99 Designs Away From Financial Peace

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This past year or so I’ve become a pretty big Dave Ramsey fan. For much of my life I haven’t paid much attention to personal finance, but largely due to his books and radio show (as well as to Megan being a financial genius) I’ve come to be more intentional with not only how I spend money, but also how I perceive it.

All in all, I find his financial methods to be incredibly sound and have found that implementing those principles in personal finance has led to a more successful relationship with money. But Dave Ramsey does more than just teach about personal finance; he also advocates for applying the same financial principles to running a business, and both Megan and I have found greater success in our professional lives by means of following those principles.

Needless to say, I have a lot of respect for Mr. Ramsey and his financial and business principles, which is why I was a little taken aback the other day. Since I am usually working while his live show is on, I try to catch the podcast on my way home and when working out. The podcast often has podcast-specific advertisements at the beginning and interspersed throughout, ranging anywhere from board games to job posting websites.

The other day as I was driving home I was somewhat shocked to hear that he is recommending 99designs.com. In case you don’t know what that is, it is a “crowd-sourced” design site where designers compete on different design projects, from “logos and websites to t-shirts and car wraps” (as the podcast ad says).

The nature of the competition, however, is basically in the form of a contest for the main iteration of the site.

Basically, a client will open a contest for a project (say, a logo), include a creative brief, any ideas they have, etc., and then offer a price for the winning design. Once the contest opens, designers have a window of time in which to create a logo (in this case) and submit it. There is a qualifying round where the client picks the top designs (more on this later) and then a final round where the winner is decided.

(There is another iteration called “Projects” which is billed as more of a traditional 1-to1 relationship where designers can connect with previous clients from 99designs and offer quotes on follow-up work.)

Now, being a fairly staunch advocate for the free market (in lieu of any other viable alternative), I don’t begrudge 99designs their business model. Some find “spec work” inherently unethical, but I am not willing to go that far. I do, however, think it a poor model for both client and designer, and a model which only benefits the middle man (in this case 99designs).

For those unfamiliar with “spec work,” it stands for “speculative work,” which in the design field is essentially creating a design or proposal in hopes of landing a particular client and eventually getting paid. In previous decades this was a actually a fairly common model for larger agencies, which would often pour insane amounts of money into RFP’s (request for proposals) or product pitches, since the potential gain from the potential contract could be extremely (if not only potentially!) lucrative.

This, of course, was always a somewhat dubious model fraught with risk even in the pre-internet era, but in recent times has fallen into relative disuse because of increased competition, tighter marketing budgets, etc. It still occurs in some agencies and in some product spaces, but there is greatly deceasing ROI.

As I said, I don’t necessarily find spec work to be unethical per se, but I do see it as a lose-lose-win situation as far as the client-designer-broker relationship is concerned. And while I do not know Dave Ramsey’s particular reasons for recommending 99designs (beyond what is stated in the ad), I am somewhat surprised that he endorses them given his stances on business practices.

I don’t pretend to know his principles better than he does, but the following is my perspective on how an endorsement of 99designs seems to run counter to Dave Ramsey’s financial and business principles, both on the client side and on the designer side.

1. Designer: Frontloading Risk

I’ve heard numerous calls on the Dave Ramsey show where people are growing their business and have the opportunity to take on a fairly big project, but in order to do so would have to either purchase a lot of equipment or inventory that would put them in financial jeopardy or would require them to borrow the money to make the deal work. In those types of situations Dave’s sound advice is that they shouldn’t take on the up-front risk that would jeopardize cash-flow, and certainly not get in a situation that would entail debt. His reasoning is that taking on that kind of project without the resources to do so in hopes of getting paid is a good way to get in trouble, since in that situation you would be taking on all the risk. After all:

A. The client could have financial troubles where they can’t pay, and then you’d be left with inventory or equipment you can’t offload or pay for

B. The client might decide for whatever reason to cancel the deal and you’d be in the same situation

C. You could have difficulty completing the project and not only have equipment or inventory that can’t be used, but also not receive the money to pay for it

These are just a few scenarios, and of course he is absolutely right to caution against taking on this kind of risk to land a project.

Because of this, I am kind of surprised that he therefore still recommends 99designs. True, his recommendation comes at it from the client side, but given that his methodology for good business is to get into the marketplace to serve people well, I am at a loss as to why the designer side of the equation is left out.

