How to Start a Graphic Design Business
Graphic design is an evolving field, and, thanks to the rise of online marketing, it’s in high demand. If you have graphic design skills, some knowledge of technology, and a bit of creativity, a career in graphic design could be for you. But rather than working for a design agency, you could start your own graphic design business, build up a client roster, and enjoy a career that you’re completely in charge of.
Graphic design businesses provide design services to businesses, publishers, nonprofits, and more. Design businesses can be operated on a part-time basis as a single designer or as large as an agency with dozens of designers on staff. These businesses often balance many clients with many individual projects at a time, and a single project may involve multiple meetings to discuss brainstorming, pin down an idea, assess rough drafts, and refine the design into a long-term finished product. While initial sketches may be made by hand on paper, design businesses today work almost entirely digitally.
The graphic design industry has undergone significant growth from 2014 to 2019, according to IBIS World. With increased profits, corporations are investing more in advertising, resulting in a projected 2.7 percent growth in the graphic design industry in 2019. In 2019, the graphic design industry should bring in a total of $14.8 billion. Thanks to this growth, more design businesses have been established, with 16,823 graphic design businesses in existence. The industry’s employment rate has also grown to 58,457.
Because graphic designers often work creating advertisements, designing catalogs, direct mail pieces, brand identity and ui/ux design, and other marketing material, the graphic design industry fluctuates as corporate spending on advertisement creation fluctuates. With corporate spending on advertising expected to increase in 2019, we should see a similar increase in the graphic design industry, too. Small businesses also make up a significant portion of revenues through logo design, business cards, flyers, and more.
The graphic design industry continues to evolve rapidly and today’s industry is vastly different from the industry just a decade or two ago. According to Forbes, as technology gives graphic design businesses the ability to interact with their customers online, this transformation has led to an increased demand for graphic design materials that facilitate customer communication.
The increased use of content marketing means that companies rely on graphic designers to create content, such as website headers, infographics, and other visuals, to enhance content. Many companies now use A/B testing to gauge how to get the best results from a piece of advertising or content, meaning that designers may be called on to produce multiple designs for these tests.
Evolving technology has also led to changes in the graphic designer’s lifestyle. Graphic design software is now accessible through laptops and tablets and phones, giving designers the ability to be more mobile. Companies are increasingly hiring freelance graphic designers and contractors in place of full-time in-house graphic designers, leading to plenty of opportunities for graphic design businesses, agencies, and independent freelancers.
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. A graphic design business’ prices can help to define its target market, with some companies willing to work with smaller businesses while others may target only higher businesses with large projects and large budgets.
Checklist for Starting a Graphic Design Business
If you’re thinking about starting your own graphic design business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect business name for a graphic design business can be challenging. Not only does the name have to resonate with your customers, it also has to be available to use.
Step 3: Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a graphic design business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
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!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
While many graphic design businesses start out of the owner’s home, having a location in a professional office park or similar setting may be beneficial. Not only will an office provide a more professional image, but it will also make meeting clients easier. Even if not meeting clients, a dedicated workspace outside of the home may be more conducive to getting work done.
If you are visibly operating out of your home, be sure to check local zoning laws in case a neighbor complains to the city.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
There is no licensing specific for a graphic design business, but there are some general business registrations that may be needed such as a local business license, sales tax permit, Employer Identification Number, and Occupancy Permit, among others.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a graphic design business is another. Fortunately, funding to start a graphic design business is really low but it can be difficult since most costs include computers and software. In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 15-25% towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
As the owner of a graphic design business, you can perform most of your company’s marketing on your own in order to keep expenses down. Expect to focus on marketing efforts like developing a professional portfolio and showcase on your website, social media platforms like Facebook, LinkedIn, Pinterest, and Instagram, exploring print and online advertising, and creating brochures and other printed materials for clients who visit the business in person.
