100K per head / How does a studio achieves this?
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- popovich
I've been coming here lately with the same subjects, the economics of a design studio. Bare with me.
Lately, I've read a book, "Corporate Design: Kosten und Nutzen" ( http://www.amazon.de/Corporate-D… ), a german book looking into the holy grail of the design business. The first part of the book consists of general knowledge sum up; the second part is worth 44 euro out of 45 euro of the book's price. It features a dozen of projects and costs for those (with other data for every studio, which was shared on voluntary basis), and this was a big reality check for me. I've learned a lot, but I have even more questions unanswered.
One of those questions is based on the observation, that a prosperous studio makes around 100K euro revenue per every employee a year (the fork is 80K to 120K). This is: a studio of 12 people turns around about 1,5 mln euros per year. Now, with an average CI project costs from 20K to 40K, they have to do about 50 such projects, which is, certainly, unrealistic. If a studio does one good CI project a month for 40K, it still makes just 0,5mln euros revenue and it is already a very good pace for a studio. So where does the other million come from? I'd tip, retainer contracts. But then again, we are talking about 10 to 20 everyday clients each worth of (ideally) 50K to 100K a year. It still seems quite a lot for a retainer contract (looking from a client side) and really a lot of work for handful people for a year (from studio side).
Anyone could help me check the reality here, please?
- monoboy0
I guess it also depends on the kind of work being done. A multi-disciplined studio that undertakes high profile branding, marketing and strategic campaigns can bring in silly numbers. Specialists with a design, digital or PR focus might have not reach the same client base or fee income. (Apart from the superstars).
- Morning_star0
A couple of things.
• Is this book available in English?
• I think that the issue may be due to the hour charge out rate.
- popovich0
monoboy: from what I could see, some of the studios seem to be pretty much skills-oriented (me meaning, that they mode design that consultancy). but, yes, I see your point.
morning: I don't know, if this book is available in English. Check amazon for it. and, hm, the hourly rates may vary, but how many >100K projects can a studio get per year. 10-15? and still be able to do it with 12 skilled designers and consultants? I am not sure.- [...] they do more design than consultancy [...]popovich
- Morning_star0
We tend to work on on a productivity of between 60%-70% when putting targets together, that works out roughly 1000 billable hours per person year. Which multiplied by an hourly rate of 100 euro gives an income of 100,000 euro per head.
- ynot0
I can see 100k per employee is not that tough, atleast not from where I am, lets see, I'm a snr AD in a medium size agency and lets take a pitch for example, lets say it's a $400k pitch, and normally we would have 1 accouts exec, 1 accounts manager, 0.25 of a creative director, 1 art director or Snr Art, 1 designer and 1 programmer.. 5.25 per 400k. if we win the job, it's still us doing the job but at the same time, new pitches keeps on coming in. one single winning pitch = $76190.48 per head.. why not? .. and this is in Malaysia.. we're like slave here.. :-)
- fiesta0
if its digital then banner adverts
- popovich0
ynot: $400K pitch — what kind of job is it about? Can you expand on it?
morning: this is pretty simplified calculation, isn't it? but, well, yes, it makes the figure. hm...
- Morning_star0
@popovich - Yes it's a pretty generic calculation but it does give you an approximate figure to target, assuming you can reach 60-70% productivity levels. Which in turn is completely reliant on the projects you get through the door. No projects, no income.
So there are at least two ways to look at it:
1. from potential capacity/productivity - which gives you a quite accurate but essentially meaningless target.
2. from a sales point of view - which is almost impossible to forecast but very useful.