The 5 risks of running a creative business
People often quote fail often and fail fast but did you know the full quote (from John C. Maxwell an American author of many books about leadership) is Fail early, fail often, but always fail forward.
“Failing forward” to me is risking failure while understanding the risks, then iterating until eventually, achieving success. It’s not about perfection, it’s about MVP, and it’s about collaboration.
But I digress…
What I want to focus on is understanding the risks.
The 2020 Risk Management Survey by the Governance Institute of Australia found 60% of small business owners thought potential damage to brand and reputation is their most immediate and serious risk. While that’s a great stat to weave into a client conversation, it’s also important not to overlook other potential risks capable of bringing down any small business (including a creative business).
And what’s the next step after you find the risks?
Strategies to avoid risk
There are four strategies:
- avoid the risk completely
- take action to reduce the risk
- transfer the risk to another person or business or
- accept the risk as part of managing a business.
Sometimes avoiding is impossible; but we can proactively reduce risks, and we can transfer to someone with more expertise, and we can accept some risk is inevitable. In all these areas, knowledge is key.
Risks specific to a creative business
In our experience, a successful creative business owner works proactively to control these risks:
Risk to your reputation
This is the stuff of nightmares: watching your business, built with sweat and toil to reflect your ethics and morals, crumble before your eyes. The risk can come from internal sources (like unhappy employees) or external sources (like disgruntled clients or suppliers).
Either way, with reputation, proactivity is key. Much of this can be solved by managing the expectations of the people you work with both inside and outside the studio.
How do you do that? By developing systems, processes and documentation.
Risk of unplanned growth
Growth is good.
Planned growth is great.
But too much growth, too soon, can turn ugly. It doesn’t take long for a positive to turn negative.
Too much work is the kind of problem every business owner would like to face. Problem is, rapid growth can capsize a business just as quickly as too little growth. Especially when the growth happens on shaky foundations. Rapid growth will quickly identify any cracks in procedures, processes and leadership.
Risk to you or your employee’s health
A creative business is a ‘people’ business. The only difference between one business and another is the unique team and their set of skills. So it’s a no-brainer to protect, and nuture your team.
Risk of financial insolvency
The risk to financial solvency can come from within a studio through mismanagement, or externally from incompetent suppliers or bad clients.
Risk of financial insolvency can come from:
- being uninsured or paying for the wrong type of insurance (it’s complicated)
- a mismanaged project. The possibilities are endless, like insufficient planning; or scope creep; or budgetary issues or scheduling/timeline issues; or a relationship breakdown with a client; or even from just not having the right talent available at the right time.
- mismanaged finances, like cashflow issues or a bad debt
- bad clients – those who take the work but refuse to pay.
Risk to your intellectual property
The risk of ambiguity in copyright ownership and copyright infringement is a constant for all creatives. It is so valuable to know and understand the risk because proactive and prevention is key.
Risk due to failure to innovate.
Traditionally, many people developed a business around a set of core skills and stuck to it, year in and year out. While technology disruptions shook that business model, COVID broke it.
More than ever, businesses need to continually disrupt to remain sustainable. We learnt ‘business as usual’ is no longer an option.
So what?
Failing forward is about understanding and assessing each risk and then identifying whether it/they are relevant to your business and your situation.
If they are relevant, strategise to avoid/reduce/transfer or accept. That can be done using inhouse skills or by accessing external resources (like insurance or legal practitioners).
Here’s two actions:
- #cheap: We’ve documented all these options in an ebook titled: How bad can it get? Risk Management for creative businesses. We’ve collected the relevant information so creative business owners can make informed decisions. Forewarned is forearmed.
- #notcheapbutgreat: We developed the Happier, Healthier Creative Business Canvas with Streamtime to help identify potential risks and opportunities in a creative business. It’s a framework to test hypothesis, run scenarios, and plan a logical, coherent progress for activities. Contact me if you’d like more information.
Carol Mackay
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Want more?
These articles talk more about working in the creative industry:
- Postmortems – something I first heard about from our friends at Portable
- Using knowledge from the health industry to learn more about project management
- I’m talking to recruiters across Australia to build knowledge about ‘what’s a fair wage?’
About Carol Mackay
After 30+ years running a design studio, I accumulated a pretty special network of fellow designers. One thing most have in common: a need for more information about the ‘business’ side of design. Most are impatient with any task competing for time spent doing what they love – designing so they wanted more info about how to work more efficiently and effectively.
Not me. I love that intersection between design and business. I built a career working with Ombudsman schemes, the Emergency Services sector and the Courts. My special power has always been an ability to use design to translate the difficult to understand or the unpalatable message.
I now use exactly the same skills with creative business owners. I translate the indigestible into bite-sized chunks of information. I share insights, introduce tools and embed processes to help others build confidence business decision-making skills. More confidence makes it easier to grasp opportunities. More confidence makes it easier to recognise a good client from the bad.
Outside DBC I have mentored with Womentor, AGDA The Aunties, and most recently Regional Arts NSW.
And I’m a proud volunteer and board member of Never Not Creative.
Always happy to chat, I can be contacted here.
