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    Creative, Cultural and Digital Industries Guidefor the West Midlands Region

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    g a creative entrepreneur brings with it many challenges as well as rewards and there are manyes to be tackled in setting up, consolidating and growing a business in the creative sector.

    ness Link are here to help you make your creative enterprise even more successful.

    me, business isnt about wearing suits or pleasing stockholders.about being true to yourself, your ideas and focusing on the essentials.chard BransonGroup of Companies

    Our dedicated team will help you to plan, establish, consolidate andgrow your creative business. Our people have been recruited accordingto their professional expertise and their suitability to the creativesector. This means that when they are working with your creativebusiness, they understand the particular perspectives of creativeentrepreneurs. We will help you nd the specialist expertise you needfrom our list of registered suppliers.

    Business Link offers various free services at the early stages ofyour creative enterprise, to help you to assess the feasibility of yourbusiness idea and to ensure that your enterprise is launched in thebest possible circumstances.

    Our network of specialist business advisers can help you at each stageas your business grows.

    The West Midlands Suppliers Database is a unique database of qualityassured suppliers in the public and private sectors, offering a range ofgoods and services relevant to the needs of your business.

    Business Link and partner agencies organise a range of networkingevents, to help you to develop your business by making the rightcontacts at the right time.

    Business Link can also help you with learning and training planstailored to the needs of your enterprise.

    For more information see

    www.businesslinkwm.co.ukor call

    0845 113 1234

    creative person in business, you have your own unique creativity,ambition about what you want your enterprise to become, andown ideas about what success means to you.

    ive entrepreneurs blend creativity with smart business thinkinghat is what this guide will help you to do, by providing informationxamples which are relevant to your situation as a creative person

    siness.

    reative sector accounts for 7.3% of the UK economy and isng at twice the rate of the economy as a whole. Creativity is at

    eart of the economy, not at the fringes, and your contribution asative entrepreneur plays a part in the UKs future as the worldsive hub.

    ess Link is committed to supporting the creative industries inest Midlands and to helping you achieve the success you areg for. This guide has been written especially for creative people iness and the content is tailored to the specic needs of enterprisescreative, cultural and digital sector.

    guide highlights issues you will face and provides insights and

    mation which will help you to deal with them successfully.

    an give you information on starting and developing your enterprisecreative sector, providing information for your business deliveredgh our website, publications, bulletins and other media.

    Introduction Business Link Services 1

    Contents 2

    Overview of the West Midlands Creative Industries Sector 3

    Case Study 383 Project 5

    Developing Your Creative Business introductio n 7

    Strategic Planning 8

    Understanding your Customers 12

    Case Study Stans Cafe 16

    Proting from your Ideas 17

    Case Study Gas Street Works 22

    Organisational Structures 23

    People and Skills 26

    Promoting your Products / Services 29

    Case Study Capsule 34

    Financial Management 35

    Legal and other issues 39

    Support for your Business 43

    Contact us Business Link Easy Ways to Get in Touch 47

    Cover images, left to right - Beestung Lips, Supersonic, MetalSymposium, Boredoms, SuperSonic, Pram Sonar, Evil, Chrome Hoof,Pram Sonar, SuperSonic.

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    tivity is big business. The creative industries account for 7.3% of the UK economy and the Westands is playing its part in helping Britain to become the Worlds Creative Hub.s region, creative enterprises in sub-sectors such as, design, music, computer games,

    performing arts, software and advertising account for 10% of regional employment and Grosse Added (GVA) of over 6 billion per annum.

    n owes his success to his creativity. No one doubts the need for it.most useful in good times and essential in bad.

    rd de Bonor and authority on Creative Thinking

    ector of the economy known as the Creative Industries,ural Industries or the Creative, Cultural and Digital Industries isasingly becoming recognised as a major force in the economy of

    West Midlands and the UK as a whole.

    creative industries were originally dened by the UKrnments Department for Culture, Media and Sport (DCMS) as:e industries which have their origin in individual creativity, skill

    alent and which have a potential for wealth and job creationgh the generation and exploitation of intellectual property.

    e are many sub-sectors of the creative industries and theseonstrate the breadth of the sector and help to illustrate thecular kinds of businesses involved. These include: advertising;tecture; the art and antiques market; crafts; design; designeron; lm and video; interactive leisure software; music; therming arts; publishing; software and computer games; andsion and radio.

    nited Kingdoms creative economy is the largest in the Europeann and as a percentage of Gross Domestic Product (GDP) probablyggest in the world.

    reative sector accounts for 7.3% of the UK economy, aroundillion, and is comparable in this respect to the nancial servicestry. The sector is growing at twice the rate of the economy as a

    e.

    In the new millennium, the UK faces challenges in a globalisedeconomy and the demise of traditional manufacturing and other heavyindustries is well documented. In order for the country to play to itsstrengths, the government recognises the growing importance ofthe creative sector in the UK economy and its potential impact in theinternational arena. Consequently the government is promoting Britainas the worlds creative hub and envisages creative industries at theheart of the national economy.

    In the West Midlands, the creative and cultural sector generatedan estimated Gross Value Added (GVA) of 6.6 billion in 2004, whichrepresents approximately 12.5% of GVA. Employment in the culturalsector grew by 4.8% to 236,000 in the year to 2004 just over 10% ofregional employment. In 2006, around 15% of businesses in the regionwere in the creative sector of the economy.

    Business Link is helping to develop this important sector of theeconomy in partnership with agencies such as Arts Council EnglandWest Midlands, Advantage West Midlands, Culture West Midlands, theLearning and Skills Council, Screen West Midlands as well as localauthorities in the region and a range of Higher Education Institutions.

    Reerences:Staying Ahead: the economic performance of the UKs creative industries, 2007.

    Department for Culture, Media and Sport (DCMS)

    Creative Britain. New Talents for the New Economy. BERR 2008.

    Growing the Cultural Economy in the West Midlands. Culture West Midlands. 2007

    Making the Business Case: Baseline and Growth Study of the Creative industriesin Birmingham. CURS 2007.

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    Intellectual Property (IP)This business creates intellectual property every day: brands, logos,designs, videos etc and recognises that intellectual property is at thecore of the companys business strategy. As creators of the IP, theyown what they create and their contracts with clients clarify this.Although the law is perfectly clear on the matter, clients often dontunderstand the legal position and assume that the IP will be theirs.383 Projects standard terms specify that the company owns the IPcreated and they then license it to their clients as part of the deal. Insome cases they have negotiated different arrangements according to

    clients needs and bargaining power. However in all cases the positionis clear so there is no potential for confusion or misunderstandings.

    This professional approach to contracting and IP enhances theircredibility with clients and is therefore a part of their professionalimage and corporate brand.

    Strategic SuccessThe companys attention to strategic and nancial planning, supportedby Business Link and guided by t heir business plan, has helped themfocus in the ri ght direction. As a consequence they are proud to beworking on highly-creative projects with clients such as Crowne Plaza,Holiday Inn and the BBC.

    The rst year for this creative enterprise wasnt easy but they didmanage to make a prot and used the cash to put some things rightthat had made things difcult in the early days.

    ConsolidationCompany Director John Newbold said After the rst year we choseto invest some of our prots to consolidate our position, especially onthe legal side such as contracts and our terms and conditions. Alarmbells had rung when dealing with some clients who didnt want tosign a contract or make any kind of up-front payment. With the helpof a solicitor recommended by Business Link, John and his businesspartner Sukhi drew up a detailed standard client contract and wrotea detailed Terms and Conditions document which claried matterssuch as payments schedules and ownership of intellectual property.

    It was money well spent and their professional approach towardscontracting helps them choose the best customers. At this stage theydont need to deal with everyone who contacts them and their termsand conditions help them to lter out potential nightmare customersat an early stage.

    They also took the opportunity at this stage to improve their Contractsof Employment and contracts used when engaging freelancers. Theynow have six full-time employees and bring in freelance associateswhen needed for larger jobs.

    383 Project is an award winning creative design agency based in Birmingham providing websites,branding, web design, and new media.

    With the support of Business Link, they devised a business plan which has provided them with a

    route to success and which they use as a basis for monitoring the growth of their creative enterprise.

