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Transcending Your Medium

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I have been reading (and watching) Gary Vaynerchuk recently.  For those that don’t know who Gary is, he is the founder of Wine Library TV.com and author of Crush It.  Gary is intense and passionate about the opportunity Social Media presents to all of us to define ourselves and spread that message almost instantly.  He talks a lot about defining a niche, no matter how small, being transparent and owning it.  Incredibly valuable advice.

What I take from Gary, though, is the opportunity Social Media provides for all creative businesses to transcend their medium.  For example, a photographer or lighting designer marketing to an interior designer elements integral to the design (as opposed to accents).  A baker expanding into all confections and vice-versa based on the core audience of each.  A DJ creating a membership to program music into a customer’s home on a monthly basis.  Why can’t the DJ help create the environment a homeowner wants in his/her home any more than a landscaper?  Especially if the homeowner is an avid fan of the music the DJ specializes in?

To my mind, Social Media distills the marketplace to myriad niches, each of which owns an incredibly pure and passionate fan base.  Add to the mix, the ability to use technology to outsource all but the core art of your creative business and you can literally go anywhere with your art.  The result: perceptions of what you and your art are do not have to exist any longer.   And if the perceptions can disappear so can the limitations imposed on your creative business by the market for the current iteration of your art.  A florist can be a stylist.  A caterer can be an invitationer.  A DJ can be a lighting designer.  The key is to find the audience that will care enough about your core art to take the leap with you as you apply it to another medium.  Social Media makes it not only possible to find this audience, but probable.

Opportunity abounds when boundaries disappear.  Try finishing this statement, “If everyone thought Creative Artist, Inc. stood for X, then we would be able to do Y”.  You owe it to yourself and your business to make it happen.

The 5 Ws Revisited

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I have heard too many stories recently that just make me sad.  Some creative business owners are overwhelmed, underpaid and now broke even though business is booming.  Others have unsupportive, dysfunctional staff and feel like they have to do everything themselves.  More than are a few are watching their businesses shrink with no thought on where to turn.

Yet, when I dig deeper, the underlying theme is a lack of structure to the business.  There is no plan to get from Point A to B, let alone from Point A to the finish line of a project. And without that plan, the creative business has no chance.

Do you have to write a full blown business plan? Would be nice, but no.  Create an intricate operating manual? Eventually, but so not a good place to start.  Hire a consultant to create the plan for you?  Definitely not.  Developing your business’ road map is entirely your job.  My suggestion: just tell your story using the 5Ws (Who, What, When, Where, Why) to define each step you want your creative business to take (and to move to the next step) until a project is finished.

A potential customer calls or emails: Who answers? When do they answer?  What do they say?  Where does it happen (i.e., in the office or on a cell phone)?  And why are they answering (as opposed to someone else)? Then when the customer comes in: Who sees them?  What gets said?  When does it happen?  Where does it happen (your office or theirs)? Why are you meeting with them (i.e., what are you selling them in person that can’t be sold by email or over the phone)?  If the customer goes with you, 5Ws for the next step and so on until the project is finished.  This is the story of your business and you are the narrator.  Tell it to everyone.

Once you have completed the exercise, you will know your process – i.e., getting from Point A to the finish line – and you will have a foundation from which you can build your organization.  You can communicate it to customers to establish boundaries.  For those of you with control issues (guilty as charged), you can use the process to glean information about where you are with each potential and existing project at a glance.  And you can assign appropriate tasks to each of your employees to keep the process moving.

The essence of creativity is to tell a story – to take the audience some place else.  I am sure it is the goal of your creative business in the creation of its art.  No reason why the story can’t be woven into the fabric of the business itself.  Knowing and communicating the story to clients, employees and mostly to yourself won’t solve all of your problems, but it will take you a long way there.

Forget About The Competition

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The fantastic Rebecca Grinnals tweeted a few quotes from last year’s Trendwatching.com: “Just copying competitors is a race to the bottom” and “If you’re obsessed with what your direct competition is doing, you will always end up copying new concepts in your industry.”

If you are interested in copying or stealing from your competition, you should not be a creative business owner.  Whether a creative business takes an image of another’s work without credit or uses the exact same model as her competition, the practice is counter to everything a creative business should be about.

