an online conversation
about design management

Financial (mis)management

In early 2014 the Creative Industries Innovation Centre released a forensic analysis of the Australian graphic design industry. Unfortunately the current federal government axed the funding for this centre, cutting off the great work they were doing. They closed down in April 2015.

In the report they outlined seven areas that graphic design businesses were failing (shown in the forensic analysis). Poor financial records and management system was one of those failings.

From my work with design studios I note that they don’t go bust because they can’t deliver good design – it’s usually because they don’t manage their finances sufficiently to remain viable.

To operate a successful design practice I think there are a number of things you need to do.

Think like an accountant

This involves working out the real cost of running your studio and then translating that into an hourly cost rate. The next step is to add a margin for profit. Then you add a premium based on the value that the work will bring to the client.

Examine cost structures and revenue

A sustainable business needs ongoing revenue streams and controlled cost structures. This begins by analysing all of the costs in the business and ensuring that they are all needed.

Then it is a matter of determining your current revenue streams and looking at other potential streams.

Identify problems

The four problem areas for any design studio are:

  • Cash flow
  • Debtors
  • Profitability
  • Capital financing

These need to be understood and then examined for your studio. You need to understand how to predict and manage cash flow, how to control debtors and maintain profitability and if needed arrange financing for the studio.

Want to know more?

We have just published an Ebook to help design studios better understand the financial management of their studio. Read more about the Ebook.

Greg Branson

Greg’s passion is the research and development of methods that improve design management and the role of design in business.

Greg has developed a series of business tools to help designers manage their business better along with a series of workshops that show designers how to use these tools.