After all, for the designer, spec work frontloads all the risk. Granted, it is usually not in the form of extra equipment or inventory, but it does entail the risk of time; namely, one must spend X amount of time on a project in hopes of getting paid when one could spend that same time on something that does pay.

Now, in some sense this is inevitable for business, and I have absolutely no problem with competition or bidding on work. The difficulty with  something like 99designs is that one is not merely bidding on a project, but usually taking a project from start to finish without any real guarantee of receiving compensation. Whereas with a bid there is some risk in not getting the project (which happens to designers all the time in bidding out projects), it is definitely nowhere near the amount of time spent designing something for a contest in hopes of winning.

For example, any bid that I give to a potential client is already backed by a certain body of work. Either they have already seen my previous work and choose to contact me on that basis, or I am providing them links to projects that I have already done. There is some amount of time involved in looking at what they want, determining if I can do it, figuring out timeframes and costs; but that is simply part of the business. Even if I don’t get the project I haven’t expended much of the effort I would be getting paid for (i.e., designing, animating, etc.).

Spec work, on the other hand, usually involves the same amount of work that I would devote to a contracted project to a project in which I have no guarantee of getting paid. In this situation I have to try to glean as much from the client’s creative brief as I can, expend the thought and effort to best communicate their brand and ethos, and then go through the steps of creating the design. It is actually not much different from a contracted design, except I am essentially doing the same amount of work for nothing.

2. Client: Marketing Misnomers

At the beginning of the podcast ad we hear:

“As a business owner, I learned early on that people will not buy from you if they do not trust you, your product and your company. Your branding is the face of your business; you can’t afford to get it wrong.”

There is a certain irony here, for while this statement is absolutely correct, the advertised means of “not getting it wrong” is actually one of the best ways of getting it wrong.

Now, that is not to say that there are not talented designers on 99designs.com. If you have 900,000 designers, there are bound to be talented people in that pool. The problem with models like 99designs actually has very little to do with the talent available, but rather more to do with the model itself.

Models like 99designs prioritize aesthetics over intentionality. These types of models reinforce the misunderstanding that good design is just about tasty visuals. To be sure, having something that is visually appealing is crucial, but mere aesthetic excellence is not the way to get marketing right, or even to avoid getting it wrong.

The misunderstanding is to perceive design and marketing as being mostly about visuals, when in fact it is primarily about problem solving. You as a business have a product or service that you want to offer the marketplace, and the problem to be solved is how to communicate what you do and who you are in a way that intentionally and meaningfully engages the marketplace. This means that a good marketing strategy- and ultimately a good brand- is reflective of not only who you are and what you do, but also the market you want to reach.

Some of this can be communicated in a creative brief, but developing a good brand is about far more than just handing off a list of bullet points to a designer. It is a lot of conversations, give-and-take, back-and-forth, so that your designer can learn the ethos of your brand and develop that into something that engages the target market.

As an example, if there is such a thing as an expert in church marketing, my wife Megan would be that. Not only does she create stunning visuals, but she gets the market, understands its trends, knows the market not just as someone coming to a project but also as someone immersed within it. She understands the culture of churches and how they want to communicate themselves, as well as how to steer them to not market themselves, even against their normal proclivities.

Any market niche has designers who specialize in that market, but places like 99designs essentially sunder that potential for specialization and marketing expertise by focusing the creative and marketing process almost entirely on the visuals. Instead of connecting with a designer who knows your market and can help you put on your best face for that market and bringing their expertise to bear upon your brand, you the client are forced into the position of becoming the marketing expert when it may very well not be your competency. You are placed into the position of choosing and paying for a brand that may have little to no connection to your culture, market or service.

Not a good way to not get it wrong.

3. Designer: Viable Business

Dave Ramsey is a fan of small businesses, and often encourages people to look for the things they are already passionate about or skilled at and turn them into a side business or even something they can do full-time. His reasoning is (as I often hear it) that in doing your own thing you often have a greater likelihood of making more than working for someone else. At the very least, the amount of money you make doing your own business is often directly related to how much effort you put into it. All of this, of course, is predicated on having a business model that is viable, a product or service that engages the market, and the actual ability to do the work.

And of course, he is right.