You do not sell wire hangers for a living.  You create art.  By definition, creative business is idiosyncratic and perpetually changing.  If your focus is on your competition, your art will be tainted and so will your business.  There is just no “one size fits all”.  Running on the wrong platform, no matter how fantastic the art, is ultimately limiting and self-defeating.  If you are a planner who is really a designer, a graphic designer who is really a stationer, an interior designer who is really a stylist, or a photographer who is really a journalist, you literally lie to yourself and your clients every day by acting like the other.  Not only will you not be able to sustain the lie, you will miss all of the opportunities that would have come your way if you had the courage to be true to yourself and your art.

That being said, it is really hard to ignore the competition when your way would be counter to what is accepted by both the industry and clients alike.  Being idiosyncratic makes you incomparable at the moment clients and vendors want to compare.  And the risk is, if they can’t compare you to your competition, you will lose out to those creative businesses that fit in the box.  To which I say your job as a creative business owner is to think about the health of your business in the long term.  If your art and business model is not an honest depiction of your vision, you will lose integrity very quickly and start competing on all the wrong metrics – price and volume.  Your investment in finding the right client that most desires your art and then supporting that client with a business model that provides both you and the client the most value is really your only long-term choice.

The point is no matter how gifted an artist Han van Meegeren, one of the greatest art forgers of all time, was, he wasn’t Vermeer.  All he did was inspire more forgeries – of his own work, no less.  Go figure, the forgeries ultimately devalued HIS art.  Not a legacy you want to leave.

Thoughts on Pricing

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Nancy Liu Chin wrote a fascinating post on Weddingbee Pro this week about how hard it is to make money in the wedding business.  She goes through a terrific explanation of how she prices her work and how narrow her profit margins are.  I have met Nancy several times and am a huge fan.  The woman knows her stuff and all brides, existing vendors and those thinking about getting into the business should pay very close attention to her.  I do have a few observations though.

The first is that if you are pricing at margin, scale is what matters.  Using Nancy’s example, she generates approximately $180,000 per year in revenue and maintains a 25% margin, meaning she makes approximately $45,000 per year, with overhead of $45,000 per year.  But overhead is static so, given consistent pricing of say 2x cost of goods sold, she will break even at $90,000 in sales and each dollar generated after that will put her creative business in the black.  If Nancy generates $250,000 in revenue, her profit will be one half of $160,000 or $80,000, bringing her profit margin to a little more than 30%.  The profit percentage can’t grow to the moon because, at a certain point, Nancy will have to add overhead to compensate for the bigger business, but my guess is that Nancy can go a long way before she has to do that.

What does scale mean to smaller or new creative businesses?  You can’t compete by pricing on margin.  If Nancy is happy with a 25% return, she can get cheaper as she gets bigger and still make money where you will lose.

Next, pricing on margin inherently creates distrust between a vendor and client.  Very simply – the vendor is incented to use the most expensive or inexpensive materials  as opposed to the best materials for the design.  As Nancy said, clients don’t understand why they have to pay more than $5 for a single flower worn on a lapel as a boutonnière.  Well, if that flower is a carnation that costs $0.50 or a rose that costs $3.00, which one would should Nancy choose?  And, if clients know the cost of the hard good and will not accept a mark up of say more than 3 times cost, then using 10 carnations for a centerpiece would give Nancy a $10.00 profit, while using 10 roses would give her a $30.00 profit.  Either way, if the rose is right for the boutonnière and the carnations are right for the centerpiece, Nancy will have to compromise her creative business for the sake of her art.

My last observation inferred from what Nancy describes is that clients today know the cost of materials.  As practice, I wanted to know how long it would take me to find out the wholesale price of 100 Leonidas Roses (@$110.00).  About 30 seconds Googling “Wholesale Price of Leonidas Roses” from rosesource.com.  Of course, this would not have been possible 20 years ago, but it is the world we live in today.  Pricing on margin when your clients know your costs completely devalues your art.

It all leads back to my fundamental presumption:  the value of any creative business is in the creation of the art, not its production.  This is not to say that production is not valuable or should not be valued, just that clients will not pay for it as Nancy so eloquently lays out.  My answer: be transparent and sell your art.  That is why your clients are hiring you and what they will pay for.  Whether that means a design fee, more outsourcing, a longer life cycle for your clients, I do not know.  But I do know that pricing from the bottom up (i.e., on margin) is a game only available to the biggest players in the market whose focus is on volume more than the creation of original art.  If design is paramount to your creative business, pricing on margin has no place.

