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The Creative Business is a series of 12 modules of information about developing creative enterprises, written especially for people running businesses in the creative industries.
The information is particularly relevant to creative businesses and cultural enterprises in the fields of Advertising, Literature and Publishing, Visual Arts, Performing Arts, Music, Design, Cultural Heritage, and Crafts.
Published on the Creative Choices website, this series of 12 articles covers a range of business issues facing creative entrepreneurs:
1. It's Creative but is it a Business? Business Feasibility - deciding whether or not to make a business from your creativity.
2. You're Creative - but so are they! Dealing with competition - understanding your competitive advantage in relation to rivals in the marketplace.
3. Not All Customers are Good Customers. Choosing Customers - finding the right customers to fit with your creativity, ambitions and values.
4. Precision Marketing. Advertising and Publicity - communicating your key messages to customers.
5. Structuring Your Enterprise. Setting up a Business - choosing the best structure: self-employed, not-for-profit company, or commercial enterprise?
6. Make Money While You Sleep! Protecting your Ideas - using intellectual property rights to protect your creativity and make money while you sleep.
7. Creative Collaborations and other essential C-words. Working in partnership with other individuals and businesses in the creative or other sectors.
8. Raising and Managing Money. Financial Management - getting the right financial result by managing your income and expenditure.
9. Customers as Partners. Keeping Customers - listening to customers and building closer relationships with your best customers.
10. Reassuringly Expensive. Pricing - deciding how much to charge by looking at pricing and value from the customers' point of view.
11. Focusing your Enterprise - selecting priorities for development as new opportunities arise.
12. Growing your Business - key issues ahead as your business grows.
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Read and comment on these articles by David Parrish at The Creative Business blog on the Creative Choices website.
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Raising finance from loans or investments can be a major challenge for all types of businesses, and it’s especially difficult when credit is scarce and investors are feeling the pinch. So any alternative ways of raising funds are worth exploring.
Enterprises in the creative, cultural and digital sector have creativity at the centre of their products and services, yet don’t always apply that same creativity to the business side of things, such as marketing, leadership or finance. But some do. True ‘creative entrepreneurs’ are not just creative people doing business – they are creative with business too. Some of these creative entrepreneurs - especially in music and film - are exploring innovative ways of raising serious amounts of money by asking lots of people for modest investments. This ‘Crowd-Financing’ approach can be labelled ‘Fan-Financing’ when fans are the focus for investments. Here are some examples:
Australian musician Clint Crighton has devised a way of raising funds from his fans to record his next album. For 100 Australian dollars (about £50) you can join an exclusive club of fans which gives you special privileges: a lifetime free entrance pass to all his live gigs, a signed pre-release version of his next album, and a chance to win a trip to Los Angeles to be there at the recording of his next album. A membership of 1,000 true fans will raise the 100,000 Australian dollars he needs.
In the USA, singer-songwriter Jill Sobule invites fans to invest in her enterprise at different levels to receive a range of different benefits. From just 10 US dollars for a digital download, the investment levels rise in steps to 1,000 USD for a specially-written song for your voicemail greeting. For 5,000 USD she will perform a concert in your home and if you want to invest 10,000 USD you can sing along with her on her next album.
In the UK, Slice the Pie is a sophisticated music investment site which allows you to invest in the future success of a wide range of musicians. (I’ve invested £100 in Sarah Grace.) This model also uses a voting system to find and filter talent and then voters are invited to invest. Like the X-Factor and Britain’s Got Talent, this model cleverly involves the ‘crowds’ in voting - and at the same time builds a base of followers who eventually become customers or investors.
Three British teenagers raised £105,000 by selling credits in their film - for just £1 you can have your name listed in the closing credits. Award-winning Merseyside writer and film director Fiona Maher sold bit-parts in her film on eBay to raise money for her first full-length feature film. A new film called The Age of Stupid is using crowd-financing to raise investment from the public by selling shares priced £10,000 which entitle investors to a share of the profits.
Music and film are leading the way with fan-financing in the creative industries, but surely other enterprises - in the creative sectors and elsewhere - could adapt these models to their own situations and raise much-needed cash by adopting this crowd-financing approach.
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This article was first published by 08businessconnect.com
Copyright David Parrish 2009. Some Rights Reserved.
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Steve Messam is a talented artist - and a shrewd creative entrepreneur.
Steve was approached by Cumbria Tourism in the UK to create an art installation to help publicise the launch of their campaign for cultural tourism. The budget offered was a modest £4,000 GBP so Steve put together a business case for a bigger budget. He knew that the client wanted publicity and so argued that a bigger investment in a more impressive work of art would pay dividends in terms of 'Advertising Equivalent Value' (AEV) - in other words, the cost of the publicity in column inches if it were paid for as advertising.
