Small creative businesses live hand to mouth

Cashflow is crucial. The creative company you deal with may well be small and under-financed (after all, would you lend them money to start their business?). They are probably always scratching around to pay their rent, wages and various overheads and very often will forfeit their wages. They don’t have bottomless bank accounts to cushion against hard times. And to make things even harder, they probably aren’t skilful managers of cashflow.

When you commission a small creative company to produce work for you, expect to be asked for 50% upfront. If they don’t ask, suggest it. It’s often very stressful for creative people to negotiate anything to do with money and they will be very wary of letting you know how desperately they need the cash. Don’t take advantage of this by screwing them into a terrible deal. Look at it this way:

If you only pay them a pitiful fee, they’ll have to take additional work to pay the rent and that’s going to dilute their attention to your project. And if you make them suffer on cashflow they could even go out of business halfway through your project.

Understanding the pressures of your creative partners is always going to improve the end result.

If your accounting department tell you they can’t pay anyone 50% upfront then go to the board. Who is responsible for the creative output of your company – you or the bean counters? Accounts will always find the money if they’re told to, and if you want to get the best result, make no mistake, you have to pay upfront. Paying entirely in arrears is massaging your cashflow at the expense of the (usually much smaller) creative company or individual’s. Which of you is better able to borrow money?

On a long-term project, it’s best to stagger the payments. Perhaps 25% upfront with the balance payable over certain periods, often linked to identifiable deliverables. Of course, you want to make sure you get your project delivered on time, so it’s perfectly acceptable to pay a final balance on delivery. But shame on you if you sit on their final invoice for a month before sending it up to Accounts. You’ve already got this in your budget right?

And if you want there to be a pool of vibrant, energetic individuals and creative companies to choose from, this attitude must permeate the industry. It’s up to individual managers to make sure this happens.

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