You’ve spent years honing your craft, creating jaw-dropping designs, and mastering software programs. But now, you’re itching to take that giant leap – starting your own graphic design business.
Sounds exciting and maybe a little scary, right? But there’s a twist. The journey ahead requires more than just your creative flair. You’ll be making tough decisions, solving real-world problems, and learning the ropes of business. In this guide, we’ll get down to the nuts and bolts of what it takes to turn your artistic skills into a thriving venture.
The graphic design industry consists of businesses that plan, design, and manage the production of visual communications for clients. Typical services include logo design, branding, packaging design, marketing materials, presentations, website design, mobile app design, signage, and more.
Most graphic design firms are small, independent businesses with under five employees. Larger graphic design agencies may have over 100 employees. Many graphic designers are self-employed freelancers and can be operated as a full-time business or on a part-time basis. Key clients of graphic design firms include advertisers, publishers, consumer goods companies, fashion brands, and more.
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The graphic design industry is a dynamic and competitive field, and with the rise in digital marketing and e-commerce, businesses of all sizes need graphic designers to create visually appealing content. In 2023 IBISWorld projects that the graphic design industry will generate $16.6 billion in sales, and the U.S Bureau of Labor Statistics reports that the demand for graphic designers is expected to grow 3% annually from 2022 to 2032.
The graphic design industry is characterized by a low level of market concentration, with thousands of operators ranging from freelance designers to multi-service design agencies. No graphic design agency accounts for more than 5.0% of industry revenue, and 97.5% of employer agencies employ fewer than 20 workers.
The target market for any graphic design business will depend on the business’s design style and areas of specialization. Some designers will specialize in one aspect of marketing, such as creating direct mail pieces. In contrast, others take a broader approach and offer a particular style that can be applied to a variety of materials.
In most cases, a graphic design company’s target market will consist of various businesses, but there’s also a market for designers who work with nonprofits, publishers, independent authors looking for book cover designers, and more.
Steps To Start A Graphic Design Business
Step 1: Research the Market
Before you dive headfirst into starting your business, there’s one step you can’t afford to skip – market research. You might think you know what the market wants, but assumptions can be risky. While your artistic talent and design skills are instrumental to your success, conducting market research is equally important. Market research allows you to identify industry demand, evaluate your competitors, and tailor your services to meet the client’s needs effectively.
The initial process involves taking a hard look at the existing market. Ask yourself, “Who are my potential clients?” Are you looking at local businesses, digital startups, or perhaps the gaming industry? Once you’ve identified your potential client base, you can then gauge the demand for graphic design services within that sector. Consider factors such as age, gender, income, education, and interests. Look for specific needs or pain points in your target market, and tailor your services to meet those needs. Understanding their needs, motivations, and purchasing behavior will help you develop relevant marketing messages that resonate with your target audience.
The next step is knowing who you’re up against. And in today’s digital age, that’s easier than ever. You can start by checking out online directories or listings from design associations. These platforms can give you a long list of graphic design firms, both big and small, in your area. Don’t just stop at names; dig deeper. Look at their range of services, the types of clients they have, their pricing, and even their branding. This will not only tell you who your competitors are but also give you an idea of market gaps you could fill.
Also, if you have a specialty like packaging design, research competitors and clients in that niche as well. Look for trends in the market and identify the top services in demand. This analysis helps you understand the customers’ needs and tailor your approach to meet those needs. A niche specialty can help set you apart from other graphic designers in your area.
Step 2: Write a Business Plan
While a business plan can be an optional step, it should be used as an ally for your success. By forcing you to put your ideas under the microscope, it helps refine your vision and steers you clear of potential pitfalls. The process of drafting this plan will arm you with insights and perspectives that you might not have considered otherwise.
It makes you ask hard questions and seek realistic answers. You’ll need to assess the demand for your services, identify your target market, consider potential challenges, and develop strategies to overcome them. This process serves as a reality check, enabling you to gauge whether your business idea is feasible before you invest significant time, energy, and resources into it.
For a graphic design business, this could involve scrutinizing market trends, understanding client needs, and assessing the competitive landscape. It requires you to think about your unique value proposition, pricing strategy, marketing plan, and more. By putting these thoughts on paper, you transform abstract ideas into a concrete plan of action.
One of the most eye-opening sections of a business plan is the financial projection. Here, you’ll estimate your income and expenses to determine the feasibility of your venture. For instance, you may discover that the client rates you had in mind won’t cover your operating expenses. That’s a red flag, signaling that you either need to find a way to cut costs or reconsider your pricing strategy.
