The graphic design business is on the way up, earning more than $7 billion in 2022. The compound annual growth rate (CAGR) from 2022 to 2029 is projected at 9.8%. This means the market could reach more than $14 billion by 2029.
This steady growth presents a lucrative opportunity for aspiring business owners looking to monetize their creative talents. However, the graphic design space comes with its fair share of challenges. Aspiring graphic designers must not only hone their artistic abilities but also develop sharp business acumen to stand out from the ever-increasing competition.
This guide offers insight on how to start a graphic design business. Topics include market research, competitive analysis, registering an EIN, obtaining business insurance, forming an LLC, and customer focus.
1. Conduct Graphic Design Market Research
Market research is an integral part of starting a business as a graphic designer. It helps you understand the marketplace, design a business plan, learn about trends in the market, and more. Some of the details you’ll learn through graphic design market research include:
- The best prospects can be found in specialized niche markets like website design, animation, sticker creation, traditional marketing graphical content, marketing materials, and logo creation.
- Catering to local small businesses is especially profitable as they invest heavily in building memorable brands on tight budgets.
- Industry profit margins range from 9% for general design firms to 17% for niche service providers.
- With low startup costs, profitability can be achieved relatively quickly.
- Standing out requires not just creative talent but equally sharp business skills.
- Strategically identifying profitable niches, ideal customer profiles, and early marketing efforts are key to success.
- Utilizing digital channels to establish authority and generate leads is the most cost-effective initially.
Small businesses especially prefer to engage local talent. Industry analysis indicates a high-growth market with rewarding opportunities. Achieving profitability requires strategic positioning, and a dual focus on design and business capabilities to overcome initial hurdles.
2. Analyze the Competition
Firstly, identify direct competitors in your locality using online business directories like Yelp.
Some ways to learn about competitors as a business owner running a freelance graphic design business include:
- Analyze the services offered, pricing models, clientele mix, and marketing content across their websites and social media pages.
- Drive-by visits allow assessment of office location, signage, interiors, and foot traffic.
- Expand research to indirect competitors like general design firms offering similar services.
- Building niche expertise gives an edge here.
- Evaluate industry leaders nationally for inspiration on positioning tactics too.
- Monitoring online sentiment across review sites and social media highlights pain points to avoid.
- It also surfaces what makes competitors stand out positively.
- Track their digital analytics using SimilarWeb to benchmark monthly traffic, lead sources, and engagement.
Competitive analysis among freelance graphic designers provides insight into seasonal trends, successful promotions, and overall traction. These provide an informed blueprint to launch your differentiated services.
3. Costs to Start a Graphic Design Business
Starting a graphic design business requires careful financial planning and cost considerations before taking the entrepreneurial plunge. There will be startup and ongoing costs throughout the life of running your own graphic design business. Here we’ll break those business expenses down.
The starting costs focus on one-time investments to lay the operational groundwork. These startup costs are essential to obtaining your business license, drawing in prospective clients, building a business website, leasing office space, and more. Here are some common startup costs:
- Legal Fees: Business formation and trademark registration could cost $700 and upwards depending on entity type and state regulations. Sole proprietors can register a DBA for under $100.
- Equipment: A MacBook Pro or iMac for design work costs between $1300 – $4000 new based on specifications.
- Additional monitors to expand the workspace run from $250. Software like Adobe CC has monthly plans from $20.98 per user but annual options save overall.
- Office Space: Coworking spaces offer flexible membership plans to operate from $150 to $500 monthly across major US cities.
- Renting office space starts from $15 per sq. ft. Leasing full-time can cost $2,000+ monthly.
- Consulting & Advisory Services: Getting input from a Small Business Development Center consultant or SCORE mentor helps avoid costly mistakes. Fees range from $100 to $150 per hour.
In total, graphic designers can launch functional agencies with as little as $2,500 upfront if opting for more budget-friendly or DIY approaches. Of course, investing more upfront in high-end tools and dedicated office space provides more credibility.
Every business faces ongoing expenses to keep the company going. Balancing business finances requires a firm understanding of where these costs come from. Common ongoing expenses to factor into your budget include:
- Salaries: Based on PayScale data, the average junior graphic designer’s salary starts from $36,000 annually. More experienced senior designers can earn $65,000+ per year.