    Case Study

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    essful creative enterprises integrate creativity and business.

    art of creative enterprise is to select from a palette of innite choices in order to drawther specic products and services with the needs of selected customers, in a way thatup nancially and is consistent with your values.

    resulting picture is a unique business formula for a successful enterprise.

    Success means different things to different people, so as a creative entrepreneuryou need to be clear about your own denition of success. In other words, you mustbe clear about where you are planning to go.

    ess for your creative enterprise may include a range of factors inon to nancial reward, such as fullling creative ambitions, stayingo personal values, and gaining recognition for your work.

    enterprise will combine these and other ingredients differently toe their own particular denition of success.

    hallenge for you as a creative person when planning andoping a business is to combine creativity with the best business, so as to turn creative talent into income streams.

    ally, this is not a matter of making a compromise betweenvity and business its a matter of getting the best of both worlds.

    guide will help you to devise a unique business formula whichines your creative talents with smart business thinking, to help youve your own version of success as a creative entrepreneur.

    ccessful creative entrepreneurs embrace both creativity and business.

    Parrishrts and Suits: A Guide to the Business of Creativity

    If one does not know to which port one is sailing, no wind is favourable.

    Lucius Annaeus SenecaPhilosopher (c.3 BC- 65 AD)

    Its not a matter o making a compromise

    between creativity and business its a

    matter o getting the best o both worlds

    Having a vision of the future is important,especially if you are working with a businesspartner or partners, otherwise its possiblethat you will all be working hard, but towardsslightly different goals. Actually writing down theobjectives of the enterprise and what the futurewill look like, helps to keep everyone inspiredand focused.

    Success should be dened as exactly aspossible, including the future size and structureof the enterprise, the types of projects to beundertaken, its ideal customers, the degree ofcreative freedom, the level of personal autonomyand the nancial reward for the business itselfand individuals involved.

    Once you are clear where you want to go, thenyou can begin to plan your Route to Success orBusiness Strategy which will become yourmaster plan for the journey.

    One of the biggest problems facing creativepeople is actually the bewildering array ofchoices available, both in terms of the creativeproducts or services you can offer and also interms of the vast number of potential customersyou could approach.

    One of the toughest challenges and mostimportant decisions you will make as a creativeperson in business is to answer two bigquestions which lie at the heart of any businessstrategy:

    1. Which specic goods or services should weoffer (from all the creative things we could do)?

    2. Which particular customers should we target(out of all those potential customers out there)?

    If you dont answer these questions, there isa danger that you can try selling everythingto everybody - and end up selling nothing tonobody.

    Many entrepreneurs have eventually found theanswers to these questions through trial anderror and have eventually found their successfulniche in the marketplace. Many others, though,have fallen along the way, having failed to nd aviable formula which connects creative integritywith nancial success.

    Strategic planning involves using your head aswell as your heart, using left-brain logic as wellas right-brain intuition, to steer your creativepassion in the direction of business success.

    Creative talent does not automatically deservebusiness success, so you need to assess all yourcreative options to decide which are likely to bethe most feasible in business terms.

    To be creative as an amateur with norequirement to make money provides

    opportunities for innite artistic freedom.However, once you take your creative talent intothe commercial arena, you will have to deal withtwo major factors competitors and customers.

    >

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    There are many creative people out there in business and so me ofthem are better than you at some particular creative activities. On theother hand, you will be better at some particular things than most ofyour competitors out there. This special thing gives you a competitiveadvantage in the market place and is one of the essential foundationsof a successful enterprise. So you need to nd which creative things youcan excel at in relation to the competition.

    Next, you must nd the answer to the question: which particularcustomers out there want the very thing at which we excel? The answerto this question will help you navigate in the direction of the mostsuitable customers the people who want your excellent creativity andare prepared to pay for it.

    Unique Business FormulaThe answers to these two questions about competitive advantage andtarget customers lead to a unique business formula for your enterprisewhich links together your creative excellence and lucrative customers.

    By focusing on this formula, and being prepared to say no toopportunities that are not in line with this business strategy, you canachieve your business goals.

    SWOT AnalysisTo help your strategic planning, you will need to analyse yourenterprises internal strengths and weaknesses and the externalopportunities and threats in the world in which you operate.

    SWOT Analysis is a technique widely used to help devise a workablebusiness strategy by combining the strengths of your business withopportunities in the marketplace, whilst avoiding threats and makingyour weaknesses irrelevant.

    Strengths and Weaknesses or CharacteristicsDepending on the challenges you face, different strengths andweaknesses of your enterprise will emerge, so a creative approachto this internal analysis of strengths and weaknesses is to use moreneutral terms and list your enterprises characteristics. You can thenask in which creative elds, in which arenas, and with which customers,do these characteristics become strengths.

    PRIMEFACTSA useful checklist to identify characteristics that are potential strengthsand weaknesses is the PRIMEFACTS checklist [Reference 1]. This isan acronym for ten factors which provide headings for your analysisof your enterprises: People, Reputation, Intellectual property, Marketinformation, Ethos, Finances, Agility, Collaborators, Talents, andStructure.

    ICEDRIPSExternal factors should be evaluated too, and a similar checklistfor identifying potential opportunities and threats is provided by theICEDRIPS checklist [reference 2]: Innovation, Competitors, Economics,Demographics, Regulations, Infrastructure, Partners and Social Trends.

    Ideally you should be looking ahead rather than just at presentcircumstances. For example, Gas Street Works (see case study, page 22)is developing new web applications to take advantage of faster broadbandspeeds which are likely to be available in the UK in the near future.

    Business GrowthA major strategic issue for creative enterprises is the question of businessgrowth.

    Some enterprises increase sales and prots by employing more and morepeople over time. On the other hand, many creative entrepreneurs choosenot to grow their business in this way, preferring to remain a sole trader orsmall team with a lifestyle business.

    Growth does not necessarily provide greater prots increased sales can bematched by increased costs, leaving the net result unchanged.

    Before growing your business, its crucial to get the business model ri ght.Obviously, a loss-making formula, when expanded, will make even greaterlosses!

    The challenges for growth include achieving scalability, in other words, how

    do you create and sell more goods or services protably, without increasingthe resources applied and the costs incurred by the same degree?

    Intellectual Property (IP)In the creative sector, intellectual property can be the key to business growthof a different kind. By using your creative talents to produce intellectualproperty, which you can retain and then license, you can increase yourincome without adding employees or other costs. J.K.Rowling didnt growher writing business by employing people, but through her own writingtalent, which produced intellectual property, which she then licensed topublishers, lm-makers etc to make her a creative millionaire.

    For more information on Intellectual Property, see Section 7 on page 17.

    Organisational StructureYour organisational structure is another factor, mentioned in thePRIMEFACTS checklist earlier, which can have an important bearing on yourbusiness strategy.

    Creative enterprises are constituted in all kinds of ways: sole traders,partnerships, private companies limited by shares, companies limited byguarantee without share capital, limited liability partnerships and even PLCs.

    Each of these structures offers advantages and drawbacks in different waysand therefore need to be considered in relation to your goals and businessstrategy. For example, the organisation structure you choose can havemajor implications for ownership and control of the enterprise, attractinginvestment and funding, and personal nancial liability for the peopleinvolved.

    For more information on Organisational Structures, see Section 8 on page 23.

    PricingPricing is an ingredient in your business strategy. Pricing policy is not just amatter of economics, making sure you fully cover all your costs and more,its also intimately connected with your market positioning and brand.

    (See Section 6 on page 12 for more information.)

    Pricing is also connected to the sale and/or licensing of the intellectualproperty in your good or services.

    (See Section 7 on page 17 for more information.)

    >

    Strategic planninginvolves using

    your head as well

    as your heart

    You need to ndwhich creativethings you can

    excel at in relationto the competition

    Pricing is not just a matter o economics;its also intimately connected with yourmarket positioning and brand

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    Business PlansThe most important thing about devising a feasible business strategy isgetting the fundamental formula right, in other words, choosing which

    creative goods/services to produce and nding a strategic t withcarefully selected customers. These assumptions about customers,competitors and your core competencies must t reality.

    Too often, business plans are written based on unrealistic assessments ofthe reality of the marketplace.

    Once these crucial pieces of the jigsaw t together to create your uniquebusiness formula, then you should write a detailed business plan.

