M4D Spring Release 2014

WHAT’S NEW

MANAGEMENT FOR DESIGN Spring 2014

Top financial mistakes faced by design firms Most designers will agree that financial acumen is not their strong suit.

However, when it comes to business success, financial know-how can make or break your business strategy.

Is your design business making financial mistakes?

The top 5 financial mistakes made by design businesses are listed below: 1. Failure to plan is your biggest foe. Budgeting and forecasting regularly will help to even out cash flow and by being aware of upcoming project costs, businesses can better prepare for months when money will be tight.

By planning ahead, measures can be put in place to ease the financial strain of project-based workflows, allowing businesses a clear picture of individual project finances as well as the big picture business forecast.

2. Stay on top of cash flow and accounts receivables. With multiple projects running simultaneously and with different payment milestones, it can

be difficult for architecture and engineering businesses to maintain a balanced cash flow throughout the year. A successful business will always be aware of current cash flow and accounts receivables to enable regular distributions and dividend payments. Invoicing systems and clear payment terms can both help to ensure prompt payment from clients. Our clients operate with 14 to 30 day payment terms 3. Lack of reliable systems. A financial management system can be a significant asset in understanding the strengths and weaknesses of your business. Strong reliable and up-to-date systems can help you to clearly see your incomings and expenses so that you can react to issues before they arise. Your business will also benefit from the ability to quickly filter financial data by revenue stream so that you can quickly see which areas of the business are and aren’t making money. Financial and business management systems can significantly ease the administrative burden through automation and efficiency.

4. Reducing costs rather than increasing revenues: the ebb and flow of a project-based workflow can mean fluctuations between financial gain and financial strain. It’s easy to rush to cut costs in times of difficulty, but be careful not to cut off valuable revenue streams and / or people at the same time. If money is being spent to stimulate growth then the revenue generated from spending could be far more valuable. Have a good look at your business development strategies and only cut once you have analysed what is and isn’t working for your business.

5. Big picture thinking. Profit for the sake of it is all good and well, but sometimes a small profit gain can get in the way of long-term business success. Always think about the big picture and long-term goals of your business — with that financial forecasting you’ve done in mind — before saying yes to projects that will bring in money in the short-term, but that may ultimately but obstructive to future progress.

How embracing change can boost your business Global financial markets are in constant fluctuation, businesses are increasingly operating on a global rather than local scale, and the world around us is a world of pixels, with everything going digital. Your ability to cope with and thrive in a changing marketplace can be the factor that sets your business apart.

The IBM Institute for Business Value recently published the results of their Making Change Work study. The study surveyed 1,400 business professionals in 48 countries to get a closer look at the way change is met within business and the impact that attitude to change has on company performance.

Results of the survey reinforces our view that businesses that are excelling and positioning themselves as market leaders, are also the businesses that are most adept at managing and embracing change. Three main tenants of successful change management are: 1. Leaders setting the tone of the business. In design businesses change is driven from the top! Architects and engineers are so focussed on project activity that unless your people are given unqualified support and direction to embrace innovation and challenge the status quo it just won’t happen. The IBM survey showed that achieving this was 50% more successful in organisations that use collaborative tools and who interact with staff via a number of communication channels.

2. Make change matter: change for the sake of it isn’t going to do your business any favours. Make sure that new initiatives have purpose and that they fit in with your strategic plan. If everyone in the company can see that change will lead to the delivery of your business objectives then change will have purpose and direction.

3. Build the muscle: in-house design teams don’t always have the skills required to implement business change effectively. This can mean the end of an initiative before it even begins. If you don’t have the time or resources to develop the skills internally, bring in expert help to strategically manage your project and to keep change on track and within the context of your overarching business objectives.

If you need assistance implementing your strategic plan, Management for Design can help. Contact us to discuss your needs.

Defining your business strategy When it comes to business forecasting, a clearly planned and documented strategy is key to success. Having ideas about where you want your business to go without putting it down in writing often leaves design businesses missing the mark and going down tangential roads that lead away from the original strategic objectives.

Below are our tips on keeping strategic goals within your sights: 1. Strategic objectives should stretch the limits of your business capabilities, making them exciting to achieve, without being impossible to accomplish.

