TexasDesign.com

Today we are talking to Cameron Foote from Creative Business. If you are not familiar with Creative Business, this is the business resource created for firm principles and free lancers. The newsletter has been published since 1989 and it is chalked full of great advice. And today, we have Cameron Foote who is the principal and editor of Creative Business. How you doing today, Cameron?

Cameron Foote: I’m just fine, Dan. Thank you.

TDc: You’ve been publishing the newsletter since 1989. Over that time, what has changed the most for running a successful Creative Business?

Cameron Foote: I think if I would to kind of summarize things, I would say that the business is tougher today than it has been at anytime since either I started in the business which was back in the sort of 60’s, long time ago or since I started Creative Business in1989. And the reason for that is that as time has gone on, there’s been more competition; there are more graduates from design schools today. And well, there is more business out there; it hasn’t keep up with the number of new people in the business. Also there are certain concerns today, business concerns that have gotten worse over a period of time.

For example, the amount of capital one needs in order to run a business successfully, the type of business skills that one needs to run the business successfully. And then, things like constant upgrades of software, new computers and so forth. So today, it’s a much tougher business than it used to be back again, or looking back 30 years or what ever. It was possible to set up a business with essentially some marks-a-lot pens and you know, a drawing board.

Today, you need computers, you need technical skills, you need bank accounts, you need to face competition, and you have to justify what you do to clients in a way you never had to before. So I think, it’s a much tougher business today than it has been in the past and I don’t see any lessening of that I think it’s gonna increase the toughness of you will, will get tougher as we go along.

TDc: Do you feel like, the creatives are wearing too many hats because they have to know the technology, they have to know the business side of things as well as being talented and motivated?

Cameron Foote: No, I don’t think so. Actually, I think that’s a good thing. I mean, certainly, in those two sides of this, no one likes more competition and certainly, I don’t like it more than anyone else does, but I think there’s another very positive side to that. It’s a process which necessitates that we be sharper.

Again decades ago if you were talented, you have artistic talents you could sort of make it on your own. Today, you got to know a little about why things work. Why things work in a certain situations? What the clients should be expecting from you and then meet those needs. So I think it’s a tougher environment certainly, but I think it’s a better environment. It forces us to not be be the sort of flaky artist, if you will. It forces us to be sort of responsive to clients needs and I think that’s good. I think its good for society and I think its good for us in a discipline type way.

TDc: Most creative firms are started by individuals that they decide they want to go out in their own. What is the one thing that they need to have in place to be a successful business?

Cameron Foote: I would say, it’s attitude and by that, I mean they have to think of what they’re doing as a business first and foremost is a great, I think, tendency for creative people who… Let’s say, are working for someone else in the agency or maybe for a design shop to go out on their own because essentially they want to make a living doing what they do. They want to make a living off their talent. That’s wonderful!

But they don’t often think about the ramifications of the business world; what they have to do in order to be successful. So, if there’s one thing that I would say, that, you know creative kid starting in business has to do, they have to think of what they are doing as business, not just as a way of making money off their talent. It’s a business and they have to be responsive to the competitiveness of the market or clients need and so forth. It’s not, in other words all about them, its about their clients and what they have to do in order to be successful with these talents. A talent is no longer enough.

TDc: In this month’s newsletter, you have advised on should employees know job cost, if employees, you know, before they left and then as they’re out. Obviously if you’re running your own firm, knowing your cost, how do you feel employees knowing the cost of certain projects and how the economics work in all that?

Cameron Foote: Well, I think it’s a little bit of a judgment call in the part of principles and I can talk about both sides of it. Personally, I think that employees should be told pretty much what is going on. I think that it makes a better employee and I think that therefore, they are more productive. Now, there are principles. Let’s say, well, if I tell an employee too much then what I’m doing is basically educating them and then they gonna go out and work for somebody else or work for themselves.

You I know I don’t really subscribe to that. I can see in some cases where there might be some confidential material that you wouldn’t want to share with an employee but I think, by and large, I think Its good for employee’s to know what goes on to be involved in the business part of the activities. In other words, not just to be doers; they’re also be thinkers, to be strategizers; to be involved in the business aspect of the created product that they are involved with.

TDc: Why do some Creative Businesses succeed while others fail?

Cameron Foote: Well again , I go back to whether or not they think of it as a business, or they think of it as a sort of their talent or their obligation that they’re getting paid for. In other words, within our business alike, if you look above why most Creative Businesses fail over a period of several decades of seeing a great deal of these and I can tell you that most creative businesses fail because they have too few clients.