    The best business plans are useful documents which become a routemap or pocket guide to help you on your journey to success.

    383 Project (see case study, page 5) devised a business plan which setout the key stages for the development of their creative business. Theyregard it as an organic document which grows and adapts to changingcircumstances and is the main reference point for the owners whenmanaging their enterprise.

    The best business plans provide milestones and measures of success,so that progress can be tracked as the business develops. These keyperformance indicators (KPIs) measure the most important aspects ofthe companys performance and are the business equivalent of a carsdashboard, providing the driver with essential real-time information.

    Business Link can provide expert assistance to help you devise a feasiblebusiness formula and help write a business plan for your creativeenterprise.

    In conclusion, planning your business strategy is crucial and much needsto be done, both at the initial drawing-board stage and as the enterprisedevelops and grows. Get the formula right rst by dealing with the major

    strategic issues. Then write it up into a more detailed business plan toguide you on your journey to success.

    The paradigm in the music business has shifted and as an artistand a businesswoman, I have to move with that shift.

    MadonnaRecording artist and entertainer

    Marketing is so basic that it cannot be considered a separate function.It is the whole business seen from the customers point of view.

    Peter DruckerWriter and Management Guru

    Reerences1. T-Shirts and Suits: A Guide to the Business of Creativity. David Parrish. 2005

    2. T-Shirts and Suits: A Guide to the Business of Creativity. David Parrish. 2005

    Understanding your Customers

    Customer FocusSuccessful creative enterprises are truly customer-focused, not inthe sense of putting customers in their sights (as if ring productsat them), but putting the customer at the centre of their universe sothat their entire business revolves around them. Its a fundamentallydifferent philosophy.

    Its a shift of thinking, from How can we sell what we want to create? toHow can we use our creativity to provide what customers want to buy?

    Selecting the right customers in the rst place is an essential elementof any successful business formula. Then organising your enterprisearound the changing needs of these selected clients is what marketingreally means. In other words, marketing is about putting targetedcustomers rst, at the beginning of the business process, not at theend. Your strategic customers needs have to be the whole point of thebusiness, from beginning to end. Thats why David Packard co-founderof Hewlett Packard famously said: Marketing is too important to beleft just to the marketing department. Marketing is the responsibilityof the whole business, not just the sales people at the end of the line.

    Marketing is denitely not a matter of trying to please all thecustomers all the time, but selecting the customers you can partnerwith most effectively and protably, matching their needs with yourcreative skills. Just as business strategy includes deciding what not todo, strategic marketing includes deciding which customers not to dealwith. Trying to focus on every possible customer is a recipe for failure.

    >

    Strategic and Operational MarketingThe word marketing encompasses both science and art as well as awide range of skills, but essentially it can be separated into strategicmarketing and operational marketing (also called marketingcommunications).

    Operational marketing is the more visible side which we seeevery day as consumers: advertising, PR and selling that is aboutcommunicating towards customers, telling them about products andservices.

    Strategic marketing is less visible and takes place behind closeddoors before any advertisements are commissioned. It concerns itselfwith key decisions about which products and services to produce inthe rst place, based on competition and market conditions, and onwhich customers to target. It is responsible for aligning the wholeorganisation around the needs of particular customers. I ts crucialthat strategic marketing comes before operational marketing becauseunless your initial business formula is right matching particularproducts and services with selected customers protably thenoperational marketing will fail, no matter how clever (or creative) theadvertising.

    The strategic marketing formula includes decisions about whichcustomers to serve and by implication, which ones not to deal with.Finding the right customers should not be a matter of opportunismbut a carefully considered choice at the heart of your businessformula.

    Marketing isnt just a posh word for selling. Its much more important than that. Its about knowingyour values, identifying your creative advantage, choosing a position in the market place, selecting

    customers that t your strategy, and then working in partnership with them.

    Selecting the right customersin the rst place is anessential element o anysuccessul business ormula

    6

    Beore growing yourbusiness its crucial to getthe business model right

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    Your company does not belong in any market where it cannot be the best.Philip Kotler

    Professor of International Marketing

    Bad CustomersNot all customers are good customers. Sometimes alarm bells will ringwhen a customer doesnt want to sign a contract, or is not preparedto make a payment up-front in line with your terms and conditions.Sometimes you will instinctively know that you are somehow not on thesame wavelength as a potential customer. Perhaps you dont share thesame values. For one reason or another, some customers are simplymore trouble than they are worth. The sooner you can get yourself into aposition where you can pick and choose your customers, the better!

    Listening to CustomersSo if customers are the whole point of the business, from beginning toend, its clearly not enough simply to talk at them at the end, but to listento them from the beginning. Marketing is a dialogue, not a monologue.

    Listening to customers has many dimensions but it is primarily anattitude towards customers as active partners, rather than passivetargets. This involves looking at things from the customers point ofview. Marketing can be described as being close to the customer andit includes researching the market but not necessarily the stereotypicalmarket research which can be too expensive for many creativeenterprises, especially in the early stages of business. There are manyways of listening to customers and looking at things from the customerspoint of view if you want to. If you really want to know about markets andcustomers, you can nd out through various means, indirect and direct.As well as direct (primary) research, market research also includessecondary (desk) research using published data from industry analyses,government statistics and trade journals, much of which is availablein libraries or on the Internet. More directly you can visit customers,invite them to focus groups, and watch them use your product (or acompetitors). Visit them to see how t hey work. Get customers involvedin new product development. Explore how you can help their businessesdevelop. Last but not least, listen to them and establish a dialoguethrough feedback mechanisms, focus groups, suggestions boxes, or overa lunch. Buy them a drink and get to know them. In return youll get theirgood ideas and loyalty.

    Customers PerspectivesSometimes insights emerge about what customers are really buying,which may not be what you think you are selling them. For example theapocryphal tales of the beer that was bought only because the empty canmade an excellent oil lamp in Africa; the bookstore that found nobodyreturned the voucher placed deep inside the Booker Prize-winningnovel because in reality people bought it to leave on their coffee table toimpress their friends. Such unsettling observations help you to see thingsfrom the customers point of view. What do you know about your currentcustomers, lost customers and target customers? What would you ideallylike to know? Using your creativity you can devise a way of nding out.

    Strategic, then Operational MarketingIf you have devised a business formula around a natural t betweenselected customers and the products they want, at the right price, thenadvertising and promotion becomes more a matter of informing themrather than coercing them. Theres no need for cold calling or hard sellingif youve listened to customers all along and theyve been included in theproject from the start. On the other hand, even the most persuasive (orcreative) advertising will not sell a product if its not what the customerswant and at the right price.

    In other words, if you get your strategic marketing right, then operationalmarketing becomes much easier.

    See Section 10, page 29 for more on operational marketing,

    Marketing is a dialogue,not a monologue

    Marketing is denitely not amatter o trying to please allthe customers all the time

    Not all customersare good customers

    Understanding your Customersimage - Chrome Hoof

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    Stans Cafe is well established and with the help of Business Link hasdeveloped strategic plans to achieve even greater success in the future.

    The companys core competencies are theatre skills and creativethinking; they use these to provoke and entertain audiences throughtheir stage productions.

    Market ResearchThinking strategically about business development, they alsorecognise that the skills at the heart of their enterprise can addvalue in different settings. Charlotte Martin said: We carried out afeasibility study to explore our options and market research indicatedthat businesses outside the arts and creative sector would be willingto pay us to use our skills for corporate training purposes. Thisnew business venture we hope will generate revenue to support thecompanys core work.

    A new trading companyStans Cafe has set up a separate company specically to undertake

    this corporate training and entertainment work. Business Link helpedby providing a specialist adviser on company structures. Charitiesoften set up companies as trading subsidiaries for non-charitablepurposes and this is a similar move. But Stans Cafe isnt a charity,its a Company Limited by Guarantee without Share Capital and thenew company, Stans Cafe Enterprises Ltd is constituted as a privatecompany limited by shares and Stans Cafe Ltd is t he sole shareholderin the new company. They have the same Directors serving on bothcompany Boards. Having these two separate corporate vehicles willallow them to keep both aspects of their business clearly distinct.

    Marketing CommunicationsThe companys marketing communications are focused on threekey market segments: (1) promoters, venues and festivals; (2)audiences; and (3) VIPs sponsors, funders and opinion formers.Their marketing messages concentrate on the benets the companydelivers to each of these different kinds of customers. The media theyuse to deliver those messages is chosen according to whats mostappropriate to the target market.

