It was 1985 and the studio, now in its third year, was growing leaps and bounds with revenue doubling every year. But, something was wrong.
Margins were disappearing, while we were working harder than ever, despite hiring twice as many designers that year.
In an effort to discover the secrets to success as we grew, creative director, Christopher Mietlowski, and I attended a seminar offered by David Goodman, well-known designer and consultant. This one-day (October 2, 1985) workshop (How To Increase Your Profits) focused on growing a design business and changed, forever, the way R.BIRD manages projects, budgets, time and revenue.
The answer to our increasing business and reduced profit conundrum became plain as day: We had become “too good” at what we were doing. More clients and more projects were simply translating to more “busy-ness.” We worked harder and accomplished the same tasks in less and less time to meet more-and-more, shorter-and-shorter deadlines. Because we could.
We missed the point that, as we became better and faster at our profession, the value should increase. And, since we were billing our accounts based on hourly rates and not value-based fees, the effect on profits was dramatically negative.
You can define “better” in any dimension you like: speed, knowledge, experience, consistency, reputation, et cetera. No matter what, the better you become at whatever you do, exponential value applies.
This principal holds true without exception, to this day. Recently, it was suggested by a client contact that we should reduce our fees because, “you know the brand, you understand the business, and you’ve created successful solutions for the same brand and business many times over.”
Simple answer was this: “If you were suddenly diagnosed with brain cancer, of course, you would seek the specialist with the most knowledge, experience and success rate, yes? What would you expect to pay? More or less?”
I like to call this phenomenon the, “Superman effect.”
If Superman (not Clark Kent, mind you) were a designer on staff and we continued to manage fees based on “time required,” we would have been out of business exactly 25 years ago.
P.S. Twenty-five years later: Thanks, again, David Goodman, wherever you are.