While there are an almost unlimited number of services to offer, you may be better off starting off focusing on a specialty or niche. If possible, look for the type of work you like doing best and research whether there is a market for it. It is tempting to offer a wide range of services and not turn away any potential work, however, it’s really hard to market yourself against all of the other competitors who do it all too.
One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a graphic design business. A few of these include:
– General liability insurance helps to cover expenses like medical bills or lawsuit expenses if a client is ever injured while in the business’ office.
– Professional liability insurance offers additional coverage that protects a business if it is ever sued for causing financial harm to a client through omissions, negligence, copyright infringement, and other potential issues.
– Worker’s comp insurance covers expenses like an employee’s lost wages or medical bills if they’re ever injured while at work.
If you anticipate using a home office for your business, you may want to invest in in-home or home office insurance, which offers both business property and liability coverage. Most traditional home insurance policies will not cover expenses related to a home-based business.
The cost to insure a graphic design business will vary by several factors, from the location of an office to the value of the equipment that the office contains. To find the best policy for a business, request quotes from multiple insurance companies. Then, compare the coverage while paying attention to factors such as deductibles, coverage limits, and policy exclusions.
Step 10: Hire Employees
You may start out as the only person working in your graphic design business; however, there is only so much you can do in a day. Bringing in additional employees, even virtually, can help take some of the grunt work off your shoulders so you can focus your time on bigger impact items.
As a business grows and gains more clients, additional staff may be needed to keep up with the work. According to PayScale, graphic designers earn an average salary of $46,278, but they can earn as little as $31,000 and as much as $73,000. Salaries fluctuate depending on geographic location and a designer’s experience level and talent.
In addition to budgeting for salaries, there are additional expenses associated with having employees, such as paid time off, contributions to health insurance and unemployment insurance, and the cost of workman’s compensation insurance.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your graphic design business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a graphic design business?
The specific startup costs of a graphic design business will vary according to a number of factors, such as if you’re starting the business with yourself as the only designer or if you plan to hire multiple designers and need to lease office space and acquire additional computers and other technology for each designer. Starting a graphic design business can be accomplished for as little as $2,000 on the smaller scale, while larger businesses with staff and an office can cost $60,000 or more to launch.
Some common startup costs for a graphic design business include:
– Office renovations
– Computers, printers, scanners, and other equipment
– Design programs such as Adobe Photoshop, Illustrator. or Indesign
– Desks, chairs, and workstations for each designer
– Office signage
– Working capital to provide a few months worth of salary, rent, internet, utilities, etc.
These startup costs will vary according to the number of staff, the types of computers, and the types of design programs needed.
How much can a graphic design business owner make?
The advantage of going into graphic design is that you can open a business with yourself as the only employee and build from there. This arrangement means that your business can operate on less income than would be needed with multiple employees, and because you won’t need to lease an office space, it can be a money-saving option that gives you time to grow.
Data is not currently available on the annual income of graphic design businesses, but the industry continues to grow and evolve, meaning that a well-planned business could bring in significant income. Your profits will depend on the years that your business has been in operation, as well as the number of designers it employs. Graphic design businesses that target large corporations with significant project budgets will usually make higher profits than businesses that target smaller projects with smaller budgets.
It’s hard to determine how much a designer can make due to the many variables, however, most designers charge between $50 and $100, depending on the skill of the work and the number of billable hours. Most designers charge an hourly rate, though some will quote a flat-rate which can be tricky starting out as it’s easy to undercharge. It can be tempting starting out to charge a very low amount to get some customers in the door, but this can give the perception that your work isn’t well valued.
Are there grants to start a graphic design business?
It’s extremely rare to find a grant to start a graphic design business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
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 all takes time.
Graphic design experience. It goes without saying, that graphic design skills are an absolute must when starting a design business. While 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 to 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.
Troubleshooting technological issues will certainly be a required skill, and the ability to troubleshoot some more minor issues can save businesses tech support and repair expenses.
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?