    Keep Overheads LowOne of the companys stated business principles is to keep overheadslow, avoiding expenditure on unnecessary costs so they can focus

    every penny on the essentials.Full-time staff are complemented by a team of associates whoare engaged on a freelance basis depending on the needs of thecompanys projects from time to time. This means they can choose theright people for each job and it also keeps xed costs down.

    Stans Cafe is a creative enterprise, thinking creatively about businessand no doubt will continue to be successful both artistically andcommercially.

    www.stanscae.co.uk

    Stans Cafe Theatre Company tours internationally from its

    base in Birmingham, and with support from Business Link onstrategic marketing and other matters, the company has builta world-class reputation for innovative theatre productions.They also recognise new business opportunities to sell theirexpertise in different arenas.

    Case Study

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    Intellectual property is at the heart of the creative industries, so all creativebusinesses need to know how to protect their intellectual property rights and then use them to generate income streams.

    As a creative entrepreneur, whether you are a designer, photographer,artist, musician, performer, jeweller, architect, writer or in one of theother subsectors, you share one thing in common with other creatives you are in the ideas business.

    Intangible AssetsThe assets of traditional businesses in the West Midlands were tangibleones and could be seen throughout the region: factories, vehicles,equipment, machinery, etc.

    In contrast, most of the value in your creative enterprise will be in itsintangible assets, such as your know-how, brands, and intellectualproperty of different kinds. The value of these intangible assets is likelyto outweigh the tangible ones on your balance sheet.

    Protecting CreativityDespite the title of this section, its important to note that ideasthemselves cannot be protected legally only the expression of those

    ideas in some recorded form. In other words, a tune in a composershead cannot be protected until it i s recorded in some way, in a musicalscript or captured on tape or disc. The idea for a novel cannot beprotected but the actual writing can.

    So intellectual property (IP) can be dened as the product of creativeideas expressed in works. [Reference 1]

    Intellectual property rights (IPR) have been described as the legalpowers associated with the ownership, protection and commercialexploitation of creative ideas expressed in works. [Reference 2]

    In practice, most intellectual property rights are protected throughcopyright, designs, trade marks or patents.

    CopyrightCopyright automatically arises as soon as an original work is created; it doesnot need to be registered. So as soon as a piece of writing is written, a phototaken or a painting painted, a copyright work has come into existence.

    Copyright applies to writing, music, lms, artwork, designs, photos, computerprograms, broadcasts, etc.

    Normally, the rst owner of a copyright work is its creator, the main exceptionbeing an employee creating something in the course of their employment.Of course copyright can be sold or given away, by agreement in writing. It isimportant to note, though, that until there is an agreement in writing to thecontrary, copyright remains with the creator. This has implications for yourterms of trade with clients as we will see later in this section.

    Although registration of copyright is not necessary to achieve legal rights, it isnevertheless useful to keep records in case of any disputes in the future. Forexample, copies signed and dated by an independent person should be kept,along with notebooks, sketches, drafts and other evidence.

    Ideas dont make you richPoet and publisher Felix Dennis wrote ideas dont make you rich, the correctexecution of ideas does. [Reference 3]

    In some ways, having the ideas is the easiest part. Getting those ideas down

    on paper, lm, canvas or a hard drive is the next part. And then using thosecreative works to make money for the creator is the real challenge for you as acreative entrepreneur.

    DesignsDesigns are protected automatically by copyright but designs can also beregistered, giving stronger legal protection in the event of a dispute overownership.

    Registering a design is one of the simplest, cheapest and quickest ways ofregistering intellectual property.

    A design could be a logo, illustration, dress, book cover, wallpaper or otherform of design. Registered Designs apply only to the appearance and form ofthings, not their functionality, which is the realm of Patents.

    Trade MarksTrade marks distinguish the goods and services of one trader as distinct fromanother and so can be described as a badge of origin to inform customersabout the source of those goods or services. Trade marks are usually words orsymbols, but can also be jingles, smells or colours. Cadburys have registeredthe colour purple as a trade mark no other chocolate manufacturer can usethis colour for their packaging.

    The purpose of trade marks is to inform consumers and to avoid deceit byunscrupulous traders. Using the reputation of another trader to sell yourgoods is known in legal terms as passing off for example adding a Nikeswoosh to cheap trainers to pass them off as the genuine article.

    Having invested creativity, time energy and money in making your goods andservices, and having built a reputation for your work, you should considerprotecting your brand through a trade mark.

    Trade marks can be registered or unregistered. An unregistered trade markcan be denoted using the TM symbol, which simply indicates that a word,phrase or logo is being used as a trade mark. However this gives little legalprotection and any dispute about its use would need to be settled using acivil action of passing off. This is complex and potentially costly as it involvesproving that you do have a reputation, someone else proted from thatreputation, and you suffered nancial losses as a result. In contrast, if thetrade mark is registered, it is much more straightforward legally to challengeany infringement.

    Registered trade marks are denoted by the symbol and it is a criminaloffence to use this symbol if the trade mark is not actually registered. Trademarks are registered for particular classes of goods, which is why Penguin canbe used as a trade mark for both books and biscuits by different companies.

    Trade marks cannot be descriptive, eg Cool Shoes or Fast Computers sinceone trader cannot have a monopoly on describing shoes or computers ascool or fast. Trade marks must be distinctive, in other words clearly signal adistinction between one traders good and anothers. Invented words, or wordsout of context, work well in this respect.

    >

    Ideas dont make you rich. The correct execution of ideas does.

    Felix DennisDennis Publishing. Publisher, poet and multi-millionaire.

    It is useul to keep

    records in case oany disputes in

    the uture

    As a creative entrepreneur,

    you are in the ideas business

    easemselves

    nnot be

    otected

    gally

    7

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    PatentsPatents cover inventions of various kinds and are most commonlyassociated with mechanical devices, but also cover pharmaceuticals,electronics and many other elds of innovation. This is a complex areaof intellectual property law and potentially the most lucrative, so youshould obtain expert advice at an early stage, before the innovation ismade public.

    Intellectual property rights can overlap so for example you couldprotect a logo through a registered design and a registered trade mark.

    Commercialising your IPYou can use intellectual property rights defensively to avoid beingripped off by others, but there are also more positive aspects to yourintellectual property rights.

    Once you have intellectual property rights, you can then actually allow

    others to use your works, in exchange for nancial income, throughthe process of licensing. In other words, not only can you stop peoplestealing your work, you can actually rent it to them. So an artist orphotographer can license others to make copies of their works, forcommercial purposes, in exchange for cash. A clothing designer canlicense their designs to manufacturers, a computer games developercan license their game for others use and a songwriter or playwrightcan allow others to perform their work in all cases in exchange for ashare of the prots or a xed payment.

    You will need to clarify the position of intellectual property in relation toyour clients. As a designer, for example, do you assign IP rights to theclient or keep them and license the client to use them. This is an areafor potential misunderstandings and confusion so you will need to haveclear terms of trade and contracts to ensure both you and your clientare clear about the legal position.

    Business Link can help you nd specialist advice aboutcontracts and your terms and conditions of trade.

    Condentiality AgreementsCondentiality Agreements or Non-disclosure agreements arelegally binding documents which ensure the condentiality of businessinformation. You may be required to sign one by a client if you need toknow aspects of their business which they need to remain condential.You can use condentiality agreements yourself when discussingyour creative projects with potential business partners, clients orsubcontractors.

    Not only can you stop people stealing your

    work, you can actually rent it to them

    I believe in IP. I believe in its value, both economic and social.I believe it should be protected, as any other property, as ameans of fostering independence, investment and autonomy.

    Jonathan I Schwartz.President of Sun Microsystems

    Making money while you sleepThis approach to using IP to develop a creative enterprise offers you amodel of business which is not solely based on your ability to continueworking.

    In this way, intellectual property rights can be used to generate incomefor yourself while you sleep, to transform you from being a creativelabourer to a creative entrepreneur. [Reference 4]

    This model is also scalable in that further income can be generatedwithout being limited by your personal capacity and availability. For

    example, a theatre company or singer can only work in one placeat a time, but through recordings or videos they can entertain manyaudiences simultaneously and generate multiple income streams.