Steve pitched his idea and business case to the PR Agency Colman Getty, who specialise in arts related work and had been commissioned by Cumbria Tourism to publicise the art installation and campaign for cultural tourism. Using data from previous projects, Steve calculated that the Advertising Equivalent Value should be at least £150,000 GBP and possibly as high as £250,000 GBP, provided the budget for his art installation was increased six-fold. Colman Getty understood the commercial value of the PR that could be generated and helped Steve to convince the client to invest accordingly.
The result was a spectacular installation called 'Drop', a huge inflatable sculpture modelled on a drop of water. The sculpture was installed at various scenic locations in the English Lake District. Part of the publicity campaign was to encourage tourists to take and publish photos of the huge silver sculpture and this viral marketing helped to promote the campaign further.
See photo below. More images of Drop can be seen in this pool of photos on Flickr.
With the help of Steve Messam's art, the campaign was highly successful and exceeded its targets in terms of publicity. In one weekend alone, over 10,500 people went to see it. News and images even reached the world's biggest circulation newspaper, China Daily.
Steve's reputation - and his creative enterprise - goes from strength to strength. He will be exhibiting his latest art installation at the Venice Biennale in June 2009, raising finance in a similar way using the business case of Advertising Equivalent Value, rather than an application for an arts grant.
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Discuss this and other ways of raising finance on the Creative Enterprise Network.
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How do you raise finance for a feature film?
(Or any other creative enterprise, for that matter.)
It's an expensive business, but some creative entrepreneurs think imaginatively about raising money, including raising small amounts from lots of people. Like 'crowd-sourcing', 'crowd financing' allows many people to participate in a small way to have a great collective effect. This 'crowd-financing' approach is now more feasible than ever before because of online networks and ecommerce technology.
Fiona Maher sold bit-parts in her film on eBay and now three British teenagers have raised £105,000 (105,000 GBP) so far, by selling credits in their film for just £1 (1 GBP) each, according to this article in the Guardian.
Congratulations to these entrepreneurs for using their creativity to think also about finance as well as their film projects !
PS: Thanks to Felix Holm for his reply on the discussion forum, letting us know about 'Boy Called Twist', a South African film financed this way.
PPS: Thanks also to Hannah Rudman for providing links to the excellent site The Age of Stupid (Crowd Financed film with funding models, budgets etc) and the fundraising/campaigning site The Point.
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Join the discussion forum about Crowd Financing on the T-Shirts and Suits Creative Enterprise Network.
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A useful and readable 'Creative, Cultural and Digital Industries Guide' has been published by Business Link West Midlands
It is available in hardcopy from Business Link West Midlands and downloadable as a free eBook in PDF format below.
This creative business guide was written by David Parrish, author of the book 'T-Shirts and Suits: A Guide to the Business of Creativity'.
The 48 page publication covers a range of issues relevant to enterprises in the creative, cultural and digital sectors.
Sections include:
- Strategic Planning
- Understanding your Customers
- Profiting from your Ideas
- Organisational Structures
- People and Skills
- Promoting your Products / Services
- Financial Management
- Legal and other issues
- Links to useful organisations and resources for creative enterprises
There are also four case studies featuring creative enterprises from the West Midlands region: 383 Project, Stan's Cafe, Gas Street Works, and Capsule.
Download PDF:
Creative, Cultural and Digital Industries Guide (PDF) [3.2 MB]
Businesses in the West Midlands region of England can obtain a hard copy of the Guide.
Contact Business Link West Midlands on 0845 113 1234.
The creative industries guide was designed by iDM Design, Wolverhampton This creative business guide was written by David Parish of TShirts and Suits.
David Parish retains copyright in this material and other writing about the business of creativity, as published in the book 'T-Shirts and Suits: A Guide to the Business of Creativity', the publication 'Designing Your Creative Business' and a series of other articles, blogs and 'Ideas in Action' features.
Similar creative business guides can be written for other organisations in the creative, cultural and digital sectors.
Contact David Parrish to discuss options and possibilities for your own version of this creative industries guide.
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How will creative businesses cope in the economic downturn?
That’s a question that I have been asked many times recently, both in the UK and overseas.
In response, I make the following points:
Though the general economic situation is difficult, the recession will not affect all businesses equally. It is not inevitable that all businesses will suffer. So individual entrepreneurs need to look at their own specific circumstances. There are opportunities as well as threats in times of economic hardship.
Hard times affect competitors too. If your competitors are hit harder than you, then the economic climate can provide some competitive advantage. In my book T-Shirts and Suits I use the analogy of running uphill to point out that though it hurts, you can still get ahead of your rivals if it hurts them even more and you are fitter at uphill running. Some businesses will become insolvent – make sure you survive when your competitors don’t.
In a meeting in Liverpool with the UK Minister responsible for creative industries, Barbara Follett MP, several creative enterprises reported that the recession had prompted them to tighten up their systems and practices, especially credit control, which actually helped them to make their businesses more efficient and financially stronger. In some ways, the recession is a blessing in disguise.
