During the seminar, I mentioned I would “talk to you later” about some of the questions you had. Using the magic of the Internet I would like to address many of these.

I would like to share my experience of starting The Groop as a collective and how I did it.
First let’s set the baseline: What is a “Collective:”

    “Collectives, also known as “co-operatives,” “cooperatives” or “co-ops” are groups of individuals who join together to undertake an activity for their mutual benefit. Co-ops may be for-profit or not-for-profit, unionized or not, and legally incorporated or not — what’s different about a co-op is that it’s owned and operated by its members.”  Source : Backspace.com

The benefits of working as a collective are many. You have more resources to share, such as, space, equipment and supplies. Another benefit is that you have different skills, and you can promote the work of the different members. Collectives have been around for ages. A great article on Backspace.com mentions that Push Pin Studios, Pentagram and other successful design studios first started out as collectives.

So how did The Groop do it? How do you create a successful business with this model?

If Pentagram and Push Pin started out as collectives, how do I do it? “Starting out” is an interesting point. In both the case of Pentagram and Push Pin studios they become more organized companies. This brings me to the negative sides of being a collective. In my experience, unless you are unified by either a political, social or “higher cause” of sorts it is difficult to keep a group of creatives united for a long stretch. When we started The Groop we researched business models, Pentagram being one of them. I tried to recruit members to join The Groop on a more permanent basis, with no success. Most of the people I reached out to wanted a more stable situation. The question was always “What is in it for me?” Even Mary Gribbin, the co-founder of The Groop, had a regular job in early years of The Groop.  I have seen collectives here in LA slowly dissolve because one-by-one the members took regular jobs for the simple reason: they needed to pay the bills on a more regular basis.
Unless you are able to answer the question of “what is in it for me?” on a regular basis, it won’t be easy. Managing expectations is one of the hardest things to do in a collective.

This all said, starting out The Groop as a collective was the right thing. It created a strong collaborative culture that still lives on today.  So, to answer the question of how we did it, here is an outline of our history:

1. The Groop started out in 2001. Because of the .com crash, many people in our area of expertise (web) were “Freelance” and not at a company. This gave us a good pool of people with whom to collaborate.

2. We positioned The Groop as a group of highly experienced designers, strategist, information architects, animators, etc. At one point I had someone do brand strategy for me and write some great copy that described this. When a lead came in for a project, I would call up the people I thought would make a good team and ask for their availability. Once I had a team, I would present them to the potential client: show them bios and the work the team members had done in the past. This worked great for a while, but once those people took on jobs as the economy recovered it became harder to do.

3. We always highlighted the benefits of working with highly experienced people. In a clear way that related to the clients needs.

4. We paid our resources very well. We took little if no margins on the hourly rates of our team members. Keeping in mind that this was less of a true collective and more of an “Assembled Team” of freelancers. Paying well helped us get the best people we could.

5. We wrote a business plan that outlined who we were and how we worked. This first business plan was extremely important because it set the foundation for who we are today. Did the business evolve according to the plan? Not exactly. We ended up changing the plan after 2 years.

So why did we change our business model and became a more traditionally structured firm?

1. It was too difficult to assemble teams quickly. As the economy recovered the pool of resources dwindled as many people took on more permanent and stable jobs. As we grew, our clients many of whom we collaborated with on multiple projects complained that we did not have enough resources to respond quickly to their needs. This was one of the top reasons.

2. We wanted to grow and the financial model we had did not allow for that because we did not have high enough profit margins. We could not invest our profits in growth: things like equipment, office space, etc.

So we changed our business. The first step we took for this transition was to go back to the drawing board and re-write our business-plan. From scratch. Here are the steps we took:

1. We assembled an advisory board to help us change our business model. This consisted of people in our close network that had MBAs, had run similar businesses, had been our clients, were vendors or strategic partners, etc. This allowed us to get input from them on different matters that pertained to The Groop.

2. We got a simple easy to understand template for a business plan. Not a lengthy 50 page document, but a more concise 15-20 slide PowerPoint that answered all the important questions, like “How big did we want to be?”, “Who did we want to sell to”, etc.

3. We shared this plan with our advisors. I flew to New York and showed our plan to as many people as I could. I got their input, revised the plan and flew back to New York to show it to them again.

4. I called some of our competitors in LA and asked them how they ran and grew their business. You will be surprised, calling someone and letting them know that you admire their business and offering to buy them lunch if they would sit with you for 30 – 60 minutes because you want to hear their story is a quite effective way to learn about business.

5. We shared our plan with people we wanted to hire. I told them of our history, our vision for the future and how they could fit into it.

6. Based on our plan we created a quarterly goals list. It outlined what needed to be done each quarter to execute our plan. My partner and I checked that list every quarter. It included things like, revenue goals, who to hire, what legal or financial infrastructure needed to be in place. When we didn’t know how to do something on the list we called someone on our board of advisors. They proposed solutions, they gave us financial planning tools, they recommended accountants, lawyers, payroll systems. You name it, we asked.

Needless to say, some things went as planned and some things changed, but having the plan and having our quarterly goals got us here.

In summary:

1. Collectives are a great way to organize a group of creatives. But you have to have clear expectations, and a really good reason to be a collective.

2. Do your homework. Ask other people who currently have successful collectives how they do it.

3. Behave as a larger business would, and be open and clear to new clients about why you are a collective and how that benefits them.

At the end of the day there is no “right way” or “wrong way” to do a creative business. But, there is a right way to do business. These fundamental mechanics don’t change. So I encourage you to learn the language, plan the business and plan the financials!

Tags: Business, Business Planning, Collectives, How we did it

This entry was posted on Monday, February 4th, 2008 at 8:42 am and is filed under Business Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.