the spectrum, no one wants to be so greedy about their time that they take on too little work. You still need to make money and pay your bills. The trick, as with everything, is finding the sweet spot.
So, how do creative agencies find this balance? If you want to find the sweet spot, you need to know all the ins and outs of your business first.
With the right tools, like what we offer at Dryrun, you are able to analyze past projects and determine the average billable hours earned. From there, it’s far easier to see how long you need to spend on a project to still maintain the quality.
The key is to make sure that efficiency and profitability are both considered. Make sure that you are taking on enough work to keep your revenue healthy, without overextending yourself to the point that your quality drops and you end up losing clients in the future.
These can be tough calls to make, but it’s so much easier if you have a strong understanding of your business. Do you know the kind of revenue you need to cover expenses, and the hours required to produce work that will continue to impress clients? The balance lies in considering all these factors as you shape how you do business.
If The Price is Right
Another thing to consider as you attempt to find the balance between business finances and creative work is making sure that your pricing strategy is doing what it should be. It is so important not to undervalue your services. Without charging enough, it won’t matter how much work you produce… you probably won’t be bringing in the revenue that you need to be profitable.
The same goes with managing your workload - you can overdo it and overwork yourself, and then charge too much that nobody will purchase your product or services.
Your pricing has to reflect two things: the quality of your work and the expenses that need to be covered. We recently spoke to Guy Bauer, a Dryrun customer and the CEO of Chicago-based video production company, Umault, who discovered that for every $200 in a job, $198 was just going to expenses. Something is definitely wrong with this scenario.
Facing this problem was largely helped by Dryrun’s financial modeling software, which allowed him to see the full picture of his business’s finances - where the pitfalls were, and how to charge more realistically for his services.
Guy’s business is rapidly expanding and, although he started as a team of one, he has over 30 permanent staff members now. That kind of growth relies, at least in part, on pricing your work effectively. He has found the balance of affordability and profitability, and is now managing to bring in great clients, while still earning enough revenue to expand his business.
Effective Financial and Project Management
Using a cash management and financial modeling software, especially if you’re a business in the creative industry, can help you see all the major patterns of your company. You can track billable hours, expenses, and revenue all from one place. This means that if you’re undercharging clients, overextending your workload, or ignoring a central factor of your business, you can see it all from one place. And once you can see it, you can act on it.
Finding the sweet spot between billable efficiency and maximum fees requires you to know every inch of your business. Dryrun allows you to do just that, with minimal effort and major benefits. That way you can focus on the creative work of producing great videos, without being hindered by financial woes.
Keep it Sweet
Can creative agencies find success and maximize revenue without compromising the quality of work? That’s what keeps a business sweet. And Dryrun can help to keep it sweet.
Fight 'Feast or Famine’
Model the future of your cash flow, sales and scenarios in a single source of truth, to smooth out your revenue and achieve a steady stream of income.
Spot the peaks and valleys ahead of time so that you can adjust your capacity, backfill sales, and pick and choose the best projects, generating more money with the same team.