The economic downturn will undoubtedly put pressure on businesses in the creative sector. This pressure will reveal weaknesses in individual firms that have so far gone undetected. Various crucial aspects of business will be tested, for example: customer relationships, fixed/flexible cost structures, credit control and cash flow, customer base (eg overseas clients), staff loyalty and commitment, and other factors.
Now, more than ever, businesses need to concentrate on the basics.
- Focus on the products and services at which you excel and make you stand out from the crowd. Play to your strengths and make the most of your competitive advantage.
- Keep your existing customers and build on the client relationships you have nurtured.
- Pay close attention to cash flow planning and management – “cash is reality”.
There is no better time than now to focus on the essentials of your business strategy.
For some creative businesses, the economic downturn will be a time for winning, not losing.
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Copyright © David Parrish 2008.
First published in Creative Times Online
Financing a feature film can be a complex and expensive business, and most talented film directors never get a chance to make a full-length feature film because of lack of finance.
But with her 'can-do' attitude, resourcefulness and determination, Fiona Maher has made a film on a micro-budget, raising cash from a variety of sources, calling in favours and getting in-kind support from suppliers and a wide range of talented people in her network.
One of the creative ways she raised funds was by selling roles in the film on eBay to people wanting to take part in the film project.
(See also Crowd Financing to Fund a Film.)
'The Tree of Death' is a comedy feature, described as 'Blair Witch meets Spinal Tap'
The film will be released later in 2008.
In the mean time, here's a teaser from YouTube...
Would you pay 50,620 Euros for a bed?
(That's over £40,000 GBP, about $78,000 USD)
Probably not. But apparently some people do. Why? What's going on here?
I'm fascinated by pricing strategies and run workshops for creative businesses on the subject.
There are different ways to decide on your pricing strategy and I'll be writing more about them soon.
Certainly, customers are often buying more than the just the bare object - they are buying into something much bigger.
See What are you selling, really?
In the case of a Hastens bed, you are invited to buy into the story of a small family firm in Sweden.
The advert asks "Who would spend 50,620 Euros on a bed?"
It continues "Most people would not or could not. A select few could and would..."
Are you one of the select few?
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I'm interested to hear from you about pricing strategies - especially about businesses in the creative industries.
One of the biggest challenges for creative businesses, especially fast-growing enterprises, is the management of cash flow.
When businesses fail, it's frequently because of a cash flow crisis rather than lack of profitability. The gap between cash outflows and cash inflows becomes too big and they run out of cash. An unprofitable business will inevitably run short of cash but even profitable businesses can face a cash crisis if cashflow isn't managed carefully.
As a business grows and its turnover increases, there is always a temptation to increase fixed costs. Then these higher fixed costs commit the business to regular cash outflows, even though the cash inflow may be more erratic, due to fluctuations in trade and delayed payments from clients.
I have seen businesses increase their fixed costs to such an extent that they are risking serious cashflow problems. In one company, a chief executive hired temporary staff to deliver short-term projects but then engaged them full time as employees, which meant that the company's expenditure was no longer flexible, even though an endless supply of short-term projects was far from guaranteed. To feed the company's new dependency on more and more cash, he then had to keep finding more and more projects, because they were no longer able to reduce their costs in lean times and 'ride the waves' of the ups and downs of business as they used to do. To avoid a cashflow crisis the company accepted unprofitable projects, to get a quick cash fix, even though it was digging itself into deeper trouble in the long term.
Unless future cash inflows are guaranteed to be steady, beware increasing fixed costs if you want to avoid cash flow problems.
Credit control is another major issue in managing cash flow effectively. Slow paying customers and bad debts can put a creative enterprise out of business, especially in the first few years when it is more vulnerable financially and less able to negotiate favourable trade terms with clients. Choose your customers carefully and agree a payment schedule through the project, ideally with a percentage paid up-front, rather agreeing to be paid only on completion of the job. Delays happen (often the fault of the client) which in turn delays payment and in the mean time cash is flowing out every week and month that goes by.
A cash flow projection spreadsheet is an essential tool for effective financial management of any creative business, so that potential problems can be foreseen - and then avoided.
Smart creative entrepreneurs keep a close eye on cashflow as well as turnover and profitability.
Finance and accounting are often regarded as the boring side of business by creative people, but those who ignore it are not in control of their business destiny. It’s like driving a car without looking at the dashboard. Successful entrepreneurs don’t need to look at all the detailed financial information but do need sight of the key financial measures. These are the equivalent of the car’s dashboard instruments showing the important information such as speed, fuel and oil pressure. The financial equivalents are profitability (per project and overall), cash flow and net assets.
This is an extract from the book 'T-Shirts and Suits: A Guide to the Business of Creativity' by David Parrish.
You can download the finance chapter 'Counting your Money'.
Download counting_your_money. Excerpt from T-Shirts and Suits. A Guide to the Business of Creativity.pdf
You are free to copy and distribute this file. (See Creative Commons licence.)
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