    To some extent, this type of business can be delegated or automatedso that as a creative entrepreneur you need not be directly involved indistribution, retail or licensing. You are then free to concentrate on yourmore creative endeavours.

    By condensing creative talent into works protected by intellectualproperty rights, you can grow your business income without necessarilyhaving to grow it in terms of employees, premises or other overheads.

    Creative CommonsSometimes, for artistic or commercial reasons, you may want to allowclients and others to copy your works, perhaps for publicity purposes,provided your name stays attached, the work is not changed and it is notused for commercial purposes without your permission. In this case youmay want to use a legal contract which sits somewhere between givingaway your work into the public domain and a strict all rights reservedpolicy. The Creative Commons movement has worked with creativepeople and lawyers to provide a variety of legally-binding contracts foruse in these situations.

    For more information about Creative Commons, see their website atwww.creativecommons.org

    ConclusionSince intellectual property is so central to all creative businessesand provides signicant opportunities for wealth creation, as anentrepreneur you will no doubt nd ways to strengthen and developyour creative business by integrating intellectual property rights intoyour business strategies.

    To paraphrase David Packards comment about marketing intellectualproperty is too important to be left to the legal department. In otherwords it should play a central part in your strategy.

    This section is intended to provide general information only and youwill of course need specialist legal advice. Business Link can help yousource the right legal advice.

    You can register a design, trade mark or patent with the UK IPO yourselfbut it is wise to seek professional advice from Business Link or a lawyersince intellectual property is a specialist area of the law.

    Registration of Designs, Trade Marks and Patents in the UK takes placeat the UK Intellectual Property Ofce (UK IPO), formerly known as thePatent Ofce.

    www.ipo.gov.uk

    Reerences1. T-Shirts and Suits: A Guide to the Business of Creativity. David Parrish. 20052. T-Shirts and Suits: A Guide to the Business of Creativity. David Parrish. 20053. How to Get Rich. Felix Dennis. 20074. Creative Labourer or Creative Entrepreneur? http://snurl.com/3lu25

    Proting rom your Ideas

    Intellectual property rights

    can be used to generate

    income or yoursel

    while you sleep

    Intellectual property

    should play a central part

    in your strategy

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    Gas Street Works is a multi award-winning digital media production company serving a largenumber of high-prole clients. As well as using their creativity to help clients directly, with thehelp of Business Link they are also developing innovative products which will generate extraincome streams through the licensing of this new intellectual property.

    Based in Birminghams Jewellery Quarter and established in 2000,this creative enterprise specialises in making high-quality web andvideo communications for clients such as the Home Ofce, the NHSand Anglian Water.

    Strategic PlanningDirector Stuart Udale said: We operated without a business planfor the rst two years and nearly went under, so we decided tostrategically look towards the future and develop plans based aroundemerging opportunities. Within the last business plan producedlast year, we are now developing new products to strengthen thecompanys protability and sustainability.

    The company is positioning itself to take advantage of changes intechnology and customer requirements. The Web 2.0 phenomenonmeans that internet users no longer want or need to be passiveviewers; instead they are increasingly actively participating in the Web,for example through websites such as Wikipedia. Facebook, Flickr andYouTube. Also, faster broadband speeds are already available in theUSA and Far East and will arrive in the UK in the next few years.

    Using their creativity and technical expertise in web video, this creativeenterprise is preparing to seize this opportunity and are developingweb applications relating to the distribution of video and userinteraction with video.

    Intellectual PropertyWith the help of Business Link, Gas Street Works has developed a newapproach to business growth based on the creation and licensing ofintellectual property.

    These products will remain the intellectual property of the companywhich will then license the applications to users for an annualfee. This strategy will generate additional income in a way whichcomplements their core business. Furthermore, in contrast to theirexisting operations, this new business development is scalable - extralicensing income is not directly dependent on employing more peoplewith associated extra costs.

    Company StructureGas Street Works Ltd is owned by two founding partners who areequal shareholders and both are Directors of the company. There arecurrently nineteen employees and the business also regularly uses

    freelancers from time to time as required by the needs of particularprojects. As the number of people grows, new tiers of managementare being put into place and staff are being trained how to becomeeven more procient in leading and managing their teams.

    With specialist advice from Business Link, the company is planningahead and considering some possible new developments, includingthe appointment of non-executive directors to the Board, an employeeshare ownership scheme, and incorporating a separate company tohold the IP in their new products.

    www.gasstreetworks.com

    Case Study

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    Your creative enterprise can be set up using a variety ofdifferent legal structures, for example as a self-employedsole trader, a partnership, a limited company, or communityinterest company etc. Selecting the most appropriate legal

    structure to support your business objectives is an integralpart of your business strategy.

    There are advantages and disadvantages to all possible legal structures,so choosing the right one for your enterprise depends on the kind ofbusiness you want and what kind of success you want to achieve.

    Options include: self-employed sole trader; partnership; privatecompany limited by shares; limited liability partnership; companylimited by guarantee without share capital; and a community interestcompany (CIC).

    Options and ConsequencesChoosing a particular structure may have short term benets but longterm drawbacks, so its important to think ahead and take professionaladvice.

    There is rarely a simple right or wrong answer. Its more a caseof understanding all the options and consequences of each legalstructure. You will need to assess the extent to which each structurecould potentially support or hinder the development of your enterprisein line with your chosen business strategy.

    Some of the questions you will need to ask when selecting a structureare:

    To what extent do the founders want to retain, or share, ownershipand control?

    What types of nancial investments, grants or loans will thebusiness need?

    What are the personal nancial risks to the people involvedand how can we minimise those risks?

    Structure and FinanceIf you are seeking nancial investment from a business angel orventure capital institution, then they will want to have sh ares in yourbusiness, so the conventional private company limited by sharesoption will enable you to issue and sell shares in your business.

    On the other hand, some public sector agencies will only awardgrants to organisations which are non-prot-distributing, whichmeans that they do not distribute their prots to shareholders. Manycreative enterprises in the arts and cultural sector are constitutedas companies limited by guarantee without share capital andsince they do not h ave shares, they cannot distribute prots toshareholders. They are therefore non-prot-distributing andeligible for some grants not available to other companies. Thesecompanies are often referred to as not-for-prot though this termcan be confusing as they are allowed to make prots, though oftentheir primary motivations are non-commercial.

    Bank loans are often secured on the assets of the business receivingthe loan, but since most creative enterprises have relatively fewtangible assets which can easily be repossessed and sold, banksmay require personal guarantees from the key people involved. Thisshifts nancial responsibility from the company to the individuals

    and increases those individuals personal risks. In turn this can haveconsequences for decision making within the company since thosewith most to lose may demand the greatest inuence on businessdecisions.

    Ownership and ControlThere are consequences for ownership and control, depending onwhich structure you select. In a company without shares, therecan be no majority shareholder. As a result, all members of thecompany are equal and this can have advantages and disadvantagesin terms of decision making and the status of founder members.

    In companies with shares, the founders could, for example, have50% of shares each and agree to sell some of their shares to otherpartners who come on boa rd later. It is advisable for shareholders toaugment the companys constitution (the Memorandum and Articlesof Association) with an additional shareholder agreement whichsets out the terms for separation, buying each other out, and whathappens when one of the shareholders dies.

    >

    8

    A group of people get together and exist as an institution that we call acompany so they are able to accomplish something collectively that theycould not accomplish separately.

    David PackardCo-founder, Hewlett Packard

    There are advantages

    and disadvantages to all

    possible legal structures

    There are consequences

    or ownership and control,

    depending on which

    structure you select

    It is possible to have more

    than one legal structure

    or an enterprise

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    Limited LiabilityOne major advantage of all limited companies (and limitedliability partnerships), as distinct from sole traders and normalpartnerships, is that the liability of the members of the companyis limited. A limited company is a legal entity which is separatefrom the members individual nancial affairs, so if the companybecomes insolvent, the people involved lose o nly their investmentin the company; their personal assets will not be taken to cover thecompanys debts.

    In contrast, the personal nancial liability of self-employed soletraders and partners is unlimited since the law does not makea distinction between their business and personal affairs. In theworst case scenario, the creative entrepreneur would lose a ll theirpersonal assets to pay off business debts.