And the reason I have too few clients is they don’t do enough marketing. So, they’re really not thinking of it as a business. Basically, they’re thinking of it as a talent, and making money off their talent. If you gonna be successful, essentially, you have to have to have clients, you have to have a steady stream of clients. Clients come and go and quite often what happens, when someone gets into the business, they typically start off with one or two clients, with maybe friends, maybe acquaintances, maybe clients that they brought with them from where they’ve worked from before. Because they have these clients and because they are very busy, they do not put any time or any thought or in terms of the long term which is marketing, which is building a steady stream of clients.

So, sooner or later these clients that they’ve had for one reason or another leave and then, all of a sudden they find out that basically no there’s no work coming down the pipeline, so then they scramble around and try to get some new business and often it’s too late. So, essentially they really haven’t a look to the future; they haven’t business like, they haven’t done any marketing and essentially, they put too many eggs in one basket and you know that its almost a sure feel safe way to fail if you will.

TDc: Right. What would you think would be, I know this is a very broad, wide open but what percentage of any, should a client take up of any body’s overall billings?

Cameron Foote: Yeah I do have very strong feelings about that and a lot by the way, depends upon how lucrative any particular client is and that sort of things. So there are some, you know, some little nuances here but I would say basically, no one client, and by the way, when I talk about one client, I’m talking about all divisions, let’s say, of a particular company and not just necessarily Division A or Division B

TDc: Or Person 1 or Person 2 as an account.

Cameron Foote: I’m talking about, if you know IBM as a client for example, if you have 15 divisions of IBM, that’s not 15 clients, just 1 client. So, again I don’t think more that 25% of any firm’s business should come from more that one client and I don’t think more 50% should come from 2 clients. And a few can kind of keep to that ratio. I think, you’ll be pretty safe because you have advantage.

If a client leaves, and by the way they always leave, whoever thinks that you know that the world is set and that clients will never leave is fooling themselves, because they all do sooner or later. And if you have that sort of in the back of your mind that you shouldn’t have more than 25% of your income tied up with any one client, you’re pretty safe.

Now again, I know firms that have been very successful, they have 75% of their work tied up with one client but yeah, that client is so profitable. They put so much money in the bank that if the client left, they’ve got sort of recovery time so if a client is profitable enough and you’ve got money in the bank to allow you to recover so your business wont go down to the tomb, then that’s okay but most people don’t do that. Most people don’t have those kind of resources, and essentially, they’re relying on the income from that particular client. They haven’t saved or you know put any sort of cushion if you will aside. So therefore if a client leaves, there are lacks.

TDc: Standing still with nothing to do.

Cameron Foote: That’s right. Yeah, and again we’ve all run into these. In this life, I’m no different in other people. I’ve had clients that, you know I’ve had for four, five, six or seven years and all of sudden…. You know, I can give you one personal anecdote here. Clients that I had for literally, I think for 7 years. They love me I love them and I get bought out by an international conglomerate and new people decided they’re going to have their own staff come in and do things.

And suddenly, I was out of work. So you know, this like happened within two weeks with no notice so that can happen to anybody and I would certainly encourage your listeners to be very careful having too many eggs in one basket.

TDc: I agree. So along that line, just kind of a formula for 25% and not to more than 50% . What other formulas, can you, would you advise on, for instance how does somebody figure if they’re self employed, single, you know free lancer. What, how would you recommend that they set their billing, their hourly billing rate ?

Cameron Foote: Well at the you know, a lot of depends here on talent and competitiveness. You can’t over charged for the market nonetheless you could be someone who’s very talented and be underpriced. You can also be someone who is not so talented but overly priced. You have to look a little bit of what your talent level is.

But, I would say for someone getting started in the business, the first thing they should look at is what other people, successful people charge for work of their comparable level. That doesn’t necessarily mean someone who’s sort of a wannabe or you know, who’s freelancing at night or whatever . I’m talking about serious people who have been in the business for a while.

Usually you can, by asking around you could get a pretty good feel for that, not always , but you can get a pretty good feel for then if some of your talent and experiences is charging $100 in a quarter of an hour, you should be charging more or less around that rate so that’s one way to do it .

The other way, and really, the more, the better one, which is a little bit more difficult is to figure out what’s your cause of doing business are and for a single individual, I would say, what, how much money do you need to live on and you could take then, you can divide that into the number of hours over the year. And what you’re gonna then come up with is a dollar figure. And the dollar figure is if you work every hour during working hour during that year, you’d have to charge so much an hour in order to get to the point that you are in today.

But then you have to look out and say, well, okay whatever that figure is,, I’m not going to work every hour, you know of every work day . Essentially, if I’m lucky I will probably work around 50% of the time maybe 60% of the time. So then you have to take that figure and you probably double it. So, if you lay out all of your expenses that you know you’re gonna incur an what kind of salary you need to make and you divide that into the number of hours an then you further, you know multiply that by two, let’s say. Then you’ll gonna come out with essentially, what is an hourly rate.

