2 for the price of 1: The benefits of a merger
Tuesday, September 27, 2016
Each designer has his or her own unique vision and talents. Design businesses, on the other hand, have a lot in common, especially the back office operation.
Why duplicate efforts? Share the load with another designer. That allows you — both — to spend more time doing what you do best.
These are difficult times for many sole practitioners and smaller firms. They just are not getting the volume or level of projects they're accustomed to. That's putting a financial strain on their businesses. Some with whom I've spoken, particularly those who have been practicing for many years, say they are thinking about closing shop if conditions don't improve.
My advice to them is, before you take that step, consider a partnership or merging your firm with that of another interior designer. That way you can increase your market reach and appeal while cutting down on overhead and other expenses that cut into your profits.
Admittedly, mergers present their own set of complications. (Mergers and partnerships are not the same from a legal standpoint, but for simplicity's sake I'll refer to them both as a merger for now.)
You need to find someone you are compatible with and whom you trust. As in any relationship, you have to figure out how you are going to accommodate each other's differences and set some rules that both parties agree to abide by. Then, there are all those pesky details that have to do with finances, contracts, staffing, office space, branding, workplace culture, etc.
Understood. I am not saying it's easy. I'm saying it can be worth the effort.
Consider how much of your time and revenue goes into operating your business. How many projects do you have to complete in a year just to cover your expenses? In tough times, you may be able to reduce those a bit. A large majority, however, you have to pay whether you're billing more time or less.
With a merger, you can reduce your share substantially. Maybe not by half exactly, but close to it, without having to give up your share of the profits, depending on how the merger is arranged.
It's all about economies of scale. If you're a sole practitioner or a small one- or two-person firm, you don't need your own bookkeeper, accountant, web designer, IT technician, graphic designer, CAD operator or whatnot. Certainly you do not need a monopoly on office rental or utility bills.
Those are costs you can share with another designer or design firm without adding substantially to the workload or overhead. You reduce your risk and financial obligations when times are not so good and increase your profit when they are better.
The same model can be expanded in areas that can support multiple practices. Several firms could join together to create a co-working space and share overhead expenses — an arrangement popular with tech startups but one that can work for smaller, more mature firms as well.
Of course, in that scenario you would want to invite firms that are not competitors, current or potential. You would also need to arrange the space so as to protect each firm's intellectual property. An alternative would be to invite firms from related disciplines, such as graphic design, web design, real estate or specialist consultancies, such as for lighting or audio, which has the potential to lead to useful connections and new markets.
In addition to taking advantage of economies of scale, a merger may be what each of your practices needs to give them a lift. You can be an inspiration and creative ally for each other, take on more ambitious projects (if that's what you want) and expand into new markets and areas of design.
Or, perhaps one of you would rather focus more on client development and managing the business, freeing up the other to spend more time on design. There are many ways to slice and dice the arrangement. Just be sure it's equitable and mutually agreeable.
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