Challenges Within The Creative Industries

At Populous World, it is our fundamental goal to draw attention to under served SMEs. Our product is simple, to provide quick, short term cash funding for businesses that stumble upon working capital shortfalls, or experience a roadblock when it comes to advancing their operations or growth.

Although our aim to alleviate cash flow problems is clear, I want to dive into the depths of the challenges in which businesses face, particularly within the creative industries.

Since joining Populous World in early 2018, I have submersed myself in capturing the culture of the invoice finance sector and getting to know it inside and out. An industry still relatively unknown to SMEs, the advantages can be outlined very simply;

Invoice finance services for small businesses has many rewarding benefits, which helps entrepreneurs to acquire fundamental working capital for optimal company growth and expansion, especially for businesses that require steady cash flow.

Once I became fully disciplined with the process and benefits that invoice finance has to offer, I then started to steer my knowledge further towards the specific details in terms of the challenges SMEs find hard to overcome, ultimately leading them to the use of alternative funding.

For the purpose of this article, I want to spotlight on a sector that captivates me the most, the creatives. Whether this is a creative content agency, a production company, marketing & advertising, a publishing house or a model agency, it constantly amazes me how much content and creativity is produced by innovative entrepreneurs and artists on a daily basis. Living in this millennial era is telling us a lot, mainly that people are more drawn towards visual content than traditional forms of media such as reading long-winded articles, (except for this one).

The UK is undoubtedly a world leader when it comes to entrepreneurship and according to the CIC (Creative Industries Council), creative industries in the UK contribute more than £100bn a year to the economy. It also reports that the number of jobs in the UK creative industries has topped two million for the first time under the current system of counting after expanding faster than the rest of the economy in 2017.

When creative jobs that are outside the creative industries are also added in – to calculate the total of the UK’s so-called creative economy – the total figure has reached 3,121,000. This represents a 2.8 percent rise year on year.

Since 2011, the UK creative industries workforce has added almost half a million jobs – an increase of approximately 28 percent. This makes it the fastest growing in the employment of all the sectors overseen by the Department for Digital, Culture, Media, and Sport between 2011 and 2017. Viewed on the last year alone, the creative industries grew jobs slower than smaller sectors such as the culture sector, digital segment or civil society, which comprised charities and non-profits.

We can often wonder why this industry is ever evolving and popular. A sign of the times suggests that it has become easier to be professionally creative. Entire industries erupted around talent in the 20th century, allowing people to earn a crust by expressing their imaginations. Words, images, music, blogging, and video content; anything and everything can be created, uploaded, shared, distributed and consumed online, so easily accessible to anyone with a phone. And while this level of access is an amazing thing in many ways, the value placed on creativity has plummeted and the pressure has intensified on creative individuals as a result.

Bold and Creative comes with conditions

To be bold and creative comes at a cost and presents many risks, particularly when you are self-employed or a director of an agency.

When speaking to an expert from the creative industry, Farah Annut, Founder of Oddity Studios, expressed to me the challenges she faces on a daily basis:

“The challenges and adversities I have faced so far are from both ends of the spectrum; (either from larger corporate entities or small startups), there is a constant battle of a value proposition. After this, is image licensing – in a nutshell, companies who want to own full buyout rights for images need not be sneaky with contracts and negotiations.

‘Content’ is the buzz word amongst brands but many companies are still stuck in the past, implementing marketing budgets in traditional formats and injecting very little online. Putting my company aside, this doesn’t make sense from a business development standpoint and something I no longer justify to clients – either they are aware or they will eventually fail for lack of relevance.

To be quite frank, I believe larger companies exploit SMEs by undervaluing their work and always seeking shortcuts.
The creative industries should be cherished and nurtured, for our innovative and creative solutions help translate your idea into visual identity”.

Since there is so much content flooding the internet, competition has increased significantly for talented creatives such as Annut, leading to the concept that most freelancers should do a lot of their work for free just to get their foot through the door with credible brands or agencies. The promise of ‘exposure’, no matter how minor, can be enough to lure start-up creatives into underselling themselves, and in doing so leaving everyone in their industry worse off. After having an in-depth chat with Annut, it is clear that the problem of payments is always the hinderance of a business.

Annut expressed that in her everyday agenda, someone is either waiting for an invoice to be paid, waiting on their client to pay before they can pay themselves and their staff, or disputing with a brand about the quality or agreement with the work that the creative has produced after initial terms had already been agreed prior to any work completed. With this in mind, I often wondered how on earth companies in the creative sector can even survive. Imagine doing months of work for free, having an empty bank account and not being able to afford basic expenses. It is no wonder that people who want to set up a creative business are usually those with investment or a privileged background behind them.

More concerning is the pattern of the ‘race to the bottom’, which emphasizes on the extent of competition in the freelance creative marketplace, whereby individuals and startups are being forced to work for lower rates of pay. Throw in the idea of working for nothing in exchange for ‘exposure’ and the whole creative landscape can seem impossible to break through.

How Invoice Finance can help

Creative businesses can extract some of the inherent benefits of invoice finance including quick and simple access to working capital, reducing the risk of late payments and bad debts.

Most SME’s choose to sell their invoices on a regular basis, thereby improving cash flow, providing predictability, and strengthening their position to take on new opportunities. This type of funding can significantly help companies such as Oddity Studios, as it will allow the business to release cash against their outstanding invoices and putting that money into sustaining, creating new content for new clients and freeing up time to take on new projects.

Businesses naturally gravitate to the banks and short-term business loans are one of the most traditional routes to finance available and frequently the option that business owners consider first, but often there are financial barriers that come with its lending terms.

Most entrepreneurs are not aware that they can sell their accounts receivables in exchange for immediate payment. However, invoice finance is an alternative now commonly used by an array of different companies and serves a very simple, but critical, purpose: it reduces the time between providing a service (or selling a product) and getting paid. This strategy improves your cash flow and allows you to meet expenses.

This type of funding is flexible and does not have the qualification requirements of a conventional bank loan. These aspects of accounts receivable financing abundantly appeal to SME’s with great potential but without a lot of tangible assets. Bank loans, however, can be expensive and inflexible as the business borrows a lump sum that has been agreed with the bank. It may subsequently become apparent that not all of the loan is required or that the business needed more than it initially thought.

Invoice finance is a great alternative to traditional banks to boost your working capital and cash flow. One of the considerable attractions of invoice finance is that it gives businesses access to funds as soon as the invoice is raised by releasing around 95% of the value of the invoice, something that we at Populous World excel at.

This is the part of Populous World that I find the most rewarding, being able to help creative businesses to grow and do what they do best – create exceptional and avant-garde content to showcase to the world.

Lou Chan.