Related: How to write a business plan
Step 3: Source Funding
After solidifying your market position and crafting a detailed business plan, the next big question looms: how are you going to fund your graphic design business? Funding can be one of the most challenging aspects of starting a business, but with careful planning and a clear understanding of the available options, it is a hurdle that can be overcome.
Many graphic designers dip their toes in the entrepreneurial pool by freelancing while holding down a full-time job. This approach allows you to save money and, importantly, to start building a client base. It’s like a test drive for your future business, giving you practical experience and a safety net at the same time.
Graphic design businesses can be started with very little money, but if personal savings aren’t enough, let’s look at some common outside funding sources.
Banks are a common avenue for business loans, especially when you need a substantial amount. Expect most lenders to require you to invest at least 15% of your personal funds towards the total project cost. A good credit score and sufficient collateral, like property or another tangible asset, are usually necessary as well. If a bank considers your business too risky for a conventional loan, they might still offer you one backed by an SBA (Small Business Administration) loan guarantee, reducing the bank’s risk and making them more likely to approve your application.
Friends and Family
Loved ones may be willing to help you financially, and that’s wonderful, but it can also get complicated. To protect both parties, make sure to put any agreements in writing, outlining repayment terms, interest rates, and any other conditions. It’s better to have a formal agreement than to rely on verbal promises.
If your funding needs are modest, or traditional lenders aren’t an option due to credit constraints, microloans could be the answer. Local economic development organizations specializing in microloans not only lend smaller amounts but often offer business training as part of the deal. This added guidance can be invaluable for a startup.
Step 4: Register the Business
Starting a graphic design business involves more than just creativity and technical skills; there are also legal considerations to take into account.
Choosing a business structure: The first step in setting up your business is registering a business structure. The structure you choose for your business will have significant legal and tax implications. The four main types of business structures are sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
- A sole proprietorship is the simplest structure, suitable for individuals who own the business entirely. This structure is easy to set up and has the lowest startup costs. However, it does not provide any liability protection, meaning the owner is personally responsible for all business debts and obligations.
- A partnership involves two or more people who share ownership of the business. Like a sole proprietorship, a partnership structure is relatively simple and inexpensive to establish but does not provide liability protection.
- A corporation is a separate legal entity owned by shareholders. This structure offers liability protection, but it is more complex and costly to set up and maintain.
- An LLC combines elements of sole proprietorships or partnerships, and corporations. Like corporations, LLCs offer liability protection, shielding owners from personal liability for business debts. They’re also simpler to run than corporations, making them a popular choice for small businesses.
While each structure has its pros and cons, many graphic design businesses opt for either a sole proprietorship for the cost and ease of setting up, or the LLC because it provides liability protection.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Obtain business licenses and permits: You’ll also need to obtain necessary business licenses and permits. The specific requirements can vary significantly depending on your state and even your local jurisdiction. Common ones include a local business license, seller’s permit, and Employer Identification Number (EIN).
Step 5: Set Up Operations
Starting a graphic design business can be a thrilling experience, but beyond the creative work, there’s also the operational side of the business that needs careful planning and execution. From developing your service offerings and pricing to setting up your workspace and creating a portfolio, each step plays a crucial role in the success of your business.
Before you pitch to clients or even set up your workspace, you need to define what services you’ll offer. Will you focus on logo design, branding, or perhaps web design? Once you’ve defined your services, developing your pricing strategy is next. There are several ways you could charge for your services – hourly, per project, or based on the value delivered. Each method has its advantages and challenges, so you’ll need to consider which one aligns best with your business model.
Next, consider where you’ll work. Some graphic designers prefer renting office space, while others opt for working from home or using a coworking space. Each has its pros and cons, which you’ll need to weigh against factors like cost, your specific needs, and how you work best. Once you decide, you’ll need to purchase the necessary equipment and software. This includes high-quality computers, design software, and even ergonomic furniture to make those long design sessions more comfortable.
Last, before diving into client projects, establish an internal creative process. Document the steps from initial brainstorming to the final draft. This sets the stage for consistent quality. Also, work out your quality control methods and client review system workflows. This ensures everyone stays on the same page and projects move smoothly.
Step 6: Prepare to Launch!
As you near the launch of your graphic design business, there are several remaining steps to address. The needs of every business will differ, but these are some of the key considerations.
