If you’re like
thousands of other designers, programmers and other creative
professionals out there, at one point in time you’ve considered
starting your own business. Unlike most, you’ve gone against common
sense and decided to open shop for yourself. And not just freelance
full-time, mind you, but file for the company name, get some
stationery, and wade through the legal mumbo-jumbo. Maybe even get
a real office with a water cooler.
This article offers
real-world advice from the trenches of a small start-up, and is
applicable to designers, web developers, copywriters, usability
experts and all manner of service providers. Freelancers take heed:
there are several items that are just as pertinent to your
profession.
Write a Business Plan
The most important
thing you can do to prepare for starting and operating your own
business. Developing a business plan requires a lot of time and
energy, but it’s invaluable for one primary reason — it forces you
to come to terms with your business idea. You must decide how you
will generate income, what your expenses will be, who your
competitors are, and most important, WHAT YOUR BUSINESS DOES. This
may seem obvious to you now, but write it down. Think about it.
What sets your business apart? What service do you offer that is
superior or unique? What’s going to put you ahead of the
competition?
Beyond the mental
exercises, a good business plan will give you a much better chance
of getting a small business loan from a bank than walking in and
saying, “I like Photoshop and maybe a can do some websites or
something. Gimme money.”
A few years ago, new age business rhetoric said forget the
business plan and just run with it. Obviously, that didn't work out
so well, so if you go that route, God bless you. The business plan
exists for a reason. There are libraries of books written on them
and huge websites devoted to developing good ones. Some
resources:
Take a few weeks and develop a strong and thought-out plan. Give
it to friends, co-workers, even family to read. Your business will
be immeasurably stronger because you took the time for this
step.
File for a Fictitious Name
A fictitious name (called a doing-business-as or DBA in some
states) is the government’s term for your company name. If you
choose HyperGlobalMegaSoft as the start-up’s name, it has to be
registered with the state to ensure no one else is using it. This
will cost about $100, but prevents you from accidentally using
someone else’s registered name, or from someone else using YOUR
name. Also note that two companies can usually register the same
name for different industries. For instance, Luigi’s (design
studio) and Luigi’s (pizza joint).
Note the fictitious name is not the same thing as a registered
trademark. A trademark involves a whole separate process, more
paperwork and additional fees. Unlike a fictitious name, however, a
trademark is not required.
Funding
This is a pretty involved topic, and enough books and articles
have been written about it to make for years of boring bathroom
reading. Advice in a nutshell: start the business with your own
savings or borrow from a bank. I highly recommend the former or a
combination that includes it, since it makes you pinch your pennies
a little more. If you go the bank route, make sure the business
plan is polished to a high shine. This may be a good time to hire a
professional business plan writer/editor.
There is one Golden Rule: Don't borrow money from family or
friends. 99% of the time, you won't be able to pay them back, and
on the off-chance you are, it won't be for months or years. The
amount is irrelevant; $1,000 or $100,000 can quickly create bad
blood.
Get an Accountant
In starting your business and maintaining its future financial
health, there is no greater ally than an accountant. He or she (or
they if you go with a firm) will be able to give advice on
innumerable aspects of your new venture. They can advise on what
type of business entity to
start with, setting up bank accounts, a means of invoicing and
collecting, and more. Most importantly, they also guide you on
paying taxes properly and punctually.
Brief advice on accountants:
- Go with an accountant or a firm in your state. Each state has
different laws.
- Make sure the accountant knows business taxes. Do not hire a
family-oriented accountant.
- Unless, you are really, really strapped for cash, hire an
accountant who is not a family member. While it may be tempting to
get a family discount, it is better to have an unbiased viewpoint
about your finances, and also better to keep your family’s nose out
of your funds in general.
- Try to trade services! Maybe your accountant wants a new logo,
website, or brochure.
Start with a Partner
If you can, start the business with a partner. This person
should be another designer or programmer with a level of experience
equal to or greater than your own, but with a different skill set.
If you’re the God of Annual Reports, your partner can be the
Overlord of Identity Design. Having two Annual Report Gods will
make for some lacking identity work when the client requests it.
And for the record, once again, it will be better if this person
isn't family.
“But why a partner?” you ask. “I'm a darn good designer, and I'm
really really gonna do this right.”
A partner will keep you on your toes. When you want to buy that
$2,000 scanner, he or she should question why. If you want to
design a promotional piece, it should be a group effort to get the
best results. If you start to slack off, he or she will be there to
remind you of business priorities. No one can do everything, and
two complementary skill sets create an asset that cannot be
reproduced when flying solo.
About Your New Office
When you start a business, the option of setting up an office
outside your home has dramatic pros and cons that must be weighed
carefully.
Good:
- You have a place for clients to visit if they are local.
- Reinforces good image (see below). Proper presentation goes a
long way, and making your office appear as if you’ve been in
business for years (you didn't tell them you were a start-up, did
you?) helps build client trust.
- You can write off all office expenses (rent, repairs, phone,
etc). This will affect your bottom line drastically.
- Gets you out of the house. Having a real place to go to work
makes the business more real, and forces you to take it that more
seriously.
Not-So-Good:
- Money out the window. Renting an office costs $250-$10,000 a
month, not including the initial deposit. This is a lot of money if
you have a thin or inconsistent client base.
- Requires additional expense. You will need to get a fire
inspection and a certificate of occupancy, not to mention
additional phone lines, Internet connection, furniture,
etc.
Setting up an outside office for a new business is a
case-by-case situation, and depends almost entirely on start-up
money and cash flow. Some businesses truly require a place to host
clients (ad agencies),and for others it’s not as important (web
development). Weigh the advantages carefully against capital,
because being locked into a lease without a means to pay is no
fun.
