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Why We Don't Make Speculative Presentations

The main product of our business is ideas-creative solutions to the communications problems and opportunities facing our many clients. And good ideas-creativity-can be tough to define, or agree upon. One person's passion is often another's poison. So it's no wonder that potential clients often ask us to take a project on speculation. That is, to try out our creative product in much the same way they may try out other types of products before purchasing.

Unfortunately, we must turn down such projects. This will explain why doing so actually makes us a better, more stable and reliable supplier for you to do business with.

It lets us keep our prices low

We make money mostly by selling our time. Unlike businesses that sell products, we can't take time back and resell it. Thus, the less time we actually sell, the more we have to charge for it. So we attempt to hold our prices down by keeping constantly busy.

We also have substantial fixed overhead costs-computers, peripherals, software, etc. So the higher the percentage of our time that is productive (billable), the more we can spread these costs, and the less each individual client gets charged for them.

In addition, the only way we can recover our overhead costs is through what we charge our clients. If we accepted speculative projects, the overhead for these non-billable hours would have to be added to the factor we already charge our regular, paying clients. We don't think this would be fair.

We want to give you only our best

We are very proud of our track record of helping many different clients with many different challenges. In doing so, we have come to understand the crucial components in producing outstanding creativity.

First, outstanding creative work requires good, complete input from our clients. It takes time and effort that's tough for them to justify unless they are committed to awarding an assignment. Yet without it, we can't show how good we really are. Or our best effort may well be misdirected; a great shot that hits the wrong target.

Equally important, great creativity requires enthusiasm. We need to be excited enough to pour all our energy into a project. Frankly, that's impossible without knowing whether we will be chosen to go all the way, or even get paid.

And, finally, developing creativity is very labor intensive. Although we wish it were otherwise, it seldom comes in a flash of inspiration. Rather, it usually requires research and thinking time, then the working through of many different ideas and approaches. This makes it difficult or impossible to do good work in a compressed time frame.

Speculative projects, whether done by us or some other firm, usually require cutting every creative corner. That's hardly in your best interests, or ours.

We're a small firm, in business to stay

We hope our small size is what attracted you to us. It has lots of business advantages.

Because we are small, you get to deal directly with those actually doing your work; there are no "middlemen" to muck things up. It also means we're more flexible, able to turn things around faster. We can offer better, more personal service, too. And because our overhead is lower than the big guys, so are our prices. In a business like creativity, size is seldom an advantage.

All these are reasons why we have been so successful. It may also be why you called us.

Another reason for our success is that we are good business people. We know that a small business like ours (probably yours, too) has to watch costs carefully and can't afford to give much away. If we weren't careful-if we did give away our time-it is likely we wouldn't be here next time you called, which means you'd have start all over again bringing someone else up to speed learning your business. We doubt you'd want that, and we know we wouldn't. We believe we should both be looking to build a long-term, mutually-productive and cost-efficient business relationship.

Truth is, small organizations like ours can seldom afford to accept speculative projects. If you find one that will, be skeptical. They may be desperate.

As for larger organizations and agencies, yes they can afford to do speculative projects, and often do. But that's the very point. If they do have the volume and staff that makes it a small risk for them, they're probably too big to give you the personal service and outstanding creativity you're searching for.

We hope you'll give us the opportunity sometime soon to prove just how good we really are. In the meantime, look carefully at our portfolio. The work we have done for many other clients with many other challenges speaks volumes about our abilities.

Professional Standards of Practice

LKN Media subscribes to the professional standards of practice developed for creative firms by the Creative Business newsletter.

Consultation. Except in unusual circumstances, a creative firm should make one free, introductory visit to a prospective client. Subsequent calls should be part of a billable assignment, unless both parties agree otherwise.

Speculative work. Client organizations should not ask for work to be done "on speculation"-i.e., to have the assignment contingent on approval of the work. Speculative work is subject to widespread abuse, increases prices, and is otherwise unprofessional.

Estimates & proposals. When sufficient information is provided, creative firms are expected to prepare a written estimate or proposal of assignment schedule, costs, and terms and conditions. When sufficient detailed information is not provided, it is the obligation of the creative firm to say so. If information is unavailable, pricing should be based on an hourly labor rate with frequent reviews of time expended. No assignment should be started without a signed acceptance of the estimate or proposal, or a purchase order authorization.

Billing. The client organization has the right to expect that the price on an estimate or proposal, plus additional expenses and taxes, will be the invoiced price unless otherwise appended, verbally or in writing, before invoicing.

Confidentiality. The client organization should expect that any information or material provided will be treated confidentially, and that all reasonable efforts will be taken to safeguard it. If requested, the creative firm should willingly sign a nondisclosure agreement.

