Start a graphic design business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your graphic design business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a graphic design business?
Many graphic design businesses start at home, with no employees. Your main expenses in that case will be the computer and design programs required to get the work done. Those programs might include the Adobe family of design tools: Photoshop, Illustrator, InDesign and others.
You can now buy Adobe on the cloud for a monthly subscription fee of $40 or $50 depending on the bundle. Also, check out this article about the availability of free graphic design software. You might have additional costs for development of your own website and for printing sales materials such as business cards, brochures or promotional items.
Even with all of that, it’s easy to imagine being able to open for business after spending less than $2,000. Just remember, unless you can generate revenue immediately you should also have a nest egg large enough to support you before you start seeing a steady income stream.
What are the ongoing expenses for a graphic design business?
In the beginning, you’ll probably work alone and from your home. As your business grows you might eventually have ongoing expenses related to studio rent and employee costs—including taxes and healthcare benefits.
You might have monthly subscription costs of less than a hundred dollars for your graphic design software. And you’ll have to pay vendors such as freelance designers, photographers, illustrators and copywriters. While those expenses will be billed into your invoice, you might have to pay the vendors before your clients pay you. (That’s one reason it’s such a good idea to get a portion of the project fee paid in advance.)
Who is the target market?
Some graphic design studios get the bulk of their work from advertising agencies while others promote their services directly to clients. Many work for both client types. Some studios might specialize in a certain type of client, such as non-profit organizations or business-to-business firms. Others might focus on a particular practice, such as logo development or packaging design.
How does a graphic design business make money?
Graphic design studio owners charge their clients an hourly rate or bill by a flat fee based on their hourly rate. If there are ongoing assignments they might negotiate a monthly retainer.
How much can you charge customers?
First, establish an hourly rate. For some client relationships, you’ll keep track of your time and charge that rate. But since many clients will feel more secure knowing the cost upfront (and you’ll avoid arguments after invoicing) you might be better off charging a flat fee for every project based on your estimation of how long the project will take.
Many graphic designers and studio owners charge an hourly rate of somewhere between $75 and $100. You probably won’t want to go lower than $75 unless you’re guaranteed many billable hours. And you might want to go higher if the competitive situation allows a higher rate.
Here’s a good article on what several graphic designers charge and how they bill their clients. You’ll see that it’s fairly common to get a third to one-half of the flat rate up front, especially if it’s a costly or long-term assignment.
How much profit can a graphic design business make?
Experts say that a graphic design studio must make at least a 15 percent profit margin and that a preferred rate is 50 percent or higher. That’s based on the rate you’ll charge your clients minus the out-of-pocket costs to get the job done: your employees’ hourly rate or the costs of hiring freelancers to complete the job.
How can you make your business more profitable?
Graphic design studio owners sometimes develop sideline businesses that also use their artistic skills. This might include art and jewelry design, t-shirts, book jacket design, web development and photography, to name a few possible areas of expansion. You might also consider partnering with a copywriter and forming an advertising agency.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your graphic design business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, and it's easy enough to form by yourself, or check out the top business formation services.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a graphic design business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
In businesses where services are provided on an extended basis, a service contract is often put in place outlining terms and conditions of service. Graphic design companies should require clients to sign a service agreement before starting a new project. Such agreements clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership (who will ultimately own the design). Here is an example of one such services agreement: AIGA Standard Form of Agreement for Design Services
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your graphic design studio business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
Certificate of Occupancy
A graphic design business is generally run out of a studio. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a graphic design business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your business will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a graphic design business
The quality of your work is your best means of self-promotion. The look you create in your logo, signage, website, business cards and even the interior design of your studio speaks volumes about your capabilities, so be sure to give the aesthetics surrounding your business the special attention it deserves.
Many future graphic design studio owners start by working for ad agencies or other studios. If that’s your route, remember to keep electronic copies of your best work for self-promotion when you open your own business. You should have a website that showcases your style and serves as your portfolio for when you start pitching your own business.
If you can get an ongoing relationship with one or more ad agencies or branding firms, this can be a strategy for getting assignments from clients you wouldn’t yet be able to gain on your own until you’ve enhanced your creative reputation. Partnering with a more senior graphic designer can be another foot in the door for work that wouldn’t otherwise be available to you.
And finally, establish great working relationships with clients and keep track of their career comings and goings. Marketing directors who leave one position for a promotion elsewhere might bring you access to new client work while you retain good relations with the former workplaces.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Define yourself. What sort of a studio do you want to be? Are you going to work with ad agencies or initiate a client roster on your own? Is there a particular business sector with which you have experience or an interest?
Keep in mind as you develop business that every client is your best salesperson. Don’t be afraid to ask them for referrals. Here’s an excellent article on making your existing customers part of your ongoing new-business strategy.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Graphic Design Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Ownership of a graphic design studio is ideal for artistically minded people who are adept at managing the aesthetics of the way their business and organizational clients address their various markets, communicating creative ideas and executing design decisions independently or through employees or vendors.
You should be able to work alone and in a collaborative environment as you grow or work alongside clients. And you must feel confident in both worlds—business and creative expression—because your work will span both.
What happens during a typical day at a graphic design business?
Here’s how your day might typically be spent:
- Developing new business on the phone or at business networking or social events
- Connecting with photographers, illustrators, freelance graphic designers and others with whom you might collaborate now or in the future
- Executing projects for clients
- Supervising the creative work of employees or freelancers
- Handling the day-to-day responsibilities associated with running a business, such as billing clients and paying bills
What are some skills and experiences that will help you build a successful graphic design business?
Graphic design studios are run by individuals with an artistic flair and an eye for visual composition. You must be adept at networking and pitching client business and should have at least a basic understanding of the work of photographers, illustrators, copywriters and other creatives who might take part in projects.
You should understand and have the ability to bring to life the design aspirations of clients. You must also be able to manage the work of others who are involved in client projects, whether it involves employees, freelancers or outside vendors. And have the entrepreneurial skills to grow their business.
Graphic designers usually have bachelor's degrees in graphic design or related fields. Before going on their own they often get experience and make valuable connections by working at ad agencies, in-house corporate creative departments or other studios.
What is the growth potential for a graphic design business?
Many studios are sole proprietors or small partnerships. They operate on their own, hiring project help when needed. However, there’s virtually no limit to growth potential except your sales success. You can hire talent and support staff as your reputation and your business grow. The largest are multinational firms with offices in major cities across the world and rosters of Fortune 500 brands.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
How and when to build a team
While you’re likely to start business as a sole proprietor, you’ll recognize the need to start growing a team when you find yourself working too many hours or even having to turn work down because there aren’t enough hours in the day.
The safest way to start expanding your workforce is by partnering with dependable freelance talent. That’s because you’ll never have to pay them for downtime—you only hire them when you’ve developed business for them. You’ll also be free of the responsibility to withhold taxes and pay for healthcare benefits, vacation time and associated expenses.
At some point, you might see the importance of having people report regularly to you so that you don’t have to worry about not being able to find freelancers available when you need them. Discuss it first with your accountant just to make sure you’re in a strong enough financial position to take on full-time help.