Retain a Good Paper Trail
Make sure to keep a solid paper trail with clients, and that
means a real, physical file with hardcopies of proposals,
contracts, invoices, time sheets and anything else you can think of
that relates to the project. This also includes all financial
records, bank statements, receipts, deposit slips, etc.
Before beginning your business, establish several important
things. First, design a consistent and scalable filing system for
all the forms. Whether you organize by client or project is
irrelevant, but make sure you can find the information when you
need it. Second, make sure to have airtight contracts. I advise
against writing them yourself. There are many places on the net
where you can get generic forms, such as www.creativepro.com. You
will also need to look for NDAs (non-disclosure agreements, for
contracting work out to other freelancers), RFP (request for
proposal) templates for clients to fill out, expense reports,
invoices, and time sheets. Every project is different, so be
prepared to make changes on these forms.
And please, when you sign a contract with a client, make sure
you have a copy with BOTH signatures. Seems like an obvious thing,
but you'd be surprised. Don't do any work without one, because
legally, you will have a very hard time forcing a delinquent client
to pay without one.
Part of maintaining a solid paper trail is having a good invoice
system ready to launch at a moment’s notice. Make sure your
invoices arrive in the client’s mailbox while the project is still
fresh. Every invoice should clearly mark the amount to be paid and
terms of payment (30 days, etc.), and clearly indicate any
additional fees resulting from delinquent recompense.
If payment is late, don't be afraid to call the client.
Sometimes they just misplaced the invoice. Other times they don't
have the money and are trying to slink away. Sometimes, “the check
is in the mail.” Regardless, the business that does not call to get
paid won't get paid!
Start Small, Conserve Loot
Consider working from your house/apartment to start, especially
if you have clients that will never visit you, or if you live in an
expensive metropolis (NYC, LA, Chicago, San Francisco, etc). Keep
your expenses down! Don't buy a new quad Xeon workstation if your
current machine can cut it, or a truckload of networking equipment
for two computers. Be cheap! Look for sales at OfficeMax, clip
coupons, and just shop smart. You’re going to need the start-up
capital down the road, so don't drain it on frivolous expenditures.
(And yes, the folded die-cut business card with the metallic ink
counts as a frivolous expenditure.)
Don't Undercharge, but Be Flexible
If there’s one thing to remember from this article, it should be
this point. Proper pricing is the one thing that keeps the business
alive, on multiple levels. When you charge appropriate amounts for
the work, the client will feel like they hired the right people;
when you undercharge, the client will know this and take advantage
of you by demanding similar rates in the future.
If you give every client a discount just to get the job (and
this will be tempting, especially in the beginning), you'll find
yourself working twelve-hour days and not being able to pay the
bills. Undercharging hurts the industry in general as well;
undercharged clients come to expect and request absurdly low
prices.
Legal Software
Make sure all the copies of your software are retail versions.
Do not use “educational” or pirated software. This is very
important, and should be part of the start-up budget.
Separate Personal and Business Finances
Nothing much else to say about this. It will save you
innumerable headaches come tax season.
Marketing
Even the most reliable clients have dry spells, so make sure you
are constantly putting your company’s name in the marketplace. Word
of mouth is the best, but getting truly fresh work usually requires
spending money.
The Importance of Image
The importance of maintaining a positive image in the eyes of
your clients and potential clients cannot be overstated. Know your
firm’s identity so you can project that identity to the
customer.
The visual identity is critical. Get business cards, letterhead,
and envelopes. Design a good logo or pay someone to do it if you’re
not a design firm.
Dress the part. When meeting with a client, look like someone
who’s come to do business, not some clichéd black-turtleneck
half-shaven graphic designer who’s gracing them with your presence
half an hour late. It sounds exaggerated, but it happens all too
often.
Make the office welcoming. If you entertain clients, keep the
office clean, organized and hospitable. Make good coffee. Purchase
comfortable chairs. Make sure they have a place to park.
Use Outside Resources
Running a business takes long hours and a willingness to learn.
However, there are many services that exist to help businesses
succeed and get work. For instance:
- Your local Chamber of Commerce
- SCORE
- Attend business seminars. You can learn a lot and do some
powerful networking. Many are free.
- Creativepro.com. Full
of valuable resources like stock photos, business contracts,
freebies and more. $29.99 / year.
- Elance.com. A cause of
dissention among many designers for the ridiculously low rates you
have to work for, but a good place to find work when the rest of
the world has shut its doors.
If you still decide to start a business, there’s nothing more I
can say except good luck.
You’ve got to have the “fire in your belly,” or you will fail.
There are long hours, hard work, and incredibly frustrating and
stressful times ahead. But the rewards — being your own boss, being
able to work on a variety of projects, feeling that proverbial
sense of accomplishment — these are all very real results.
A Special Note for Those Still in School
When I was in
school, what I wanted more than anything was to start a business
creating customized audio solutions for multimedia content
creators. I asked my teachers — they said it was a good idea. I
asked my classmates — they thought it was a good idea. Then I took
a six-month internship at a “new media” company whose focus was
streaming audio and met people so poor they slept in the warehouse
with the equipment because they didn't have the experience to
succeed in what they were doing. (Incidentally, they didn't have a
business plan either.)
Before you start a
business fresh out of school, wait and get some real world work
experience first. I started my design company when I was 23, and
the business clearly suffered because of it. Not because I was
young and dumb (well, not that young and dumb anyway), but simply
because I didn't have enough street smarts to REALLY succeed.
Technical knowledge
and raw talent only go so far. When working at a company, you see
how established businesses function: how workflow is managed, how
clients are dealt with, how managers treat workers, and the
absolutely critical nature of deadlines, no matter how tight. These
are invaluable lessons that school does not
teach.