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Blog: Fresh Tilled Ideas

The best and worst time to start a web design studio

Posted On: May 14th 2008
By: Richard Banfield

There are really no good business reasons to start a design studio. Competition is stiffer than ever, the hours are long, the pay is mediocre and clients can be a real pain in the neck. A design team in India or Croatia or South Africa can design a website in half the time and a quarter of the cost so why even bother? Offshore competition isn’t the only thing new studios have to worry about. They are their own worst enemies it seems. Most of the new shops will never evolve beyond doing websites for their cousin’s single shingle legal practice and the local church fundraiser because they will be so badly managed. Internal problems will still be the biggest enemy of success for any new studio.

So why is it that everywhere I turn there are new studios opening shop? Because web design is fun and necessary and important! Whether you are a hard core CSS junkie or just believe that Web 2.0 is the Second Coming you cannot help yourself from booting up and marking up. The truth is there has never been a better time to be a web designer. Ever business in the developed world needs a website, or a long overdue redesign or help promoting some new fad on the web. It’s a veritable design feast out there.

Even in these times of plenty many studios won’t succeed because we can’t make the leap from designer to business owner. Trying too hard to be a good designer is exactly the thing that kills the designer inside us. Don’t get me wrong, being a good designer is what it’s all about but there comes a time when you have to swap hats and take the role of manager and entrepreneur. In the process we all end up making the same mistakes. Here is a short guide to preventing those mistakes and to becoming a successful studio owner.

Money

Let’s start the money conversation right up front. I don’t care if you think you’re an artist and the money is just a distraction, money matters - big time. I can tell you from experience that there is no fun designing amazing websites if you’re eating toast for dinner night after night. The romanticized image of the starving artist is great fodder for movies but it sucks to live that reality.

If you are going to design something get something up front. This is a rule that cannot be broken. If a client can’t afford to (or worse, is not willing to) pay you a deposit up front you need to walk away. Failure to commit to you financially is a red flag. Until you are established and have adequate cash flow don’t work for equity either. You are not a bank. On the other end of the job you need to invoice quickly and accurately. Don’t let mistakes in the invoice become a reason for the client to delay payment. Make sure payment terms are clear in the agreement. This includes the basic payment terms, interest on late payments, change order fees, and out of scope expenses.

For designers just starting out there is a tendency to only charge for actual design work. Your time and your knowledge are your only assets at this stage so care for them carefully. Time spent in meetings, driving around to clients, sourcing stock art or icons, and general project management are all billable expenses.

Hourly vs. Project Fees

There is no easy answer to the debate whether to charge by the hour or based on project value. It depends on the client but personally I have found project fees and retainers to be a great deal more profitable if managed correctly. If you settle on hourly rates ensure you do a top-down estimate to counter your hourly aggregate estimate. For example, a project that might take 20 hours at a blended rate of $100/hr will collect only $2,000. However, if you ask the right questions upfront you might find out that the project you are about to deliver will result in a significant increase your client’s margins. This allows you to establish a true value of the work. Landing on a number between the hourly rate and the value rate will give you something you can both feel good about.

If you can’t sell get help

Selling is the hardest job in the world. It’s mostly filled with thankless tasks guaranteed with lots of rejection. It’s also the most important job in the studio. If there are no sales there is no work, simple. Most designers I meet are horrible at selling and all the training in the world is not going to change them. If you’re one of those designers find someone who loves to sell and has the energy to go out and pound the streets. Notice I didn’t say anything about needing experience. Energy is infinitely more important than sales experience for a salesperson’s success. Studies have shown that the only common characteristic across successful sales people, regardless of education, race, age or background, is perseverance. Pay them a small salary and a big commission. The best salespeople prefer working for commissions because there is no limit on how much they can earn.

Don’t sell when you are selling

This is advice for anyone in the studio. Whether you are the creative head or the business development director your best pitch is the one you never make. Let other’s pitch you. I don’t need to tell you that when a referral comes your way it’s like money in the bank. The referral is nothing more than a pitch on your behalf. Create a community of salespeople out of your clients, partners and your general network. When a new prospect asks you to respond to an RFP send over a list of references instead. Tell them very nicely that you are too busy working on a deadline to write out a ten page response to their request but they should speak to your past clients in the meantime. If you’ve done impressive work and delivered on your promises this tactic will close the prospect for you, every time.

Don’t advertise

Never ever get tempted to buy an ad in the local paper or Yellow Pages. It’s a waste of money. Your entire marketing budget should be spent on your existing clients and contacts. Send them thank you gifts and tokens of appreciation when they refer someone to you. Better yet send them a check every time they refer someone to you. Very quickly they’ll start spending more time selling you than selling themselves. If you doubt this technique try it for a month and see what happens.

References and portfolio work is what gets you more work and nothing gets more work than doing brand name work. If you don’t have either then offer a few well known local brands or high profile businesses a discounted web redesign. You’ll be amazed at how effective a mockup or screenshot is at getting a potential client’s attention. Give them a taste of what you can do for them and then draw them in for a bigger piece of work. This will allow you to build a portfolio of recognizable names while establishing a rolodex of connected clients that will refer you more work.

Being good at business makes you a better designer

Nothing will ever take the place of quality design and clean standards driven programming but it’s not enough. Understanding and mastering your own business will also make you a better designer. You’ll be more sensitive to your client’s business objectives as they relate to the design and you’ll have more credibility if you are running a successful business yourself.

This piece is only the tip of the iceberg. I highly recommend you read Kevin Potts' article on starting a design business for a more in-depth look at design startups. It covers the fundamentals of creating your own business with simplicity and clarity.