    Two structures?It is possible to have more than one legal structure for anenterprise and many businesses set up separate companies ortrading subsidiaries for particular activities, or for other reasons.

    Stans Cafe (see case study, page 15) is a theatre company whichhas set up a separate company, Stans Cafe Enterprises Ltd, toconduct training projects in the commercial sector.

    Advisers and Directors

    As your enterprise grows, you will require more professionaladvice from accountants, lawyers and consultants and in somecases it is appropriate for such individuals to become companydirectors or otherwise have a formal role within the enterprise.

    Investors and others with expert knowledge and contacts mayserve as non-executive directors on your companys Board.

    Business Link can help at the different stages of yourenterprises development.

    Crazy times call for crazy organisations.

    Tom PetersAuthor and Management Guru

    One major advantage o all

    limited companies is that the

    liability o the members o

    the company is limited

    9

    As your creative enterprise develops, you may want to expandby employing people or engaging freelancers or both. Thisinvolves learning to become a manager and leader as well ascontinuing to develop your own creative skills and those of thepeople around you.

    Appointing your rst employee is a signicant step for any business.Its an exciting time as new people come on board and you begin tobuild your team.

    At the same time, you will have legal responsibilities as an employerand its important to be fully aware of the law, and comply withregulations in terms of recruitment, employment and dealing withgrievances, disputes and redundancies.

    Employers Liability Insurance is required and as an employer youwill have to deal with HM Revenue and Customs (HMRC) in relationto employees tax deductions and both employees and employersNational Insurance contributions.

    HM Revenue and Customs provide information, including a NewEmployers Pack, which can be obtained by contacting your local ofceor the website:

    www.hmrc.gov.uk

    More information on other legal responsibilities is in Section 12on page 39.

    Some creative entrepreneurs choose not to employ other people, butinstead have a network of associates, engaging freelance contractorsfrom time to time as required by particular projects.

    Many creative rms do both; they employ some people and also usefreelancers to top up their team when required by the demands of thebusiness. The creative enterprises featured in the case studies in thisGuide have employees and also take on freelance workers as needed.See 383 Project (page 6), Stans Cafe (page 16), Gas Street Works (page22), and Capsule (page 34).

    >

    Management is efciency in climbing the ladder of success; leadershipdetermines whether the ladder is leaning against the right wall.Steven CoveyAuthor, The 7 Habits of Highly Effective People

    You will have legal

    responsibilities asan employer and

    its important to

    be ully aware o

    the law

    Many creative rms employ some

    people and also use reelancers to

    top up their team

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    Whilst there are clearly many advantages to having employeesconstantly available in the business, there are disadvantages too,particularly the impact on the enterprises xed costs. Having a monthlynancial commitment to employees means that you must nd anequally regular and reliable source of income to guarantee being able topay their salaries. If your business is seasonal, or work uctuates in anunpredictable way, then high xed costs because of employees or otheroverheads can have a serious impact on cash ow.

    For more information on cash ow and other nancial matters seeSection 11 on page 35.

    Management StructuresAs the number of employees grows, you will need to put in place somekind of management structure and as a creative entrepreneur you willnd yourself spending an increasing amount of time dealing with otherpeople in the business.

    As a creative entrepreneur you must spend more time working onthe business rather than in it, in other words directing people andestablishing systems as a manager rather than a worker. This can belikened to air trafc control, concentrating on directing planes and

    making sure they travel quickly without crashing rather than ying aplane yourself.

    As your employees become managers of other people in the business,they may require management training as it does not automaticallyfollow that someone recruited initially for their creative skills willbecome a natural manager. Gas Street Works (see case study on page22) are providing management training for their employees.

    Becoming a leaderSoon you will nd that you have become not only a manager but a leader,with employees looking to you to provide vision and direction for the team.

    The word leadership often brings to mind the worlds great leaders ofnations and movements: Nelson Mandela, Winston Churchill, MahatmaGhandi, Martin Luther King, etc. and so it can seem much too grand aterm for the boss of a ve-person design rm. However the requirementsfor leadership (as opposed to management) are still the same. Broadly

    speaking, management concentrates on telling people what to do,whereas leadership focuses on telling people where they are going, theninspiring them and enabling them to play their part in the journey.

    As a leader you will learn to use different leadership styles to suit thecircumstances and the people you are leading.

    Learning and TrainingLeadership is also about aligning the interests and motivations of eachindividual with the aims and direction of the whole enterprise. Eachperson must develop individually if they are to continue to be motivatedand make an increasing contribution to the enterprise.

    As a manager and leader you may want to help each employee to developa personal plan for Continuing Professional Development (CPD). Thislearning plan may involve training but can include many other waysto learn, for example reading, job swaps, networking and attendingseminars as well as training workshops.

    A culture of learning is much more important than a budget for training.

    Through the Train to Gain scheme, we can identify any skills ortraining needs that you or your business may have and we can suggestappropriate training courses and learning opportunities relevant to you.

    For more information on the Train to Gain servicevisit www.traintogain.gov.uk

    Business Link also works closely with Skillset and the Cultural SectorSkills Council.

    As the number o employees

    grows, you will need to

    put in place some kind o

    management structure

    A culture o learning is much

    more important than a

    budget or training

    Leadership ocuses

    on inspiring and

    enabling people

    As a creative entrepreneur

    you must spend more time

    working on the business

    rather than in it

    A leader is best when people barely know he exists, when his work is done,his aim fullled, they will say: we did it ourselves.

    Lao TzuChinese Philosopher (604 BC - 531 BC)

    People and Skills

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    that you have devised a marketing strategy, you need to communicatectively with your target customers. Use the 3Ms of Marketing: Market,sage and Medium, to select the right market segments, decide theise message for each segment, then choose the most suitable media tosmit those messages to their target audiences.

    rational Marketing (also called Marketing Communications)ws from Strategic Marketing (see Section 6 on page 12 for morels.

    e marketing rather than mass marketing techniques are moreopriate to small and medium sized enterprises (SMEs) and thises even more so to micro-businesses, including those in theive industries.

    creative goods or services wont appeal to everyone and theyneed to. So you wont want to advertise to a mass market but

    ose particular customers who want the best you can offer - andrepared to pay for it. It wont matter that the mass marketnt know about you so long as you can attract enough of the rightmers to make your business successful in your terms.

    k o budgetcreative businesses do not have a large budget for advertising.doxically this can be a good thing, because a lack of budget meansave to target promotions mo re carefully and apply your creativeing to your marketing communications as well as to producingelivering your products and services.

    unique business formula and marketing strategy will indicateh particular types of customers are most in tune with, and willingy for, your best creativity.

    at this focused level, you may still have two or three differentof customer, so you will need to deal with each of them

    rently. For example, theatre company Stans Cafe (see case study,

    16) recognises they have three types o f customers. They need tomunicate with (1) promoters, festivals and venues that connect

    to audiences, (2) the audiences themselves, and (3) VIPs keyle such as sponsors, funders and opinion leaders.

    ur creative goods or services

    ont appeal to everyone

    d they dont need to

    Use the 3Ms oMarketing: Market,

    Message and Medium

    0The 3Ms o MarketingThe 3Ms of Marketing technique will help you to be clear about whatand how to communicate to each of your key customer types. The 3Ms,(Market Message Medium) should be considered in the right order.Think rst about the customer type (market), then decide what they mostneed to know (message), and then choose the most effective vehicle(medium) to deliver that message.

    This approach will help you to be more focused and efcient in getting theright messages to the right people in the most cost-effective way.

    B2B and B2CYour creative enterprise might sell to other businesses (B2B businessto business) or to individual customers (B2C business to consumer), orboth.

    B2B is often a more complex multi-stage process involving variousgatekeepers and budget-holders in the client organisation.

    Its important to remember this distinction and understand the differentperspectives of these two different types of customers so that you cantailor your marketing messages to them accordingly.

    For example, a publisher might sell directly to readers and also toother businesses such as distributors and booksellers. The publishersmarketing messages to readers will emphasise the high literary merit ofthe books or their must-read qualities. On the other hand, to distributorsand booksellers, the publisher will emphasise the expected demand andthe trade discount available to make this a protable product to stock.

