The GD Business model. Time for a new one?

The other day I was talking to a couple of designers and we brought up as a topic of conversation the existing GD business model.Now I’m no MBA and certainly am not qualified to design new business models but I think it’s a fair question, for which there may or may not be an answer, as to whether or not the GD business model should be revised or changed?The old GD business models were as follows:The old print GD business model:Before the computer came along and turned it on it’s ear, this model was a very profitable one for graphic designers. Trained graphic designers were the only people who had the expertise to prepare ideas and designs for the arcane and complex offset printing process. Once ideas were finalized, they would create mechanicals which made the artwork “camera-ready” and marked those mechanicals with very specific printing instructions. Designers retained mechanicals from design projects unless clients paid large sums of money (I’ve seen as much as $5,000 for a set of mechanicals) to purchase them.

So typically, if a client wanted a reprint, they came back to the original designer. Designers also “marked-up” printing fees by as much as 15%, since they would typically choose the printer and pay them out of their own funds, only to be reimbursed by the client.Here’s the problem with that business model: design was only a small chunk of the overall revenues from typical projects. Most of the money was spent on preparing comps, production, mechanicals and printing. Once computers came along, the process of preparing files to be sent to the printer — while still sticky — was not nearly as arcane or impossible as it was prior to computers. Furthermore, printing is no longer the mystery that it once was. And printing advances now mean that clients are just as likely to ask that we simply supply them with Acrobat files of the designs for them to print themselves. No more mark-up. No more $5K for an Acrobat file.So since we never charged that much for design in the first place, rather than charging for the cost of producing the design, absent those production revenues the margins for design projects have grown shockingly thin compared to in the past.The Advertising business modelAdvertising agencies have traditionally GIVEN AWAY design work! That’s right, for FREE. As if it meant nothing at all. Why? Because advertising agencies typically charged clients a percentage of the overall media buy.Ad firms not only create the artwork but they modify them for various publications, help decide where artwork should be placed for maximum effect, and then place them accordingly. Ad firms typically charged between 15-20% of the overall ad buy. So if a company rolled out a $2 million ad campaign, the agency would get between $300 – $400K in fees.They never charged for revisions, no matter how endless, and never specifically itemized design as a significant deliverable cost. Why? Because the big bucks were in the ad buy itself. Why worry about piddly little design changes here or there?Nowadays, as more and more big and mid-sized advertisers have their own media departments, they no longer pay those percentages of ad buys. Many advertisers simply pay Ad firms to do the creative and then hand it over so that they can place the ads themselves and keep their cash in their own pockets. Many of the larger advertisers even hire away media buyers from big agencies to run their media departments.What now?So now Ad firms are stuck in the same position as GD firms: trying to find a way to make profits by charging for creative and dealing with thin margins that can be blown by demanding clients who insist on scope creep and endless revisions.Flawed business models that have been turned onto their ear due to technology and in-house media departments. Are there more ways to make money in GD? Are there revenue streams that we’re ignoring? What do you guys think?.chris{}


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