- Software and Cloud Services: Besides main Adobe apps, additional subscriptions like file sharing systems ($30 to $75 per user monthly) prove handy along with website and hosting packages ($15 to $45 monthly).
- Marketing & Advertising: Dedicate 5-10% of total revenue towards self-promotion across digital channels and offline options like print, sponsorships, and events. Costs scale accordingly.
On the higher end, investing $15,000 upfront in equipment, hire, and promotion allows for broader capabilities and capacity. Eventually, achieving annual revenues of $40,000 helps attain healthy profit margins given capped overheads.
4. Form a Legal Business Entity
The right business structure is key for graphic designers to balance legal protections, tax implications, and operating flexibility as entrepreneurial ventures. Common legal business entities include sole proprietorships, partnerships, limited liability companies, and corporations.
Offer the easiest setup with no formal registration needed in most states. However, the owner assumes unlimited liability for debts and claims. Income gets reported on personal returns. This works well for freelancers but assets remain at risk as businesses scale.
Allow sharing ownership between two or more designers. A formal partnership agreement governs rights and profit distributions. However, every partner bears responsibility for collective liabilities too. Decision conflicts also tend to emerge frequently.
Provide the best of both worlds – limited liability shield along with pass-through taxation. Ownership splits are flexible via percentage membership interests. Costs range from $100 onwards for state registration and the only annual legal need is a return filing. This hybrid structure works perfectly for small creative agencies.
Ensure the highest business liability protection but come with more complex compliance in terms of taxes, record-keeping, and reporting. Ownership via stocks also complicates profit-sharing. Incorporating generally benefits larger design firms managing bigger financial and legal risks.
5. Register Your Business For Taxes
An Employer Identification Number (EIN) serves as a unique tax ID for business entities to identify themselves to tax authorities. Even small graphic design firms structured as sole proprietors or single-member LLCs require one by law for various reasons:
- Filing and paying estimated taxes tied to company income
- Opening business bank accounts
- Processing payments from clients
- Managing employees down the line
Applying online takes less than 15 minutes via the official IRS portal. Simply provide entity details, ownership information, and contact data as prompted. Both domestic and foreign businesses can qualify for free. Once submitted, the EIN gets issued immediately.
This ID number then goes on all official tax paperwork. Schedule C filers report it when submitting 1040 returns. Incorporated firms use it across quarterly reporting documents like 941, 940, and W-2/W-3 forms.
Those making physical goods also need sales tax permits in their particular state. Registering for relevant licenses, accounts and certificates ensures full compliance. Fees depend on individual locality rules but the application process remains straightforward.
6. Setup Your Accounting
Proper financial management is crucial for graphic design business owners to maximize profits and ensure full legal compliance. Implementing the right accounting systems and expert support from the start prevents issues down the line.
Using small business accounting software like QuickBooks automatically tracks income, expenses, account reconciliations, and taxes without manual effort. Seamless connectivity with bank/credit card feeds, invoicing, and payroll simplifies reporting needs. Plans start from $25 per month with the core system covering all essential workflows.
Hire an Accountant
Working with an accountant is still advisable for optimal accuracy. Yearly services average around $800 but the investment offers multiple advantages. Bookkeeping assistance properly categorizes every business transaction and identifies deductible expenses. Accountants also file quarterly sales tax returns and finalize annual income tax paperwork.
Open a Business Bank Account
Keeping business and personal finances completely separate is crucial as well from both bank account and credit card perspectives. Business-only accounts and cards help accurately track company earnings/costs for reporting. It also provides transparency if external funding is ever needed.
Apply for a Business Credit Card
Applying for a small business credit card only requires basic details like EINs, company financials, and the owner’s credit scores. The process is quite similar to personal applications. However, approved credit limits correlate directly to demonstrated business revenues and assets.
7. Obtain Licenses and Permits
Starting a graphic design business involves more than just creative and operational prep. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.
Also called tax registration certificates, business licenses verify compliance across all reporting like income taxes, payroll taxes, and sales tax collection needs to be tied to the particular state. Fees are under $100 in most cases.
For designers selling physical products like logos on merchandise or prints, securing sales tax permits allows legally collecting and remitting dues on such transactions States levy anywhere from 2% to 7% on goods sold.
