With digital media increasingly becoming an essential part of all aspects of life, the ability to design a functional, user-friendly website that also looks appealing is a skill set in high demand. If you have a creative flair and are tech-savvy as well, you should read on.
In this guide, we’ll walk you through the essentials of setting up your web design business, providing an overview of the industry, actionable steps to get started, and answers to common questions..
Web design businesses provide a range of services, from creating and redesigning websites to providing ongoing updates and maintenance. Certain web design firms specialize in an area, such as e-commerce, user experience design (UX design), or app development, while others offer a wider range of services. Additionally, a web design company may also provide content marketing and search engine optimization (SEO) to increase traffic to the website.
This profession lends itself to freelancing, and you can contract for an agency or work directly with businesses. Being your own boss means you have the freedom to select your projects, but you will also have to be ready to manage your business and put in the time and effort to find potential clients.
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Web design and web development is an industry that has a low barrier to entry. You can easily start small with a minimal investment, ease yourself into being your own boss, and then grow your business from there. It’s also a business that ‘travels well’ as you can work wherever you are, as long as you have a reliable computer and internet connection.
The web design industry is growing rapidly as internet usage expands and companies focus more on digital platforms. Over the past five years, the industry has grown at an average of 2.6% per year and is expected to generate $42.2 billion in revenue during 2023.1 Also, the Bureau of Labor Statistics projects that the job market for web developers and digital designers will see a 16% increase between 2022 and 2032, which is a significantly higher growth rate compared to many other professions.2
The web design industry is largely fragmented, with no single company dominating the market. This is due to the vast number of web design firms and freelancers operating globally, offering a wide range of services.
Steps To Starting A Web Design Business
Step 1: Write your Business Plan
Not everyone who starts a web design business will write a business plan. It’s not a required step because most web design companies are started without seeking a loan or investment, but there are still good reasons for doing one. Along with the technical skills needed to run a web design business, you need to consider a range of other things like marketing, accounting, and everyday office tasks. That’s where a business plan comes in. The process of writing a business plan gives you the ability to consider all the different parts of running a business.
One of the primary benefits of writing a business plan is that it helps you work through your business concept. It asks you to define your target market, understand the industry trends, and identify your competition. With this in mind, you can craft marketing strategies, tailor your services, and identify the unique selling proposition of your business to stand out in a crowded market.
Another important section of the business plan is the financial projections, which are used to calculate the feasibility and profitability of your web design business. A business plan outlines startup costs, revenue streams, and expenses. This helps you make informed decisions regarding pricing, budgeting, and investment.
Related: How to write a business plan
Step 2: Source Funding
The next thing to consider when starting a web design business is the cost. Luckily, getting started in web design doesn’t typically require a lot of money, and you might already own most of the equipment already. As a result, the owner’s personal investment is often enough to cover startup costs. However, if your personal savings aren’t enough to cover all of the startup costs, there are several ways you could find additional funding.
One most common external sources of business funding is a bank loan. In general, banks require borrowers to put up at least 15% of their own money of the total cost of the project, have a good credit score, and be able to provide enough collateral to back the loan. If a bank decides giving you a loan is too risky, there’s another option, which is a loan guarantee from the Small Business Administration (SBA). This can make banks more willing to lend money because the government promises to pay back a portion of the loan if you can’t.
Another potential source of funding is from friends and family. This might be a good option if you don’t need a big sum of money or don’t qualify for a bank loan. If you take money from friends or family, put the agreement in writing to protect these relationships by clarifying how and when the money will be paid back.
Microloans can also be a good option, especially if you need a smaller amount of funding or can’t get a traditional loan. Microloans are small, short-term loans offered by different types of lenders, including local economic development organizations. Some of these organizations even provide business training along with the funding, which can be a nice bonus.
Step 3: Register the Business
Starting a web design business involves more than just creating websites. It also requires making your business legal and compliant with various regulations. The process can vary depending on the state you’re in, but some general steps apply to most regions.
Business Structures: There are four main types of business structures. Each comes with specific benefits, and the best structure depends on your personal circumstances.
- Sole proprietorship: This is where you alone own the business. It’s quite simple to set up and costs less than other types of structures. The downside is that you’re personally responsible for any business debts or lawsuits.
- General partnership: This is when you and one or more people own the business together. Much like a sole proprietorship, it’s straightforward to set up but exposes you to personal liability for business debts and lawsuits.
- Corporation: This structure offers protection against personal liability, but it requires more paperwork and higher startup costs.
- Limited Liability Company (LLC): LLCs combine the ease of a sole proprietorship or partnership with the liability protection of a corporation. This structure is popular among small businesses, including web design companies, due to its flexibility and 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.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!
Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!
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: Depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).
Step 4: Set Up Operations
Now that you have formulated a plan for your web design business, it’s time to kick-start the operations.
Choosing the right place to set up your business is the first aspect to cover, which includes two options: a home office or a commercial space.