    Businesses may be looking for a longer-term relationship with you thanindividual consumers and may consequently require more evidenceof your ability to supply them reliably. This is often the case for largercompanies and public authorities which have procurement policieswhich require you to pre-qualify before being able to tender by providinginformation about your nancial track record, capacity to deliver and youradherence to relevant policies and procedures.

    Features and BenetsThe most successful marketing involves looking at things from thecustomers point of view. Often, creative people in business are soenthusiastic about their products or services that they fail to look atthings through customers eyes.

    The customer wants to know: Whats in it for me?, so we need toemphasise customer benets rather than product features.

    For example, a business customer will rightly be more concerned aboutwhether a packaging design will increase their sales than whether it willwin you an award. An individual consumer will want to know whether yourproduct will make them look good, more than about how you made it.

    The acid-test is this: if the customer is still asking So what?, thenyouve been talking features, not benets!

    >

    If you dont listen, you dont sell anything.

    Caroline MarlandManaging Director, Guardian Media Group

    The most successul

    marketing involves

    looking at things

    rom the customers

    point o view

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    Listening to customersTo understand the customers point of view, you will need to listen tothem. Any kind of dialogue with the customer will help face to faceor telephone conversations, online feedback, postal questionnairesetc. Listening rather than talking will provide insights about thedifferent ways your customers value your business. It will also provideopportunities for them to suggest improvements, enhancements oradditional products.

    Once you discover that they also value your after sales service, yourpackaging or premises, or some feel-good factor you bring to them,then you can build these extra benets into your marketing messages.

    PricingPricing is central to marketing. At a strategic level, your pricing policydenes your position amongst the competition, makes a statementabout the value you add, and denes the type of customer you need toachieve your business goals.

    At a more operational level, you will obviously need to calculate pricescorrectly to cover the direct and indirect costs of your enterprise,including depreciation to make a prot. The right price will ensureyou are making enough money to serve your customers well, listen tothem, and then develop new creative products in line with their needsand wants.

    The price your customers are prepared to pay is more closely related tothe benets they enjoy rather than your production costs. Value basedpricing encourages you to look towards customer benets such asstatus or convenience, rather than to product features or productioncosts in order to calculate the optimal price to charge.

    In fact, a high price might be a benet in itself, giving the customerthe benet of conspicuous consumption - a kind of show-off factorcommonly associated with the most expensive fashion goods andsports cars.

    Marketing Media

    Marketing media should always be chosen after deciding who youwant to communicate with and the message you want to convey.

    There is an abundance of different means of delivering your message:direct mail, leaets, emails, newspaper articles and adverts, videos,online social networks and word of mouth.

    A well-positioned article in a relevant trade magazine, onlinenewsletter or specialist website could be worth thousands of poundsin paid advertising.

    The internet and associated electronic media offer a growing range ofopportunities to communicate with your target customers. Websitesand email are now well-established, but as the internet becomesmore user-driven (the Web 2.0 phenomenon), then consumers wantto play a more active role than simply reading online advertisements.

    Online social networking is a powerful medium (eg Facebook, Bebo,Friends Reunited) and blogging allows everyone to easily and cheaplypublish their opinions. Micro-blogging from mobile phones is now acheap and easy way to communicate too (eg Twitter). Mobile phoneswith digital cameras make it possible for millions of people toparticipate online by publishing photos and videos through sites suchas Flickr, YouTube and MySpace.

    In short, we are in the age of mass electronic communications andeveryone can be involved, not just traditional broadcasters andwealthy advertisers.

    These new media open up innovative possibilities for you tocommunicate with customers and signicantly, for them tocommunicate with each other.

    Word o MouthCustomers have always talked with each other about products andservices and now word of mouth has gone electronic and global. Thisprovides opportunities for buzz marketing ie super-charged wordof mouth using electronic media with messages about products andservice carried through stories from customer to customer.

    However the new electronic media will not suit all customer types,so remember the 3Ms of marketing to communicate with yourcustomers by using the media that suit them, not you.

    A high price might be

    a benet in itsel

    Listening will provide

    insights about the dierent

    ways your customers

    value your business

    Consumers want to play

    a more active role thansimply reading online

    advertisements

    Word o mouth has gone

    electronic and global

    Promoting your Products/Services

    That which costs little is less valued

    Miguel CervantesSpanish novelist, dramatist and poet

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    Based in Birminghams Custard Factory complex, Capsule is a creative business which presentslive music, events, exhibitions and the highly-acclaimed annual Supersonic festival. Amongstother achievements they received Best Brand and Best International Business awards from theCreative City Awards in 2005.

    Capsule has brought art and interesting non-mainstream music toBirmingham since 1999, and the company continues to attract largeaudiences to their events which mi x music and art. They were votedBest Music Festival by Plan B magazine i n 2007 and their Supersonicfestival has been called the best organised and most wisely curatedfestival by the magazine.

    Business Link has helped Capsule develop partnerships with keyagencies to improve the strategic positioning of the company.

    DIY BrandingCreative entrepreneurs Jenny Moore and Lisa Meyer have builttheir business from scratch, learning a great deal along the way bydoing it themselves. Jenny explained: this DIY approach is part ofour company ethos and reected in our aesthetic. Our corporatevisual identity has a deliberate cut and paste feel about it, whichdifferentiates us from other organisations in the sector.

    In addition, Business Link has supported Capsule with specialistadvice on branding and marketing communications.

    International ScopeCapsule works internationally and through the Passport to ExportScheme, UK Trade and Investment (UKTI) helped them to make animpact at festivals overseas and make crucial in ternational contactsin foreign markets. In recent years, Capsule has been commissionedto organise the showcasing of British bands at Sonar, a leadingalternative music festival held annually in Barcelona.

    Business Link has assisted Capsule in a number of ways, includingnancial management. The people at Business Link have been reallyhelpful. They understood what we are about and have given us exactlythe support we needed, just when we needed it, said Jenny.

    They have also had support from Arts Council England.

    Flexible workorceCompany directors and shareholders Jenny and Lisa work full-timefor Capsule and they engage freelancers as required, for examplewhen promoting the annual Supersonic festival or other events whenthey need extra people or specialist skills. This exibility in theirworkforce means that they can build teams tailored to each event andbring in the most appropriate skills for any particular project. It alsohelps to keep costs to a minimum between projects.

    Training and Learning

    Attending some specic training workshops has been part of Jennyand Lisas continuing professional development but mainly they haveenhanced their expertise through practical experience and informallearning from a network of oth er people in the creative sector.

    E-commerceCapsules website and online shop sells bags, t-shirts, posters andCDs from their boutique record label Capsule Recordings. Thisonline trading provides the company with additional income to helpprotability.

    www.capsule.org.uk

    Case Study

    top - Beestung Lips

    bottom - Supersonic

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    will need to plan and manage the nancial affairs of your creativeness. Even if protability is not the only or primary objective of yourrprise, good nancial management will strengthen your business, helpbuild reserves for a rainy day, build funds to invest in new projects and

    de a sound nancial base for your creative endeavours.

    ur orecastsnancial forecasts included in your business plan will show theey and the destination expressed in nancial terms. The credibilityr business plan will depend on your forecasts of income andditure (prot and loss), cash ow, and balance sheets, backed

    th supporting information to justify the gures. Its easy to beopeful about achieving high sales income and at the same timeng costs down, so its important to be realistic deliberatelyg a dose of pessimism (perhaps somebody elses) to temperoptimism. Bank managers and other potential funders will applynsitivity analysis to your forecasts, so you should anticipate thiso it yourself rst. This involves asking what if questions, suchhat if sales are 15% less than anticipated? or What if costs rise%? If the answers to these questions indicate complete disaster,hey will be worried and so should you. On the other hand, if your

    asts are robust enough to withstand the storms of reality and theable setbacks along the journey, it will reassure outsiders and helpleep at night. Many people in business focus on sales (turnover)urely prot is a better measure. Whats the point of winning a00 contract if it costs 60,000 to deliver?! Turnover is vanity, protity as the old saying goes.