The End Is The Beginning

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Much is made of entrepreneurs who have failed (miserably) at one venture only to rise again in another.  Most times though, the focus is on the rebirth and not on the dying.  Rebirth is the “happily ever after” part that we all want to hear about and believe in to keep going in what we are currently doing.  However, having made a huge mess of things the first time around, I can say that I would do things so much differently if I had to do it again (which I pray I never will).  Whether you are confronted with shutting your creative business down or having to re-invent your business given today’s new world order, the lessons are the same.

The first is to own your shame.  You made mistakes and your personality only intensified them.  Whether you are too controlling, too trusting, too lax or too anything, that trait made you what you are and what you are not.  In your creative business, it is knowing what you are not as much as what you are that will be your first step in moving forward.  Once you own your shame, let it go.  Focusing on the mistakes you made and the predicament you are in will only bring tunnel vision.  You can’t make any decision if you can’t see past your nose.  You have to have perspective to see opportunities.

The next is to believe in the possibility of radical change.  If you can see the future, you can manifest it.  But before you do, it is a good idea to jettison everything and everyone who is not willing to go where you want to go.  Stop the bleeding everywhere.  Your business can not be about generating revenue to repay vendors and keep people employed all the while you get in deeper and deeper.  Better to have a smaller profitable business, then a big loser.  My guess is that vendors and creditors would rather have a chance to get their money back over a longer period than to get nothing.  If you are the person fielding all of these dunning calls, address the situation head on with each creditor and then assign the task to someone else to make a plan you can stick with.  Your job has to be about creating a better future for your art and your creative business, fully aware of today’s reality, but not mired in it.

The next is to write a business reinvention plan.  A reinvention plan surveys the assets you, your art and your creative business possess – physically, energetically and even spiritually.  The plan then blue skies what these assets can create – a new product, service, methodology, etc.  Nothing is out of bounds. Then the plan ranks each idea on the list in order of practicality – how hard would each one be to get going (i.e., time, money and energy).  Only after you have thought of practicality should you think about profit.  You can’t make a billion dollars if you can’t get out of the starting gate.  Once you have an idea of absolute profits, assign risks to the profits of each item.  Retailing hard goods may only generate a ten percent return, but hard goods don’t rot or call in sick.  At this point, I am guessing that one or two opportunities will be jumping out at you.  These are the ones that deserve your attention and resources — today. 

If it means shutting your current creative business to bring your new ideas to fruition, then so be it.  Suffice it to say there are many people today expert in shutting down businesses well.  Find one and make it happen.  Sounds cut and dry, but know you will have had to have done an incredible amount of work to get there.  And if you can make use of  what your creative business currently has to take advantage of the new opportunity, so much the better.

Change is a process, as much a reflection of you as an artist and business owner as the world we all live in.  The desire for change is what propels all of us toward the future.  No matter the chaos, you can have perspective if you choose to have it.

Margin Scale and Platform

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All creative business owners should make a point of understanding the interplay between margin, scale and platform as they apply to their creative business.  Sounds like Greek, but it is not.  Margin is how much money you make on what you sell.  Scale is how big your business is and how it needs to operate to maintain margin.  Platform is the mindset behind your current approach to margin and scale. 

Most creative businesses fall into one of two general categories: low margin, low price predicated on volume or high art, one-off big sale.  The former is all about ultra efficient pricing and process; the latter, high touch, long lead relationship.  No judgment on which model has the higher long term value. My only comment — it is nearly impossible to do both well.    

However, when the economy collapsed, most creative business owners responded by unwittingly doing both.  For instance, a florist might have had a minimum of $20,000 per job in 2007, but had to pick up $5,000 jobs in 2008 to keep going.  Smaller dollar sales increases risk exponentially as most production mistakes are fixed – a $500 mistake on a $20,000 job reduces profit by five percent.  The same $500 mistake on a $5,000 job reduces profit by twenty percent.  Likewise, focusing on margin at the expense of the finesse of high design will likely undercut the essence of the florist’s brand and alienate the core clientele.  While the dollar volume of the florist’s business might actually be the same, the florist’s business is not. 

Now that the economy and (hopefully) your creative business are seeing an upturn, your job has to be to evaluate your business’ current strategy and scale. Crazy as it might sound, the more business you get, the bigger problem not identifying your platform will become.  As the florist example shows, high dollar and low dollar strategies are remarkably different and at odds.  If each area grows, you will stretch your resources too thin to handle it all.  Stretched resources increases risk, which is a ticking time bomb.  Much better to take a step back and evaluate where you want to go and choose the strategy that best fits you and your business.  You might sacrifice short term revenue (incredibly scary coming out of the recession I know), but you will give your creative business the best chance of success in the future.

