Nuts and bolts

There are no hard and fast rules about what’s needed for each individual business to trade, but one thing is almost universally true: out-of-control and unnecessary overheads will cripple a creative company.

An overhead, put simply, is something you have to pay for regardless of how much business you do – an ever-present monster that sits over your head, demanding to be fed. It’s your rent, salaries and lease payments. It’s your monthly service charges for heat and lighting, your internet access fee,annual accountancy bill and legal costs and many other things it’s easy to forget about.

Overheads are all of the things you have to pay for before you can pay yourself – the cost of opening the doors at the start of the month, and the amount you have to find before you can close them again. And overheads are what can force your hand when you are making delicate strategic decisions. You may not want to take an uninspiring job – something that won’t further your portfolio in any way – but if it pays the bills you might feel compelled to say yes. A small creative company can be seriously harmed by taking work which is empty of creative growth or positive energy – especially if it requires a commitment of many months to complete. Your portfolio is a dynamic creature; it needs to be fed and nurtured too. If you spend a year making work you wouldn’t dream of putting in it, what are you going to show your potential clients when you start looking for work again? The same stuff you had last year?

“Overheads can cripple a creative company.”

Creative companies can put creativity first by keeping a tight control on overheads. It could mean there are some ‘cracks’ in your system. You might not have enough administration support, the latest software or the fastest hardware. You may not be able to afford flashy and expensive shop fronts or hi-tech receptions filled with uniformed assistants. But you will have the freedom to choose better jobs and make better creative work – and better work leads to better jobs with more opportunities and higher fees.

Consider long-term financial commitments carefully. Be aware of penalty clauses for early defaults, and leases that oblige you to repair and re-decorate.

Taking on staff can be a massive overhead, not just because of salary obligations but also local employment laws concerning benefits, health care, tax burdens and terminations. Staff cost money just by occupying space; they probably need a desk, a computer and associated technology to allow them to do their jobs, and they’ll be using energy and various other consumables. Also consider time obligations for training and supervising. For all but the smallest companies, it’s likely that a manager will be devoting more than half of their time to staff-related issues instead of jobs and clients.

Creative companies need to be nimble and able to adapt quickly. Using freelance producers on a job-by-job basis rather than full-time staff might be more expensive in the short term, but can allow greater flexibility and the freedom to make the right strategic decisions which are far better in the long term.

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