    Cash FlowThe third perspective on your accounts is your Cash Flow. This canbe reported retrospectively it is the cash ow forecast which isthe most important and useful. Your cash ow forecast will showanticipated receipts and payments, ie actual cash in and cash outof your bank account and exactly when these cash movements arepredicted to occur. Cash is Reality, as they say, and its the lifebloodof your business. Problems with cash ow have been responsiblefor closing down many businesses, both in the early years and whenthey are going through periods of expansion. Clearly, being unableto pay your bills as they fall due can prove fatal. So your cash owforecast will probably be one of the most useful tools you will use toguide your business safely towards success. Updated frequently, asnew information becomes available, it will enable you to anticipateproblems in time to avoid them, for example by chasing in cash owedto you or by arranging longer credit terms with suppliers in advance.Your contracts with clients and your terms and conditions of trade arevery important for cash ow as well as for other reasons, explainedin other sections. If your terms require customers to pay at least apercentage of the contract value up-front and agree to a clear paymentschedule, it will help to keep your cash ow healthy.

    Barriers to EntryStart-up costs for most creative enterprises tend to be relatively low,in contrast with industrial businesses which often require substantialinvestments in premises, equipment and stock. So it can be relativelyinexpensive to set up in business. The other side of this same coin isthat it is equally inexpensive for other people to set up in businessthemselves and become your competitors. Put another way, thebarriers to entry are as low for them as they were for you! Yourdefence against competitors is therefore unlikely to be huge set-upcosts; your competitive strategy will more likely be based on yourspecial creative skills and ownership of intellectual property. (SeeSection 5 on page 8 and Section 7 on page 10.)

    >

    Three windowsThe nancial affairs of any business or organisation can be observedfrom three different standpoints, each giving a different view to make upthe total nancial picture. Your Prot and Loss account (also known asthe Income and Expenditure account) shows the nancial performanceover a period of time, adjusted to take account of debtors and creditors,to give a true picture of the degree to which your business is makingor losing money. Your Balance Sheet provides a snapshot of the totalvalue of your enterprise at a particular point in time, eg the nancialyear end. It shows all assets and liabilities and the balance is the networth of the business.

    Conventional businesses have assets in buildings, equipment, stock

    etc, though this is much less likely to be the case for your creativeenterprises. Probably, the assets of your creative business will bemainly in intangible assets such as intellectual property, the value ofyour brand and reputation, and the know-how of you and your team.However it can be difcult to value these accurately and you will needto take professional advice from an accountant about valuing theseintangibles.

    The credibility o your business

    plan will depend on your

    nancial orecasts

    Your cash fow orecast will

    probably be one o the most

    useul tools you will use to

    guide your business

    The assets o your creativebusiness will be mainly in

    intangible assets

    e nancial aairs o anysiness or organisation

    n be observed rom three

    erent standpoints

    1

    e principal purpose of a company is not to make a prot, full stop. It is to make a prot iner to continue to do things or make things, and to do so even better and more abundantly.

    es Handyr, Philosopher and Management Guru.

    Turnover is vanity, prot is sanity, and cash is reality.Adage

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    Raising FundsNevertheless, you may still need to raise funds to start up your creativeenterprise. Finance could come from loans, banks or individuals,shareholders investing funds, or grants from public sector agencies ortrusts. If you are approaching any of these organisations or people forfunds, you will need to understand the point of view of the investors,their hopes and concerns, and what they expect to get out of it. A returnon investment is always required, in one way or another. Its morebusiness like to regard their money as an investment for some returnthan to think of it as support. This clearly applies to venture capitalistinvestment but in other ways applies equally to public sector grantsand soft loans, where some kind of public benet is the paybackrequired. Availability of funding will depend on many factors, includingyour organisational structure. If investors require an equity stake, thenyou will have to be constituted as a company with shares. On the otherhand, some public sector investors will only give grants to non-prot-distributing organisations, which means you will have to be constitutedas a company without shares. Your own personal nancial risk will alsodepend to some degree on the organisational structure you choose.Limited personal nancial liability is provided by limited companystructures, though sole traders and partners do not have this protectionand can be held personally liable for business debts if things go wrong.The organisational structure you choose will have some impact onfunding opportunities, nancial risk and other issues. (See Section 8 onpage 23.)

    Business Links Access to Finance scheme can provideinformation on relevant support for business and eligibilitycriteria, and can help you look at funding options for yourenterprise.

    www.westmidlandsnance.com

    It can be relativelyinexpensive to set upin business

    You will need tounderstand the point oview o the investors

    Fixed CostsAs your business grows, so too can your xed costs or overheads.Ofce or studio premises, rental of equipment and especiallyemployees add to your overheads, which you will need to pay formonthly from some reliable monthly income. If your business isseasonal or income is irregular, then high xed costs can presentproblems and cash ow needs to be managed very carefully. A goodway to defend against uctuating income is to arrange matchinguctuating expenditure, by organising your enterprise so it can growand shrink according to the volume of work available and cash comingin. Many creative enterprises bring in additional exible resourcestemporarily during busy times. One of the biggest overheads isemployees so you will need to consider carefully how to get thebalance right between employees and freelance contractors. (SeeSection 9 on page 26).

    Red TapeYou will need to deal with HM Revenue and Customs (HMRC) on

    matters of taxation for personal income tax, and possibly alsocorporation tax and VAT. As an employer you will have to set upa PAYE system to deduct employees tax and National Insurancecontributions as well as your employers NI contributions. Registrationfor VAT is compulsory when your annual turnover reaches the 64,000threshold, but you can choose to register voluntarily before you reachthis gure. There are advantages and disadvantages to doing this, soyou will want to take advice from an accountant or other professionaladviser. HM Revenue and Customs will supply information about alltax and customs matters. Contact your local ofce or visit www.hmrc.gov.uk. A good accountant will provide professional advice about allnancial matters facing your business.

    Business Link can help you understand the nancial aspectsof your business.

    Consider careully how to get the

    balance right between employees

    and reelance contractors

    You can choose to register

    voluntarily or VAT

    Financial Management

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    ng your creativity into the commercial arena means that you have to dealan array of legal issues to ensure you comply with all relevant legislation.

    ng full attention to legal matters not only protects your enterprise froml risks, but can also give you a competitive advantage.

    iness Structurehever business structure you choose will require you to complyn assortment of regulations. As a sole trader your businessersonal affairs are combined so you will be personally liable forcial and other risks. This applies also to a partnership (exceptited Liability Partnership). Partnerships need to have a clearership Agreement to govern the relationship between the businessers. If you set up a company, the company itself will need toly with relevant legislation on tax, health and safety, insurancehe companys affairs are governed by legislation in the Companiesand as a company director you will have additional responsibilities.

    Memorandum and Articles of Association of the company (MemArts) are the companys constitution and describe in detail whatompany can and cannot do, and how it runs its affairs. As aeholder in a business, you may also choose to have an additionalholder Agreement to set out with other shareholders how you will

    with different eventualities.

    more on Organisational Structures for creative enterprises, seeon 8 on page 23.

    EmploymentEmploying people brings with it a range of regulations which you willneed to comply with. Recruitment, contracts of employment, equalopportunities and anti-discrimination law, health and safety at work,maternity rights, and other matters apply to you as an employer. Youwill need to have employers liability insurance. As an employer youare responsible for deducting employees tax and national insurancecontributions through a Pay as You Earn (PAYE) scheme on behalf of HMRevenue and Customs (HMRC).

    You may use freelance contractors, associates and perhaps volunteersin addition to employees. Though these are not strictly employees youshould nevertheless consider agreeing contracts with them aboutyour working relationship. Matters of condentiality, ownership ofintellectual property and adherence to your enterprises various policiesare some of issues which could be formalised in a written contract.

    For further information see Section 9 on page 26.

    Paying ull attention to legal

    matters can give you a

    competitive advantage

    Matters o taxationcan become extremelycomplex so you will needto take the advice o aproessional accountant

    You need to have aknowledge o the law on

    intellectual property

    2

    TaxationHM Revenue and Customs (HMRC) deals with income tax, corporationtax and VAT as well as other taxation matters you will need to dealwith as a creative entrepreneur.

    HMRC are helpful and have a number of publications and informationpacks to help you get started. They also have telephone help-lines andmay give presentations and workshops on tax matters in your localarea.

    At the same time, matters of taxation can become extremely complexso you will need to take the advice of a professional accountant at anearly stage. You may also need to deal with a VAT specialist or taxplanning professional at some point as your business grows.

    For more information contact your local HMRC ofce or