I have always been a fan of being an independent designer as a small business for many reasons. Firstly, of all business startups it has a very low startup cost, if any. After all, any aspiring designer who has some skill will most likely already own the tools (computer, software, for example) necessary for the career, which means the upfront costs are potentially negligible.

Additionally, given that many clients will be non-local, an independent design business can be developed on the side since there aren’t necessarily meetings to attend in person or office hours to keep. For many projects you can make your own hours and work on the projects as you have time, depending on timelines and such.

The biggest barrier to a successful design business is not simply finding clients, but finding good clients. Not all clients are created equal, and after awhile you begin to find that you kind of have to weed out good clients from bad, since even though the bad clients might pay, often the fee is not worth the hassle.

Places like 99designs can seem like good places to potentially find clients and get your foot into the design world, but turning your time into spec work is almost guaranteed to stifle your design business and keep you from finding good clients.

Your skill as a designer is certainly one of your most valuable assets, but even more so is your time. After enough time in the design world you will realize that your time is more important than what you can do, and is the most difficult part of your business to manage. All projects take time, and if you are not careful you can end up devoting too much time to projects whose payoff is out of proportion with the time spent creating.

Spec work carries absolutely no guarantee of getting paid, which places the cost of your time completely on your own shoulders. In spec work you have to spend your time (which could be spent on work that has money associated with it) creating designs that have a very low likelihood of having any financial remuneration. One might argue that if you are good enough your designs will stand out and that will increase your likelihood of winning; this may seem to be true, until you begin to look through the types of designs that clients usually pick as the winner.

Secondly, the “price” of the winning design is usually far lower than what you can get through a non-99designs client.

For example, the website home page touts $91,715,806 in payouts to date, which sounds like a huge pot of money. Who wouldn’t want a piece of that? But if you average that with the 354,551 contests to date, that means that on average you will receive only about $250 per project, assuming, of course, that you win.

Let’s assume that you spend 2 hours per project to receive $250, and that you win 5% of the contests you enter. That means you would actually be spending 40 hours on 20 contests to get $250, which comes out to $6.25/hour.

Thirdly, one reason that some tout spec work is that it can help you form relationships with potential clients. The thinking is that if you win the contest, they will be more likely to use you in the future.

This is fallacious reasoning on a couple of levels. To start, one of the things you eventually learn about attracting and retaining good clients is that good clients recognize the value of good design. That recognition- if it is not just blustering but actually a legitimate realization- will entail that they are willing to pay for good design.

This is where Dave’s endorsement of 99designs breaks down for me. It is absolutely true that good design and branding is essential for your business; he is spot-on here. However, the corollary of that importance is that you need to be willing to pay for a quality product. That doesn’t mean that you simply throw money at the problem without regard for the cost, but it does mean that finding a good designer who can put the best face on your brand usually comes at a premium.

The disconnect with 99designs is that instead of looking for a designer who can develop your brand in an intentional and high quality manner, places like 99deisgns outsource this important task to the lowest bidder. $250 average for a brand design is laughable, and it reflects the types of designers and clients who don’t understand the value of good design and branding. Developing a good brand that engages your market is not simply about visuals; if you think it is, then you still do not understand the value of good design or how it is ultimately about solving a problem.

One of the things I have come to learn over years of designing and working with all kinds of clients is that clients who are wanting bottom dollar for a design are not the kind of clients who give you work in the future. The very mentality of this approach makes it obvious, since if they are not willing to put the kind of money into their brand that they need to, they are not going to be willing to put that money into future work.

In my experience, this type of client sees a designer as a Photoshop monkey who can make visuals that they would sooner do themselves if they could. In this perspective paying a designer is done grudgingly out of necessity, rather than looking for someone who can solve a problem and bring their particular expertise to bear on it.

Nor do bottom-dollar paying clients suddenly start paying you more simply because you have a relationship with them. Generally, a client who isn’t willing to pay a premium is not suddenly going to change that stance; in fact, in my experience they often expect you to do additional work at even lower rates, either because they think you are desperate for work, think you want something to stuff in your portfolio, or think that things they think are easy or quick (which they rarely are!) should cost less.

The numbers on 99designs bear this out. If you go to the Projects section where the 1-to-1 relationship is highlighted, one will notice that $10,340,639 in invoices have been paid. Again, this sounds like a large amount of money, until you compare it to the number of projects created. On the same page they tout 83,830 projects created, which comes out to an average of $123 per project, which is less than half of the contest average. The upshot is that the potential after-contest relationship average is far worse than the average for the contest, which gives the lie to the potential benefit of forming future relationships.

