Transition

by seanlow on July 18, 2018

Change sucks.  The only reason to ever change anything in your creative business (or your life for that matter) is if the (potential) benefit outweighs the pain you will have to go through to get there.

The part to remember is that there is never change without pain.  Necessarily you will be giving up something in the hopes of attaining something else.  For some people, ripping the band-aid off is the way to go.  Radical surgery that is a ninety degree turn from where you are today.  For your business, it might mean firing long-term employees, shutting down a particular area of the business that no longer serves you or your art, going all in on a particular way of doing things.

Other artists, however, cannot go all in and need incremental change to get where they are going.  They can deal with sustained pain, just not intense pain.  These creative business owners scale back a business line, limit an employee, raise their prices slightly.  The goal is to change but not risk everything in the process.

My deep preference is for radical change, where you give yourself no option but to stand in the light YOU choose and live with the consequences of others either not believing you, or worse, not caring.  You leap fully aware and conscious of the intense pain you are about to endure with the faith that the other side is available and valuable to get to where you need to be on your journey as an artist and creative business owner.

I do, however, have appreciation for those that need to move slower, to dip their toe so to speak.  Provided they have the same commitment to fundamental change as those who would leap, those who hop can get there too.  Like leaping though, if you undervalue the depth of pain you will feel or overvalue the change you are actually making, you are likely to get nowhere.  Incremental change is an oxymoron if it keeps you in the same place with new clothes.  If you want to be perceived as luxury or power luxury, and raise your prices twenty percent to get you there, you did nothing but drive the point that you are who you have always been, all the while validating those who wish to be you.

To make change, you have to be committed to the pain of change.  You have to endure what is in front of you with the understanding that many will be wishing you to be as you always were.  And yet.  If the promise of your art and your creative business is to be better tomorrow than you are today, you must embrace the work and challenges ahead to be more authentic, more focused, more willing to reject those who would see you as other.  You cannot be simultaneously the comfort of what was and relevant to today.  The comfort of what was can drive you to today, of course, but leave the same as it always was to the diners and delis of the world.

Whether radical change or more subtle shifts, awareness and intention matter.  With awareness and intention, you will close the door behind you and seal it shut.  This is the place of abject fear for us all.  True change, no matter the form, means giving up the idea that you can ever go back to what was.  It means losing all of the back doors embraced in the phrase, “we can do that too…” No, you can only do what YOU do, the too part is for some other artist as it is what THEY do.  Even if you wind up going back to the way you once did things, it will not be as you were but you are now.  The story of the Phoenixis resonant and should be a guiding light as you seek to evolve your art and your creative business.  If you have truly embraced change, the phoenix has burned and there is no longer any there there only what is here.  Change from here has vastly different implications than change from a there that no longer exists or is available to you, your art or your creative business.

Knowing what is right for you is different than having the courage to live there.  Then again, the courage should come from the idea that you really do not have a choice.  When you hide, you give others permission to take the light that is yours.  That is not sustainable. The light will be either permanently lost or you will reclaim it as yours.  Hiding serves no one, least of all, you.

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All luxury is not the same.  We as creative businesses need to better at saying what area of luxury we inhabit.  There are three categories that come to mind: luxury, power luxury and ultra luxury.  Each of these markets demand a different business model to reflect the needs of the clientele who inhabit each level.  As a whole, creative business has done a very poor job of defining and segmenting luxury markets to create models that serve those specific markets.  We are still a hodgepodge considering all luxury to be the same and it needs to change.

Critical to the conversation though is the fundamental idea that all creative businesses have a subjective component and an objective one. The subjective are those ephemeral items like design, concept and vision. Objective is the cost to implement the subjective in real time. Smush the two together and, I do not care who you are, subjective becomes worth zero. Today, more than ever, no one sees the value of design in its production. In fact, quite the opposite. And even more than that, if you do not charge specifically for the subjective, it is worth what you say it is – nothing. Free is free.

So if we are going to value the subjective, we have to make it plain that that is what is getting paid for. Regardless of the category of luxury, all luxury creative businesses have to get paid in some form for the subjective.  Easy enough, but not nearly good enough. On to the different categories we go.

Luxury.  We live in a fluid world and we have to recognize that variables have to be in relation to expectations and project size until they are not.   Overall cost of luxury in the wedding market should not be less than $700/pp all things being equal. Really it is closer to $1,000/pp, but I will let the floor be slightly lower. So 200 person wedding, base $140,000 cost.  For interior designers, let’s call it $75/sf on a typical 2,000 sf space (i.e., $150,000).  Less than that is not compelling as luxury – just not enough there there. What that means is that to support a creative business with projects lower than this sort would require a volume that takes away the attention that luxury clients demand.  You can do beautiful work there but the level of specialness and trust in the relationship between client and artist just cannot be there.  You have to work too much to make this promise of specific attention a reality.  All of you should work in your markets to define the floor but I am not going to be too far off.

