FunctionFox helps small to mid-sized creative firms compete against larger advertising agencies through expense capturing, time management and project-tracking tools! Visit www.functionfox.com for more information.

This month's newsletter provides insight for small creative firms on the issue of Raising prices without raising a flap. The article, provided by Creative Business, dives deeper into the issue of increasing profitability and other things to consider before raising prices. In any business, understanding when and how to increase profitability is a must, so be sure to fill out the FoxPoll question to see what others in the industry are doing in terms of increasing rates.

Raising prices without raising a flap (Contributed by Creative Business)

Raising prices is one of the toughest challenges for any company. Whether the company is General Electric or Gene Freelance, the question is the same: will the increase in revenue offset the (possible) loss of customers? Never an easy answer.

In addition, creative firms, especially smaller ones, have two other concerns: In most cases the principal is also the messenger. And unlike manufacturing companies that can blame raising prices on the rising costs of raw materials, creative companies sell mostly time. So justification is never as straightforward either.

Despite these difficulties, price increases are a necessary fact of business life. How often to do it, and how to inform clients when you do, can have a major impact on profitability.

BUT FIRST...
Raising prices is only one way to increase profitability. Other options should be considered first. Most not only provide a more immediate effect, but also skirt the problem of client approval.

Are all clients treated equally? When you charge lower fees to some clients, you must charge higher fees to others, or make up the difference out of your own pocket. Either way, bad practice. Charge all clients—big, small, profit and not-for-profit—equally.

Are you managing effectively? Here are some common trouble spots to look at: inaccurate time recording... workflow bottlenecks... consistently exceeding estimated time by "fine tuning"... high employee turnover... bad cash flow predictions... inefficient employees... too many not-productive meetings.

Are your ratios in line? Keep an eye on key creative business indicators such as: accounts receivable collections (45/60 days)... billable time (>60%)... work backlog (2/4 weeks)... marketing costs (<20%)... salaries & benefits (<70%)... quick ratio—assets÷ liabilities (1.0 to 1.5)... debt to asset ratio (.30 to .60).

Are you charging for everything? Is all job time recorded and billed? Are all pass-on expenses itemized and billed?

Do you have minimum fees? To keep small jobs from being money-losers you probably should have a minimum charge—one or more day's billable time for all jobs; one or more hours for all work on a job.

WHEN IT MAKES SENSE... Click here for full PDF article.

This article originally appeared in the Creative Business newsletter and is reproduced here with their permission. More information on the Creative Business newsletter is available at http://www.creativebusiness.com/.

If you have an article that you would like to share, please contact us Toll-Free at 1.866.369.8463 or email info@functionfox.com.

Last month we asked our subscribers what their company is doing to handle capacity within the next 4 months. We asked whether companies planned to increase staff, decrease staff or remain constant. Results confirmed that 48% of all people surveyed voted that they would most likely increase staff before the end of 2004.

Some interesting facts that validate this trend:

On average, the months of September, October and February are very active periods for the creative industry. As creative companies prepare to handle the annual report season and Christmas advertising, firms tend to increase their handle on capacity through new employees. Moreover, with the approaching New Year, firms gear up to win new clients and handle new projects. At this point creative companies review their abilities to handle increasing needs and as a result add on necessary personnel.

Ask yourself:
• Is my firm prepared to handle an increase in business?
• Do my employees or colleagues have too much on their plate?

Consider what may happen to the company if employees were inundated with too many projects, how would this affect the quality of work your company produces? In general, with the approaching New Year it is always best to audit your company in terms of new business for the upcoming year and present ongoing clients and projects. Are your resources, people and internal business practices in place and prepared to handle an inflow of new business?

Make an effort to understand what projects, and specifically what tasks your employees are working on. Run a TimeFox task report and make sure to include "show estimates". Look at your total estimated time for specific clients and projects and compare it with your actual time as of that date. If you are finding you are typically over for certain tasks consider what may be the potential affects if you could alleviate some of this over-budget time by hiring on additional employees. Would hiring on additional support staff allow other employees to spend more time on billable tasks and keep your actual time and estimates within their specified time and budget?

Visit the FunctionFox Resources for a variety of free articles.

CALL FOR ENTRIES to STEP inside design 100!

Bring on your creative best! The Call for Entries in the STEP Design 100 Competition is underway. Why enter? Your winning design will be prominently showcased in STEP's design annual, the ONLY annual that interviews all 100 winners! Plus, you'll get a rare opportunity to reveal the creative thinking behind your great solution.

All work produced between October 1, 2003 and October 1, 2004 is eligible for entry. PDFs of entry forms and rules are available online at http://www.stepinsidedesign.com/cfe123

Esteemed Jurors include:
Dana Arnett – Principal, VSA Partners, Chicago
Stephen Doyle – Principal, Doyle Partners, New York
Brown Johnson – Creative Director, Nick Jr., New York
Noreen Morioka – Principal, Adams Morioka, Los Angeles
Rick Valicenti – Principal, Thirst, Chicago

The deadline is October 1, 2004. Enter and good luck!

If you refer someone to FunctionFox, and they purchase a TimeFox subscription, we'll give you a month's subscription to TimeFox FREE! Refer two new customers; you'll get two months free. If you refer 12 new customers, you'll get a whole year's subscription FREE!

Don't miss this chance to pass the word and realize considerable savings!

Here's how: Ask the person you refer to enter your name/company under 'Referral (Client or Friend)' when they sign up for a free demo at www.functionfox.com/demo or tell a friend at www.functionfox.com/referral_program.

FoxPoll

Within the next year my firm will likely:

• Increase prices

• Decrease prices

• Remain constant

• Uncertain

Click on your answer to participate in the FoxPoll or do so at: www.functionfox.com