4. Client: Getting a Quality Product

I am in many communities with other designers, and one running joke is how many of us end up working on projects to “fix” a design that the client got from somewhere else. Almost invariably this occurs because the client opted to “save” as much money as possible and either:

1. Tried to design it themselves

2. Gave it to a family member

3. Hired a designer who was willing to work for bottom-dollar

When evaluating these types of costs, one has to not only look at the upfront cost in getting the project completed, but also the potential costs for having to go in a different direction if the branding misses, the product doesn’t do what it’s supposed to do, etc.

For example, if you hire a designer who is willing to work for bottom-dollar, you may get something you like visually, but you may come to find it simply doesn’t work for your market for whatever reason. Not only have you sunk money into paying that designer (or not paying someone, which means spending your time or someone else’s), but you also have the cost of any materials created with that brand, the cost of time in doing a rebranding, etc. What can seem a like a cost savings upfront may actually end up costing you more in the long-run.

This becomes more evident in things like website and app design. Both of these involve a lot of specialization, and getting things right the first time costs a lot less than having to have someone competent come in to fix it later, both in terms of fees to the developer as well as lost sales and time due to delayed rollouts, loss of functionality, websites being down, etc.

Places like 99designs horrifyingly offer website and app design; if you are looking for a developer or website designer, you simply need to run away in terror.

After all, if we look at the potential payout from the designer side, we quickly realize that any designer on a site like 99designs must necessarily devote as little time to a design as possible to not only maximize the amount of contests he can enter, but also to ensure that the amount of time spent on a project is appropriate for the potential payout. I used an example of 2 hours per project, but this is actually probably a little generous. Even 1 hour per project with a 5% contest win rate equals very little average money.

The question you have to ask yourself as a potential client is this:

Do you really want your brand- which is reflective of your company and culture, which is your face in the marketplace– to have about 1 hour of work and thought devoted to it? Is that really the best way to develop your brand for the marketplace and “not get it wrong?”

If you as a client are wanting a quality product, you need to find someone who is not only competent, but also be willing to pay for that competence and expertise. Places like 99designs are simply not places to find that, and you will probably find that nothing costs more money than trying to save money by purchasing an inferior product.

5. Client and Designer: Spec Work Is The Payday Lender of The Design World

Some of Dave Ramsey’s most virulent rants are directed against the payday lending industry, and rightly so. He notes that these types of services target and take advantage of the lower economic classes, and that you simply will not find these types of businesses in areas of town that have a higher economic class. He very rightly sees payday lenders as being predatory towards the broke and the desperate, and thus entirely deserving of opprobrium since they promise help to those most in need but end up placing them into an even more untenable economic situation.

These rants are entirely justified, but I find a parallel exists between payday lenders and spec work.

Spec work is primarily aimed at designers who are starting out or who exist in markets with little work, and it promises relatively easy money for not much effort. The trap is that the bait of the contest prize keeps that designer from working on work that could actually earn money, and instead focuses effort on projects which have a low probability of resulting in remuneration.

Most successful designers realize that spec work is a dead end, and simply don’t go near it. As a result, not only do less experienced and starting-out designers get locked into a promise with no payout which can impede their eventual success, but clients also get trapped into receiving an inferior product by means of less upfront costs for design.

As I mentioned before, as far as the client-designer-broker relationship goes, this is a lose-lose-win situation, since the only one really coming out ahead is the broker, in this case 99designs.

Good designers and good clients are ideally working towards that same goal, and can create a win-win situation: the client receives a quality product and the designer receives a fair remuneration. Both are working to ensure a good design that communicates the client well in the marketplace, without the strictures and limitations of the design broker who necessarily is focused on volume over quality.

This is the relationship both designers and clients should be looking for, and the only one that has benefits for both and the potential for long-term success.

Conclusion

I still respect Dave Ramsey’s principles, which is why I simply find an endorsement like this inexplicable, since the service seems to go against the very principles he propagates. Again, I don’t know the reasons for the endorsement or any rationale behind them, nor am I willing to speculate as to motivations, but I find little consonance between his sound personal and business finance principles and endorsement of a service like 99designs.

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Jason Watson

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