Now this is the rate that you have to use when you go out and estimate the job. It’s the rate that will tell you whether you are making money on work or you are not making money on work. It’s not necessarily the rate you charge, although usually it’s related. What I mean by that, is you may come into a particular client and you look around.

And obviously work with other people of, you know, very sophisticated suppliers.

You know that they work with the agencies or whatever and they asked you to do a certain job, you go back and you estimate it. Then, let’s say it’s 10 hours of a $100 an hour, for you know it’s just an example so this is a thousand dollars. But then you look around and say wow, these people can share can pay a lot more than a thousand of dollars.

So then you can look that, you know that you’ve got to charge a thousand of dollars in order to make any money on these but on the other hand maybe these people can afford $1500 and there’ll be no sweat off their back to pay us. So then you come in and say “ Well, okay, my fee for these will be $1500 knowing that you’re gonna make a $500 profit on it.

On the other hand you don’t want to go into a situation like that and have the client say, “Well, you know our budget for this particular project is $900.” And you’ve done this calculation and you say, “Well, you know, I’m gonna lose money anything under a thousand and that should be certainly a red flag and unless there’s some promotional benefit for doing work with these client, you should turn down the work.

TDc: So that you meant ….

Cameron Foote: You have this hourly rate, I mean again, people often criticize hourly wage. And I say, we should go by the hour, we should go by the value, we should go by what client can afford. And my answer to that is that you should have an hourly rate, you should have an hourly rate so you should know what you should be charging and then you could charge more or less than that as the circumstances dictate, but at least you know what you should, what you have to charge for that job.

TDc: Right, where you are standing in that. What other image of the red flag like if they say, “You know its gonna cost you a thousand of dollars, they have a $900″. But you know, are there other any red flags, other than just a financial aspect that you would look for when you go in and future project or creative like that?

Cameron Foote: You know, a lot of these, I suppose is experience but once again you can usually get a pretty good feel for one when you go to a client. You know how sophisticated they are, you can see what kinds of work they’ve done with either other agencies or other suppliers, you can look around. I mean is it a you know, everything, just look like everything was purchased at Wal-Mart or does it look like you know, they’ve got a little you know, capital behind on that sort of thing.

So there are certain clues that you can use and the other thing is when you sit down and talk to someone, the client contact if you will, are they reasonably sophisticated people? Do they know good from bad? Are they business like people? Do they know what things cost, for example? Do they really think that you as a professional are gonna charged a fraction of what a, what a lawyer or what ever we charged? Do they look at you in that level? Or do they do look at you as a professional that should be more or less that league?

And what kind of questions do they ask? Are they focused on price? You know, do they gonna beat you up in prize? I mean, I can tell you that any client who is very concerned about price going into a project is probably gonna be trouble some later. Not only on price, but they’re gonna beat you up in all kinds of changes and trend and won a lot for nothing . In other words, they are people who are trying to squeeze blood from the stone so to speak.

TDc: Right, and the situation rarely gets better.

Cameron Foote: That’s right. Exactly. Yeah, so you can, you know. Most of this is experience. I mean there’s a lot of trial and error here and you learn through, basically taking a lot of fretfulls, but sooner or later you’ve got the feelings that when you walk into the clients, that these people or this person that I have to deal with is gonna be a good client.

They’ve got money and they’re gonna be respectful of my talent or they’re none of the above, in which case, the hardest thing to do in a situation like these is to walk away because there is a little voice from the back of our heads that always says, well maybe I can overcome this. Maybe, they will be different or whatever and they never are .

TDc: Yeah, and the voice can get louder and louder.
Cameron Foote: You cannot change someone personality overnight and firms don’t change their way of doing business for you. It just does not happen.

TDc: Right, let’s say you ignore all those red flags and signals and things like that and you’ve done a couple of projects with them and now you’re just fed up . What’s the best way to fire a client?

Cameron Foote: I guess the answer to that is always, always very tactfully. You never know who your client your is going to talk to so you never want a bad mouth from a client. And no matter how bad the experience is, you know you need a little crow if necessary. Say basically “whatever this difficulty that we have is my fault it’s not your fault. It’s my fault. I don’t, I guess frankly, I don’t get. I know that you’re the client and been trying to tell me what you want. I can’s seem to get straight what ever.

What I’m suggesting is let’s part company. Let me, you know, cut my bills by some portions, you’re not, you know paying for things you didn’t get. Let me, maybe give up some files or whatever so you can work with someone else more conveniently. I’ll try to find someone else to work with you”, whatever. Make sure that you talk about it not in a way, a judgmental way like somehow its them. Eat some crow and you walk out of there in many cases, with someone who will respect you even though you no longer work with them.

