Pricing policy has both immediate and long-term consequences on a creative business and has an impact not only on the economics of the enterprise but also on the perception of its products and/or services.
Prices can be derived from costs and this is a useful exercise to do, though it’s not the only way to decide how much to charge. All the direct costs must be included of course, including the cost of labour. More difficult to calculate is a proportion of the indirect costs that should be allocated to products and services - in other words, how much should the sale of each item contribute to the overheads of the business? There is no exact way to do this but there are conventions of management accountancy, which can help. Whatever method you use, income from sales must be sufficient to cover both the direct and indirect costs of producing goods or services.
One of the points I make in my training workshop 'How to Make Money While You Sleep' is that 'Ideas Don't Make You Rich". I quote multimillionaire Felix Dennis, publisher and poet, who wrote in his book 'How to Get Rich': "Ideas don't make you rich, the correct execution of ideas does." In other words, ideas are necessary but not sufficient. My workshop is about intellectual property, its creatiion, protection and commercialisation.
In terms of intellectual property rights, you cannot protect an idea, only its expression in a tangible format. These intellectual property rights can then be sold or often even better) licensed or 'rented' to make money while you sleep. My article about Guilherme Marconi, 'Don't Sell It; Rent It' is one example of this. However, what's crucial, is a feasible business model, in other words a system for turning a great idea into the generation of profit. This system can also be called a Profit Model, a Revenue Strategy or other name. And it's this that is the hard part! It involves creating your own 'Business Formula', developed into a workable strategy, plus lots of hard work, resilience, and luck. This is the hard part!
Whilst working with the creative and digital businesses in New Zealand, I had the pleasure of meeting digital media guru Helen Baxter of Mohawk Media in Wellington's creative quarter.
Helen has written about crowd-funding for Generator on The Big Idea, the home of New Zealand's creative community. Written from a NZ angle, the articles provide additional information and inspiration for creative entrepreneurs everywhere.
On the page 'Attracting a Crowd', Helen Baxter says of crowdfunding, “Without a good promotional strategy across old and new media to back up your campaign, it’s like putting a poster on your bedroom wall and hoping the world will see it.”
Related articles explain more about Planning, Platforms and Performing. Platforms mentioned include New Zealand's own Pledge Me, Australia's Pozible, as well as internationally renowned KickStarter, Rocket Hub and Indiegogo. The advantages and disadvantages of various crowdfunding platforms are set out clearly in a table on the Platforms page.
As well as a wealth of information on this Generator site, there are links to David Branin's Crowdfunding Cheat Sheet and a free eBook: The Crowdfunding Bible On Campaigns That Succeeded & Those That Failed.
Here's a fascinating interview with fashion design guru Paul Smith, who talks about many aspects of growing a creative business, including:
- How he succeeds by saying no to many potential clients, choosing only those projects which fit his brand and excite his creativity. He has (politely) rejected the opportunity to design 3 hotels, 5 mobile phones and 2 cars - and that's just in the last year!
- How he manages his company's finances and business growth in such a way that he can be selective. He avoids the pressure to constantly grow. Crucially, he manages cash flow carefully so that he has never needed to borrow money from a bank.
- How he became 'big in Japan' by being respectful of Japanese people and culture (when others were being brash), and took his time to build solid business relationships.
Creativity loves a crisis. Especially at times of crisis we need creativity. Indeed some of the most creative solutions in human endeavour have come about because of a crisis.
But what do we mean exactly, by ‘Creativity’? There is artistic creativity: the visual arts, music, literature, design, architecture, film and video, TV and radio, crafts and advertising, for example. These are the kinds of artistic creativity on which the concept of the ‘creative industries’ is based. Examples of artistic creativity are numerous and obvious: the art of Leonardo da Vinci and Michelangelo, the literature of Shakespeare, the music of Mozart. More recently there have been modern classics in design, architecture and cinema.
But there is also a more general kind of creativity, which we might call ‘ingenuity’, ‘innovation’, ‘invention’, ‘lateral thinking’, or simply ‘problem solving’. We can find this kind of creativity in all fields of human activity: for example in science, education, politics, finance, engineering, agriculture, health care and warfare.
The fact is: Creativity is everywhere.
But we have a problem of terminology. The word Creativity has two meanings (at least). This can cause confusion and can prevent us discussing creativity in the most comprehensive and useful way possible.
In the English language, the word Creativity usually implies ‘artistic creativity’. You might say that the word Creativity has been ‘hi-jacked’ by the arts sector. Hence the word is skewed towards a definition of artistic creativity and does not comfortably suit the more general meaning of creativity (ingenuity, problem solving, innovation etc). Consequently some people will say they are “not creative” meaning that they are not talented artistically, even though they might be ingenious engineers, innovative farmers or inventive educationalists. Ironically, many people who are indeed very creative don’t relate to the word ‘creativity’. And that’s what I meant when I wrote in my book: “Creativity is not the monopoly of the artist”.
So, for the sake of clarity, let’s use two words. I suggest:
“a-Creativity” for artistic creativity of all kinds; and
“i-Creativity” for the wider version of creativity: ingenuity.