Business insurance: This is a safeguard for you, your clients, and your assets. One common type of insurance for graphic designers is business liability insurance, which is used to protect against potential legal claims. Errors and omissions insurance is another option that covers professional mistakes or oversights.
Bookkeeping: Next, set up your bookkeeping. Proper financial management is key to the long-term success of any business. Whether you hire an accountant or use software like Wave Accounting (FREE) or Quickbooks, having a system is essential for tracking income, expenses, and taxes.
Contracts: As a graphic designer, contracts like design service agreements, intellectual property agreements, and confidentiality agreements will be crucial to protect your rights and clarify expectations with clients. A lack of a contract leaves you unprotected if disputes arise. RocketLawyer and Law Depot have free and inexpensive templates that may be helpful.
Business bank account: This helps separate personal and business finances, making bookkeeping and tax preparation easier
Hiring staff: If you’re considering hiring staff or outsourcing work, now’s the time to assess your workload and budget for additional salaries. Make sure you’re also up to speed on employment laws and regulations in your area.
Marketing strategy: Creating a marketing strategy is key to letting potential customers know about your new business. This could include creating a striking logo, developing a professional website, utilizing social media, and more. Also, put together a portfolio to allow prospective clients to easily browse your work and get a sense of your style and capabilities.
Join industry associations: Industry associations like AIGA, the Graphic Artists Guild, and the Design Management Institute can offer networking and professional development opportunities. These organizations can connect you with like-minded professionals and keep you updated on industry trends and best practices.
Common Questions When Starting A Graphic Design Business
How much does it cost to start a graphic design business?
The cost to start a graphic design business can be very inexpensive, and you may already have many of the items needed. A rough estimate of the total costs to start a small graphic design business typically ranges from $2,000 to $8,000 for basic costs like equipment, software, registration, and marketing.
The largest upfront costs are typically:
Computer: A high-performance laptop or desktop ($1,000-$2,000)
Design software: Adobe Creative Cloud subscription ($600 per year)
Website: Domain registration ($20 annually) and website design ($300-$1,000)
Printer: Decent quality color printer ($200-$600)
Other startup costs may include:
Registration & licenses: Business registration fees ($50-$500) and local business licenses ($0-$100)
Insurance: Insurance ($300-$1,000 annually)
Marketing: Business cards ($50), branding ($200-$500), and online advertising ($500+)
Office setup: Desk, office supplies, etc ($300-$500)
How profitable is a graphic design business?
The profit potential for a graphic design business can vary greatly depending on factors like location, niche, and number of clients. However, for a small graphic design studio, pre-tax profits of around $40,000 to $80,000 are realistic based on industry statistics.
A common pricing model is to charge clients 2-3x the designer’s hourly rate. For example, a solo designer billing for design work at $80 per hour (2x their $40 hourly rate) and working 40 hours per week, they would generate around $133,000 in annual revenue if booked 80% of the time.
Factoring in expenses like software, insurance, marketing, and other operating costs of around $30,000 per year, this would result in about $103,000 in pre-tax profit annually.
Of course, as a graphic design studio grows, hires staff and takes on more clients, the earning potential increases. This is a rough estimation and actual profits can vary significantly based on the specific circumstances of each business.
What skills are needed to run a graphic design business?
Starting a graphic design business doesn’t require a business degree, but to have a successful graphic design business, several skills beyond pure graphic design capabilities are needed. Learning how to find the right clients for your business, how to price your work appropriately, and how to develop relationships with clients that allow you to do your best work takes time.
Graphic design experience: It goes without saying that graphic design skills are an absolute must when starting a design business. At the same time, these skills can be self-taught, a degree in graphic design can help to prepare a business owner for the multiple challenges they’ll face in owning a business, from providing customer service to marketing their services.
Creativity: The graphic design field is highly competitive. Creativity in their design work and their marketing for their own business will help design business owners stand out from their competitors.
Technology skills: Design businesses are dependent on technology, which means a business owner needs to be skilled at using different types of technology and design programs.
Management experience: The ability to hire, train, and manage employees is important for any design business owner who plans to have staff.
Organizational skills: Graphic design businesses typically balance multiple projects with multiple clients, all with different deadlines and many different components. Organizational skills are necessary to keep projects progressing forward and to ensure that deadlines are met.
What is the NAICS code for a graphic design business?
The NAICS code for a graphic design business is 541430.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?