Conflict of interest. Creative firms engaged in advertising and public relations should not work for two clients who are directly competitive. It is acceptable for firms engaged in other types of assignments to work with competitive clients, but not simultaneously. Where there is concern about conflict of interest, it is the responsibility of the creative firm to ask the first client if it is permissible to also accept the work of the second.

Working arrangements. Unless otherwise stipulated, every assignment is considered to comprise two equal sections: product specifics, market objectives, budget and approvals are the responsibility of the client organization; conceptual approaches, creativity, management, and production expertise are the responsibility of the creative firm.

Submissions. It is the responsibility of the creative firm to recommend what, in its professional opinion, is the best way to meet the client's objectives. Similarly, it is its responsibility to follow the direction, input, criticisms, and comments of the client organization closely.

Ownership. The final output of the creative firm becomes, after payment, the property of the client organization except in the case of illustration or photography, or where otherwise indicated. However, all preparatory materials (sketches, concepts not utilized, artwork, mechanical files, computer files, etc.) remain the property of the creative firm.

Approvals. It is the sole responsibility of the client organization to review all material before production and to attest to its accuracy.

Non use. In accordance with accepted professional services practice, the client organization is financially obligated for work done, whether or not it is utilized. In the event of dissatisfaction, the creative firm should resign at the earliest possible date and make an effort to find another firm to continue.

Measuring The True Cost of Creativity 

It is relatively easy for an organization to determine the true cost of manufactured goods-a combination of raw material, fabrication, marketing and distribution, labor, and overhead costs. Much more difficult to determine is the true cost of services. Services are labor-intensive, not capital-intensive; their value lies not so much in what they provide today as in what they contribute to the future; and comparison and evaluation are always qualitative, seldom quantitative.

Here are some things to consider when evaluating how to handle your organization's requirements for creative services.

The Need for Specialists

Being efficient and competitive in today's global economy not only requires an organization to utilize the most sophisticated of resources, but also to maintain a high degree of flexibility. The only way to accomplish both cost-effectively is to employ a core staff of managers and to supplement them with trusted outside specialists when required. This way, it is possible to employ the best possible talent at competitive costs.

Specifically, when it comes to creative services, it is nearly impossible for any organization to employ enough talented individuals-writers, graphic designers, illustrators and photographers-to handle its many different communications needs internally.

Real Versus "Company" Money

On the surface, utilizing outside vendors often seems exorbitantly costly. In fact, however, they are usually very cost-competitive, and may even be less expensive than attempting to handle the same work internally.

The reason for the appearance of high cost is that traditional accounting practices and internal budget transfers seldom reflect the true cost of internal labor.

Most commonly, internal department cross-charges only accommodate actual payroll expenses with a small factor thrown in for overhead expenses. When all costs-salaries, benefits, and overhead-are included, studies have shown that charges for outside creative vendors actually average about 5% less than the same work done internally.

Also important to consider is that except for the smallest of jobs, creative fees are always a small fraction of total job costs. Even when apparent (as opposed to actual) costs are the basis for calculation, the incremental increase in creative costs attributable to going outside is seldom more 5% to 10% on a small brochure or ad, or less than 1% on a major corporate brochure.

Keeping creative work inside for budget reasons seldom stands up to scrutiny.

Efficiency Tests

Does the necessary talent exist internally? Some communications challenges take special talent, some don't. But when talent is truly required, it seldom pays to compromise. Using well-meaning but unqualified internal staff can be very expensive in the long run-in lost efficiency and in market impact. And computers with specialized software are never any better than the talent and experience of those operating them. When effectiveness is critically important, hiring an outside specialist is always the least expensive and most productive alternative.

Will handling it internally put a strain on resources? The disruptive cost of handling an unusual or special assignment internally can be enormous. Even small assignments can wreak havoc when staff is already overloaded. When faced with a special assignment, employees typically either give it low priority, in which case it is handled poorly, or they dedicate themselves to it, in which case their regular work suffers. Unless your staff is visibly under utilized, always handle special assignments outside.

Will there be more or less control? This question is not as simple to answer as it may appear. Despite appearances to the contrary, work handled inside is usually less controllable because it is difficult to assign tough deadlines, make unpopular changes and be honestly critical. In even the best-run organizations, office politics and turf battles are a plague to productivity. When you absolutely, positively have to have it done, your way and on schedule, hire an outside vendor.

Will the project benefit from objectivity? Some communications challenges absolutely require it. For others it is not crucial. You decide. If you are looking for a fresh viewpoint, however, keep in mind how difficult it is for anyone working close to the product, or within the sponsoring organization, to recognize distinctive, customer-appealing elements. If objectivity is important, hire an objective, outside source.