A home office can be an excellent option for a new web design business. It saves costs associated with rent, utilities, and commuting. Starting at home also allows you to test the market without having to make a significant investment. Make sure you’re aware of local regulations, landlord restrictions if you’re renting, or homeowner’s association rules if you own your home.
If your business requires more room for expansion, or you believe that a professional environment will enhance your brand image, a commercial space might be the way to go. This also separates your work life from your home life, boosting productivity and creating stricter boundaries in daily routines.
With the where sorted out, take a look at the software you have and what’s still needed. AppSumo is a great resource for web developers who sell inexpensive, limited-time, long-term deals.
the what. Make sure you have the necessary software in place. Common tools for web design include Adobe Creative Suite, Sketch, and various code editors.
Last, work out which web design services you’ll offer, such as website design, e-commerce solutions, or search engine optimization. Once you have a clear list of services, set your pricing structure to reflect the value of your skills by researching what other web designers, especially those in your local area or target market, are charging for similar services. Use this information as a benchmark, but also consider your level of expertise.
Step 5: Prepare to Launch!
After the core steps of starting a web design business have been covered, several elements will probably be needed before starting the business. These will vary by individual, but here are some of the most common:
Business insurance: As a business owner, it’s a good idea to have insurance, such as general liability or professional liability insurance, to protect your business.
Hiring: Starting out, you may need people to assist with projects or provide specialized skills. Consider hiring locally or using platforms like Upwork to find freelance web designers and developers for added support.
Setting up bookkeeping: Set up an accounting system to handle daily transactions, taxes, and financial statements. You can hire a bookkeeper or use software like Wave Accounting (FREE) or Quickbooks to streamline your financial management.
Contracts: Some of the relevant contracts to consider include a client agreement, a website design agreement, and a non-disclosure agreement. Consult a lawyer to create custom contracts or templates from RocketLawyer and Law Depot.
Business bank account: Separate your personal and business finances by opening a business bank account to make managing finances more organized and simplify tax filing.
Marketing strategy: Create a marketing strategy to promote your new business. Design a logo and website to showcase your work and services and develop a portfolio showcasing your design skills and previous projects. Also, consider using social media, email marketing, and search engine optimization to reach potential customers.
Grand opening: Put a plan in place for your opening day, including promotions, social media posts, and any other events to celebrate your launch. Consider reaching out to your family, friends, and contacts to help you spread the word and support your new business.
Common Questions When Starting A Web Design Business
How much does it cost to start a web design business?
The cost to start a web design business will vary by individual, but a rough estimate for most will be between $2,000 to $10,000, depending on your existing resources. Key startup costs include:
Computer equipment: $2,500 – $5,000 for high-spec laptops or desktops, software suites, monitors, tablets, and accessories. You may already have this equipment, which reduces your initial startup costs.
Location: $1,000 – $3,000 for deposits if an office space is needed.
Office furnishings: $500 – $2,000 for desks, chairs, filing cabinets, and client seating, depending on home office vs leased space.
Marketing: $500 – $1,000 Initial costs for digital marketing (like Google Ads or social media ads), business cards, logo, and website (I’m assuming you won’t hire this out 🙂
Business registration: $50 – $500 covers entity formation and any licenses.
Insurance: $400-1,000 will provide basic business liability & errors coverage.
How profitable is a web design business?
Estimating the potential profitability of a web design business requires considering various factors, including the market rate for web design services, the number of clients you can realistically service, and operational expenses. Let’s break this down with some assumptions and industry statistics.
First, the revenue. Assume you charge an average of $2,000 for a basic website design. This rate can fluctuate based on the complexity of the project, your experience, and your location of course, but if you complete two website projects per month, your monthly revenue would be $4,000. Annually, this equates to $48,000 in revenue.
Next, the expenses. Let’s assume your ongoing monthly expenses include software subscriptions ($100), marketing ($300), and miscellaneous costs ($200). Total monthly operating expenses would then be around $600, leading to an annual expense of $7,200.
Now, let’s calculate the profit. Subtracting the annual expenses ($7,200) from your annual revenue ($48,000) results in an annual profit of $40,800.
What skills are helpful when running a web design business?
Running a successful web design business requires a blend of technical, creative, and business skills. Here are some key skills that can be helpful:
Credentials and competence: Your project work, additional certifications, and professional memberships from organizations like the American Webmasters Association and Professional Association of Design will help back up your web design skills.
Graphic design: A good sense of aesthetics and the ability to create visually appealing designs is key. This includes understanding color theory, typography, layout, and branding.
Project management: Being able to manage multiple projects at once, meet deadlines, and keep clients updated is important. Tools like Asana or Trello can help with this.
Communication: Excellent communication skills are essential for understanding client needs, presenting your ideas, and dealing with feedback.
Sales and marketing: These skills can help you attract new clients and sell your services effectively.
What is the NAICS code for a web design business?
The NAICS code for a web design business is 541511, which is classified under Custom Computer Programming Services. Other industries listed in this code include software development, computer programming services, computer software support services, software analysis, and others.
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.