The floor is the easy part. From the floor to a certain level where power luxury will begin, all the stars align for luxury – you get to make the money you need relative to project expense and work as much as you would like to make it. Expectation and relative cost of a project align. Let’s say your average wedding is $150,000, you make your 20% or so and you would like to work 15 times a year. $500,000 in fees with a 50-60% margin and all is good. You take home $250,000.  Interior designers make a higher percentage (closer to 30-35%) but probably cannnot support 15 projects so they do less projects but make more so they wind up at the same $250,000. 

The value for professionals in the luxury market is predicated on expected attention (i.e., how much you want to work) and relative value to the project (how much you cost relative to budget). This is the meat of the bell curve. What this looks like in each respective market should be absolutes and known. And all of you should set them.  Local markets are just permutations of national/international levels when it comes to luxury.

However, to make those standards effective in the luxury market, we have to define the next strata of luxury, power luxury, where the relationship between subjective and objective breaks, where expectations and scarcity become the primary drivers.

Power Luxury. For weddings, events from $2,500-5,000/pp I would consider power luxury. Interior designers the cost would be $140/sf – $275/sf.   Pretty outrageous but not ultra anything. Here we are starting to see the need for a new model focused on the relationship to expectation as opposed to relationship to cost. Relationship to expectation is: what should something like this cost from a creative business like yours? If the steak should be $75 in this category, pricing at $50 excludes you from the category. This has to be paired with scarcity – how much time are you willing to devote to each project so that the premium client gets the attention they deserve.

In the power luxury category, you can still bastardize the luxury model, but only to a point. 20% can become 15% (or, for interior designers, 35% can become 30%) and design fees can rise. Your fees can grow incrementally and still make some sense. Just know you are pushing it though. Power luxury looks a little like luxury and a little like ultra luxury. It is a valuable market and allows luxury players to stretch and ultra luxury players to dip down. Completely dangerous though as it is neither luxury or ultra luxury. The model has to be a specific hybrid and needs to be well defined by everyone. There has to be a design/subjective component that is far more substantial than any objective one. For instance, in the power luxury category, design itself needs to approach 10% of a budget. Think about it. Execution is relatively static in the luxury/power luxury world, it is not multiples harder to do a $1,000/pp wedding (or $100/sf design) as it is a $2,500/pp one (or $250/sf design), harder sure, but less than 2.5 times.  However, the pressure on design is enormous. These clients expect original and special and should receive it.  So you HAVE to charge a premium of design to fulfill your promise of couture.  Percentage on production just does not get that done alone.

Ultra Luxury.  My presumption is that we are at $6,000/pp and up for this category ($350/sf and up for interior design). Here it is all about expectations and scarcity. My position is that there should be absolutely no relationship to cost of production here. It just makes no sense. The conversation should be that it needs to cost $x to do this work with ALL costs of production shifted to a monthly fee. How many of these projects undertaken per year matters too. Let’s say we are talking about a $3mm wedding, I would start with the premise that there will only be 5 events like this per year and target revenue for your business for these projects is $x. For arguments sake, let’s say $x is $2.5mm. Design would be $300k per event with production running at a monthly rate necessary to produce the event and based on a 4 month production schedule. Call it $50,000 per month. Presuming this makes sense as a business and relative market expectations, there you have it. If the event takes over the ability to do 5 (say it is a $9mm event), everything adjusts accordingly. Think about it as if the $9mm client is buying 3 events: $900k design fee, with $150k/month production fee.  Interior design can look similar with a very large design fee and either a monthly fee for production or a commensurate percentage earned monthly and then extended if time extends (not a risk for events).  For the ultra luxury market, we are talking about being commissioned as a high artist and the price for that has to be almost entirely skewed to design (aka, the creative aspect of what you do).

Can you inhabit more than one level of luxury?  Sure.  I just do not think you can inhabit all three.  Way too confusing and you will just wind up cannibalizing yourself.  Better to focus on what you do and how you fit in the market(s) you wish to call your own.  Knowing whether you consider your creative business luxury, power luxury or ultra luxury gives you permission to act accordingly.  It also gives you permission to tell clients who are in the wrong market that they are comparing the wrong metrics.  Ultra luxury has no substitutes, luxury does.  If you are in the ultra luxury market and compare yourself to any other creative business, you are lost.  Likewise, in the luxury market, you are allowed to be at the top of that market but not act as ultra luxury. Lanes matter for everyone and set the stage for better art and better business.

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