Costly design business mistakes

With changing market conditions, maintaining a successful design firm can be challenging. The industry has become more competitive, cost pressures are coming left, right and centre and there are any number of practices that have become more innovative in the way they deliver their services. In difficult times many firms adopt bad habits which in the long run limit their ability to increase their profit margins.

The most common business management mistakes design firms make are:

1. Not embracing change Constant change and improvement is necessary for growth and enables firms to be more competitive.

2. Inappropriate senior appointments This is a big one and can have far reaching and long lasting consequences. If you are nodding and in this situation then ask for help — don’t sit on it!!

3. Inadequate spending on marketing In a difficult climate marketing is often one of the first expenses to be cut. This can have a significant effect on a firm’s ability to recover when opportunities return. The fastest growing firms spend more on marketing during tougher economic conditions.

4. Inadequate accountability This needs to start at the top and flow down through the organization. Responsibilities should be clearly articulated and you need to set people up to succeed (if you want them to!).

5. Poor recruitment decisions This doesn’t only mean recruiting the wrong person but includes recruiting at the wrong time and with the wrong employment conditions.

6. Not investing in the business and its systems This goes out the window when cost pressures arise. Well guess what — you won’t have a successful business if you don’t!

7. Lack of financial management expertise Having an expert in financial management available to assist with business decisions is essential — this is not a book-keeper or office manager!

8. Poor cash flow management Managing cash flow is essential in order to be prepared to deal with any potential highs and lows. Effective invoicing and collection will allow you to impact cash flow and you need to have accurate forecasts so that any potential shortages can be dealt with in advance.

9. Not sharing financial data Many businesses are hesitant about sharing financial data with project managers, however if project managers don’t receive the necessary information they are unable to make informed decisions and this can impact profit margins.

10. Not training project managers Most project managers never receive complete training for all the different facets of their roles. Good training is essential.

11. Antiquated systems Many firms are still using outdated software and are therefore missing out on the competitive advantage newer technology provides. New technology should be viewed as a strategic advantage.

12. Not planning for succession Companies should prepare for ownership transition at least 5 years in advance. Think about it from the moment you set-up your business. It’s not an afterthought.