Lessons From Todd

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I have just returned from Engage!09: The Encore.  My mind is still spinning.  So many incredible professionals in one room, all candid and ready to engage (pun intended).  There will be many posts recapping the overall conference for all who were and weren’t there.  I am only going to focus on what Todd-Avery Lenahan spoke about and the incredible lessons he imparted through the stories he told.

Todd talked about his work, his design process and, in particular, his work for Steve Wynn at the Encore Hotel in Las Vegas.  Todd was responsible for the design of the Spa, the suites, several restaurants and many of the common areas at the hotel.  He regaled us with a detailed discussion of how the Country Club and Spa came to be.  Although he did not specifically discuss the steps of his process, they were plain to see during his talk.

Todd’s approach is what every creative business owner should aspire to replicate.  It begins with direction from the client.  First, he listens.  Then he re-interprets what he has heard relative to what the overall vision for the project is (which, most often, he has had a hand in creating).  From there he thinks about the direction and overall vision.  And before he starts sketching, he starts writing (he is a brilliant writer).  He tells the story.  With the story in hand, he decides what the project will not be.  For the Spa, that meant not what was expected of spas today, but what was quintessential to the experience.  He showed us images of Roman bath houses, dramatic European spas and other Italian architecture that served as his inspiration.  Once he had his inspiration and his story told, only then did he start designing.  His design began with a conceptual sketch, then computer rendering, then full mock-up.  The Spa was not at all what Steve Wynn had asked for, but everything he wanted it to be for the Encore.

Lessons:  Todd’s art comes first.  He listens.  He studies.  He forms an opinion.  His presentation is defended with intellect — a written vision statement for each element in his design, a thorough understanding and representation of his inspiration(s).  He compromises, but never if at the expense of his integrity as a designer.  Nothing happens until the design is done.

Todd did not share how he prices his projects.  From my view, what is valuable about what Todd does is actually the design process leading to the final design, even more so than the finished design, and definitely more than supervising its production.  Having a well defined vision for the project first and translating that vision into design is so important that some developers have hired branding firms to do just that.  Todd showed us this week that that is HIS value.  In descending order, Todd should be (and I sincerely hope is) paid for creating the project’s vision with the developer, then for translating the vision into design, and finally for helping bring that design to reality.  Each has its own value and each should have its own price.  Regardless of your design area (event, interior or graphic), you would do well to study Todd’s process and the incredible value it offers him and his clients.

The Price of Conviction

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Living and working in New York City affords me the opportunity to see the best and worst of business.  The best:  the sheer desire to succeed, often where others have failed many times before.  The worst: the entrenchment of THE way and adherence to an unseemly order long since invalidated.  For creative businesses focused on the New York market, it is the best and worst of times.  The best because the mountain of creativity and talent has never been bigger.  The worst because there are so many lions chasing after the squirrel.

While Frank and Liza may be right about New York, I would like to think that, for creative businesses, you can make it there if you are unwilling to be anything other than Frank or Liza (i.e., iconic).  However, if you try to get (or stay) there by playing the same game by the same rules, you will likely run incredibly fast…in quicksand.

I am also sure that New York is not alone — every major urban market in the United States (and perhaps the world) likely operates the same way.  So, my advice:  change the rules or, better yet, start a new game.  Will it be expensive?  Sure, but maybe not in dollars, just time, energy and fortitude.  Will it be worth it?  Who knows.  Though, for any creative business owner the choice of being first and best should be too compelling to ignore.

In practical terms, figure out the way for your art to stand on its own.  Don’t compete on price.  Adopt what is successful about the models of other creative industries into your own.  Extend your client.  Use technology and social media for more than just marketing.  Embrace unexpected, yet integrative partnerships.

There are creative businesses that have already begun to seize the opportunity to create a new order.  The question is who will be willing go even further?

No matter the effort, change will take time and will be challenged on all fronts.  Such is the price of conviction.  Every creative business has to create a platform that best suits its art.  No one size fits all, and even if it did, the outfit would still change.  Your willingness to own your model in the face of critics, competition and maybe even clients is where you will find success.  The more integrity you have in your process and your art, the better chance you will wind up as the icon and not the me too.

