Statistics collected by the Australian Bureau of Statistics show that about 15% of small services businesses (1-19 employees) fail each year.
A 2013 survey by accounting software provider CCH and global information services group Wolters Kluwer gave an interesting insight into these business failures. Of those surveyed, 61% of SME operators said small businesses failed because of an inability to manage costs, 50% said inexperienced management, 50% said poorly designed business models or no business plan, 49% said insufficient capital, 37% said poor or insufficient marketing, and 35% said insufficient time managing the books.
This relates to the research undertaken by the Creative Industries Innovation Centre which stated that graphic design business were finding increasing pressure from:
This is also supported by the research we did while preparing The business of design a publication that shows how to manage and grow an Australian design studio.
Given all of this we thought it would be good to look at what risks you need to manage in operating a design studio.
Conflicts of interest can be overlooked when studios are desperate for work. Is it ok to approach your client’s competitors and not breach confidentiality?
Getting the right person for the right job, what to look for, what questions to ask.
How do they fit with your accountant? Where does their advice begin and end in relation to advice from your accountant?
What insurance policies should your studio have? Professional indemnity, product liability, public liability, work interruption – which are essential and what should you look for?How often should you review insurance?
The devil is in the detail in the seemingly routine purchase order. What has to be included? How do you use them to protect yourself?
Where does the buck stop? What is ‘fair’? How do you build it into estimates?
Employer regulations with PAYG wage earners and subcontractors. What is the legal situation?
What are the risks and do they outweigh the benefits? Rapidly changing/evolving technology is making it more useful and less expensive. How do you evaluate the offers being made?
What are the risks emailing / sharing files? What are the legal issues with email agreements?
What should you include? What can’t be put in an employment contract.
Ensuring your staff and contractors understand their responsibilities. Can they be enforced?
Licensing staff and freelancers to use your work in their folio. Can you stop them? Should you even bother trying.
What should be included – how do you enforce them?
Risks and responsibilities – who is responsible for what?