They won’t bad mouth you and that’s any money that’s due you, chances are, they’ll pay you as opposed to the other situation which is sort of you know answer your dark side which is to tell the SOB’s the way things really are. And you kind of educate them on how bad a client they’ve been. If you do that they are just going to dig in their heels, and once again if they owe you any money it’s going to be a fight. So be as tactful and diplomatic, and if necessary eat crow but walk out of there.And you know, just kiss them goodbye and let it go. Don’t even think anymore about it.

TDc: And find the next client and go from there.

Cameron Foote: That’s right .Exactly. You know the point is that I think, there are lot of people getting into the business, maybe naively think that you know they’re all good clients out there and I’m gonna work with only people that I want to work with and it will never happen.

There are all types of clients, there’s good ones and there’s bad ones. Then, you gonna occasionally get hitched with the bad ones. You’re gonna get stacked and you have to when that happens and you have to say “This isn’t personal its business, you know I’m gonna write this off and go on to the next thing and not let it bother me”.
TDc: Although, I think with a lot of creatives, I know my self that shaking it off and saying “this is a business decision and I’ve made this decision and now I’m breaking ties” There’s always that lingering effect.

Cameron Foote: Oh, I know, in fact, it is one of the hardest things to do because you know in your heart of hearts that everything you’re saying to this person is biased frankly. I mean they’re at fault; its not you. But yet, on the other hand, if you are going to be successful in the business, you don’t, you want them to pay their bills on time.

And you want them to not bad mouth you to whoever their friends are.

So you want to walk away from there, with as much dignity as possible. And you basically, the way to do that is to give them what they want and then walk away and not let it bother you anymore. It’s tough, I grant you but it’s really the only way to do it.

TDc: Right. Those kind of switch gears a little bit. We talked, you mentioned earlier a little bit about technology and how we have to know the latest you know, version of Photoshop and those etc, etc. How have business tools changed overtime you know, having the computer come in and basically you can’t run a business with out that, but as far as the business tools that come along with that, how have they changed? How we do billing? How we could do with tracking? How we manage things?
Cameron Foote: Well, you know obviously when we say change and everything is different today. You can’t run a firm without computers. You cannot do bookkeeping without, you know, a good software and so forth. So, certainly it’s a sea of change. Everything is change now. Having said that, let me say that, in terms of the implication there, I don’t see any fundamental difference in the end result.

In other words, things are done much faster, but you know, the phase of life is much faster, so we need all the stuff because we have to keep with the phase of life. But in the terms of , do they allow us necessarily to do bookkeeping faster? Do they allow us necessarily to design better? Do they allow us to do all the sudden stuff? I would say no. I frankly, maybe I’m a little bit stacked in the past on these but essentially that’s my view point. Things have changed certainly, but I don’t think necessarily it made anything any better. It’s just made things different, that’s all.
TDc: Okay, I know for myself, I see it’s made easier to track time just its right there because its right there. It’s all in one place .

Cameron Foote: Oh it is. But let me just play the devil’s advocate. That’s absolutely true, but on the other hand, the people, many people never tracked time before. Now you can track time down to the tenth of them, second or minute or what ever. But you know there’s also in the past and certainly me and I know other people who’ve worked for me kept time sheets and they just basically wrote it down on a piece of paper.

Now, I recognize that some employees didn’t do that. You had to keep after them, and so forth. But the degree of precision in all which is available today with computers isn’t always necessary.

TDc: Right

Cameron Foote: In fact, many people, I think people use it as a crutch. You know, it’s not absolutely necessary. You can do without that, in fact once again I would say that there’s a certain discipline on not relying those crutches. So, you know different viewpoints on these but maybe again it looks you are talking to someone who’s had experience in the old way. And I found out that that worked perfectly adequately so the new stuff makes things faster and easier and so forth, but don’t necessarily change the foundation of what I need to do.

TDc: The business principles are all still there.

Cameron Foote: That’s right, exactly. Its just different ways of doing it.

TDc: All right, well, Cameron and I really appreciate you joining us for this podcast today. And everybody should go to creativebusiness.com and take a look at the newsletters, as well as the books that they offer and the advice that comes along with the subscriber being with the newsletter. And I want to thank you for your time today, Cameron.

Cameron Foote: Well, thank you TDc. And just one thing I would add to that and also on the website there are number of free forms, business forms which are available there for downloading. It’s totally free, and there are also articles with that address on number of different routine business subjects that others might want you know download as they need or necessitate

TDc: Right, so the website is a great resource.

Cameron Foote: So well, let me thank you for interviewing me and you know I’m looking forward to more productive years in the business. and if I I could help anyone else be a little bit more productive, that’ll make it all much better for me.

TDc: And everybody else too. All right great. Thank you very much.