Thoughts on Modern Bride and Elegant Bride

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The uber-fabulous Marcy Blum wrote a fantastic post yesterday about this week’s untimely closing of Modern Bride and Elegant Bride.  Her commentary on the value of what Brides puts out relative to Modern Bride is wonderfully insightful, as is the emotion (read devastation) that is behind her words.  I too am not knowledgeable (or pompous) enough to say that I understand why the magazines folded or the impact the Internet had on their businesses.  People much wiser than I have expounded on why there is simply not enough value provided to advertisers in a magazine versus their online counterparts.  Remember, Modern Bride and Elegant Bride are not alone when it comes to creative space magazine closings:  there is Domino, Blueprint, Oprah at Home just to name three.  What I can talk about is what I think today’s successful media companies are going to have to do in order to survive in the long term.  To paraphrase Seth Godin, it will be about creating a dialogue with consumers and capturing their (and advertisers) business in as a function of that dialogue.

It overstates the obvious that The Knot is who media companies are looking to as today’s paradigm, especially since it is making money.  However, no disrespect to the unbelievable job David and Carley do, but even that comparison misses the point.  The Knot at heart is still an advertising business and predicated on the number of eyeballs providing targeted value to advertisers.  Its extraordinary content is meant to capture those eyeballs and the community they have created is meant to make sure they stay there.

What The Knot is not though is a validator.  More to the point, they are not a validator tailored to the specific customer – not only who is the best, but who is the best for the SPECIFIC customer.  They are all about providing tools for the bride (and they are incredible tools), but not so much about working with the bride as to how to best use those tools.  And, even more to the point, they are not an incubator for vendors who advertise with them – if you are the best with 10 customers and they can help you get to 100, what will happen then.  It is axiomatic that growing too fast is as risky as not growing fast enough.

Modern Bride and Elegant Bride died because they became unprofitable as advertising dwindled.  They are evidence of the struggles that confront the magazine business as the paradigm shifts.  Brides Magazine may remain as the paragon of wedding style.  We might still listen because Millie and Co. are so fantastic …. for a while.  But in the end, if consumers don’t have a chance to have a CONVERSATION with the tastemakers, someone will come along that provides THAT platform and take all the money with them.  In that sense ONLY, it would not be The Knot I would be worried about if I were Conde Nast, it would be The Bridal Bar.

To What End?

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Almost every creative business owner I speak to tells me that they would like to one day sell their business.  Yet, when I ask who would buy the business and why, most often I am met either with their larger competitor or a blank stare.  Both don’t do justice to the power of the question(s).  Deciding who would be a likely (and perhaps unexpected) buyer provides an invaluable roadmap as to what path your creative business should take.

Key to the analysis is understanding the niche your creative business fills, its potential for growth – both in terms of geography and/or product expansion – and what hidden value might be unlocked by the buyer.  Several examples:  Amazon’s purchase of Zappos.com for $900 million.  Zappos has announced that it will be entering several different markets using its “Powered by Service” credo on top of Amazon’s incredible distribution and purchasing infrastructure.  Did Zappos build its business for Amazon to buy?  Probably not.  But did they think of the compelling value they would offer to Amazon?  Absolutely.  Closer to home, take a look at the Knot’s purchase of WedSnap (the Knot for Facebook) earlier this year.  The similarities in the two businesses are striking, but for the platforms.  There had to be a consideration in the minds of WedSnap’s owners that, if they proved successful, The Knot would be a buyer.

However, there is a gulf between creative businesses and, say, tech businesses.  Creative businesses do not have the luxury of creating the platform without worrying so much about how they are going to make money.  Those who would be willing to buy or invest a substantial sum in your creative business are going to want to see that there is a market for your art and that it can thrive at scale.  Twitter can prove its value with its user base.  Colin Cowie, no matter how fabulous his events, can’t prove his value based on his events alone.  His business value will be based on his lifestyle brand and the trends of his initiatives — both in terms of dollars and customers.  If it is Colin’s goal to one day sell his business, he will have to think about his brand beyond events and who will most value what he is doing in this arena.  Simply, no one is going to pay him alot of money for his events business.

Having the discipline to see beyond today will afford you the opportunity to analyze the highest (and possibly hidden) value of your creative business.  Your work will then be to reveal and justify that value to those who you think will care the most.

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