Unrealistic objectives can conversely have a negative impact on morale as well as being an inefficient use of your valuable resources.

2. Set longer term 3–5 year objectives and action these in into realistic milestones of 3 months and 12 months.

3. Your strategic plan should be visible to your key people so that they understand and embrace where you are heading and work with you to deliver clear outcomes. Businesses with clearly defined goals and transparent internal communication are more likely to succeed as your key people are encouraged to think strategically, share ideas, and put in the effort required to make business goals a reality.

4. Know thyself: a strategic plan should closely mirror the ethos of your company. In design, most businesses have aspirations far loftier than just making money. While profit is obviously necessary for company survival, it is

not financial gain that defines who you are or what you do. Think about your mission statement and you value proposition. Why do you do what you do?

And apply this to your strategic plan to ensure that your business objectives stay true to the company. This will ensure the plan remains genuine, achievable and something all members of your team can believe in.

5. What does the future hold? A short-term strategic plan may define your cash flow and financial objectives for the coming year, but what about the years beyond that? How do you want your business to grow, and what environmental, financial and industry factors might need to be considered in line with your long-term plans?

Keeping on top of your business strategy can be daunting. If your strategic plan needs an overhaul, get in touch for some advice.  

The future of the industry — architecture and engineering Management for Design continues to receive great feedback on the Business Insight networking event held at Melbourne’s popular Eureka 89, in July.

For those who were unable to attend, business leaders Ian Hopkins, CEO at Norman Disney & Young, Leone Lorrimer, CEO at dwp|suters, and Tony Battersby, Director at SJB Architects, discussed some of the key challenges facing the architecture and engineering industry.

The panellists discussed what their distinct practices are doing now to ensure their businesses thrive into the future. The key points raised included strategic alliances to broaden skillsets without stretching resources, fostering and nurturing creative talent and the need for an international mindset. Leone

Lorrimer talked about the alliance between dwp and suters as an opportunity to diversify into new and exciting areas through leveraging skills on both sides of the partnership. Tony Battersby said that outsourcing business services to Management for Design has enabled SJB Architects to focus on the design talent they have in-house. With the specialists at M4D taking care of business, SJB can get on with what they do best — design. Ian Hopkins noted that geographical spread is important to maintain stability through local peaks and troughs, and that in today’s global market, an international outlook both in business location as well as in mindset in essential.

When discussing what the future holds, Tony Battersby said the key to future success at SJB Architects will be to further hone the specialist skills they have in-house in order to provide a unique design offering to their clients. Leone Lorrimer said that a long-term strategic plan — and dwp|suters has just used Foresight to imagine alternate futures to develop a strategic plan to 2040 — is what allows her business to look ahead. By planning for the future dwp|suters are able to respond to change quickly, having already scoped out the solutions available to them. Ian Hopkins said there is scope for Norman Disney & Young to grow by up to 30%, but to get there the focus will be on nurturing quality staff. The company employs one graduate for every 20 staff each year and is committed to training the next generation of business leaders.

Business leaders in the audience had the opportunity to ask questions throughout the discussion, leading to a conversation about pricing and the strategies dwp|suters, SJB Architects and Norman Disney & Young employ when it comes to today’s competitive fee market. Ian Hopkins commented that everyone thought the bottom had fallen out of the market over a decade ago, but it’s kept falling since — generating a requirement to continually increase efficiency. Both Leone Lorrimer and Tony Battersby said that their firms aim not to compete on price. For SJB Architects, customers know that they provide a premium service and are willing to pay for the privilege. Tony Battersby noted, however, that sometimes that meant losing a client, so you’ve got to be in a position to take that risk. Projects that are innovative or unusual — Tony Battersby used the example of an SJB project in Asia set to house half a million people, “how often do you get the chance to design a city?”, he said — that will provide inspiration and creative growth for staff, are instances where price might be negotiated more than usual.

Attendees praised the event as “an incredibly valuable experience” with the opportunity to meet other business leaders, make new contacts and to reestablish connections with former colleagues and business contacts.

The event is part of the Management for Design Business Insights event series. Keep an eye out for the next event to be held in December 2014, the conversation is sure to be inspiring. We look forward to seeing you there.