For sole proprietorships or partnerships not operating under legal owner names, filing a DBA allows the registration of a professional business name. The registration cost is under $50 across most states.
For ventures opting for physical retail spaces, construction compliance ensures the site meets state codes for legal occupancy. From parking needs to restroom access and more, various aspects get evaluated before permit approval.
In addition, most cities also have zoning regulations around allowable property usage for commercial space rentals and purchases. Checking these proactively prevents wasted investments into sites that get denied later. Pittsburgh city planners for instance do not allow creative office spaces in core downtown zones.
8. Get Business Insurance
Business insurance serves as a financial safety net to keep graphic design agencies protected from unexpected legal and property liabilities. Lacking adequate coverage could potentially bankrupt companies in many scenarios:
A client slips during a meeting at your commercial office space and sustains injuries needing urgent medical treatment and extended care. Without liability insurance, the legal claim and compensation costs fall directly on your business.
A hard disk failure erases months of client design files and work-in-progress deliverables before backups occur. The lack of contingency plans leads to breached contracts and lawsuits from affected customers.
An electrical fire sparked by faulty office equipment destroys computers containing vital accounting data and intellectual property like branding guidebooks. Lacking protection from such disasters directly impacts business continuity.
To ensure full protection as per unique risks, graphic design entrepreneurs can connect with specialized brokers to guide them through tailored plans. The typical process includes:
- Discussing Business Model, Assets, and Locations: This overview helps gauge exposure areas.
- Evaluating Potential Threats: Fraud, property damage, data loss, legal issues.
- Exploring Insurance Options: General liability, errors & omissions, commercial property, data and equipment coverage, etc.
- Comparing Premium Quotes: Rates vary based on assets insured and claim history.
- Finalizing a Custom Plan: Ensures optimal protection based on the agency size, services, and clients.
Legal compliance also mandates Worker’s Compensation insurance once staff gets hired. Staying vigilant and responsively addressing ever-evolving risks keeps companies shielded from long-term success.
9. Create an Office Space
Dedicating work areas for creative tasks and client meetings is pivotal for optimal graphic design business operations. Options balancing convenience, professional perception, and cost include:
Converting basements or spare rooms into design studios allows easy access to assets needed for digital work like computers and software subscriptions. It promotes flexible schedules without rental overheads too. However, home offices lack client meeting spaces and keep work-life boundaries blurred. Cost is limited to desk and storage expenses from $300 upwards.
Shared work environments like WeWork offer both open desk spots and private offices for individuals or small teams on flexible plans starting at around $300 a month. The community facilitates collaboration while amenities like meeting rooms, cafes, and event spaces provide full business functionality. However, spaces fill up fast in core city locations.
Commercial Office Spaces
Getting dedicated premises in business complexes allows the branding of custom units fully as per a company’s creative vision with waiting lounges to impress clients. Pricing averages $20 per sq. ft. but multi-year leases ensure stability. The main drawbacks are substantial security deposits and fitting out costs scaling to thousands based on specifications.
10. Source Your Equipment
Launching a graphic design business requires key equipment investments in high-spec computers and creative software. Aspiring entrepreneurs have options across buying, leasing, and even financing routes.
New iMacs or PC workstations meeting processing capacities for design tools like Adobe Creative Cloud run $1000 upwards from retailers like Apple, HP, and Dell. Multi-monitor setups improve workflows too. Software bundles and cloud storage upgrades cost extra based on the intended usage scale.
Opting for used devices lets entrepreneurs repurpose functioning Mac systems or PCs cast off by companies upgrading staff equipment within limited budgets. Marketplaces like Craigslist, Facebook Marketplace, and eBay offer reliable finds at 40-60% discounts.
Renting workstations monthly allows for utilizing cutting-edge gear without major capital costs. Rental rates often include unlimited technical support and maintenance too. The flexible terms work well for new ventures still stabilizing financially.
Leasing via issuers like AlignCredit works akin to car financing where affordable monthly payments secure equipment ownership eventually. Credit history impacts approval odds and interest rates. The main benefit is acquiring advanced creative gear from the start minus large lump-sum payments.
11. Establish Your Brand Assets
Establishing a strong brand presence is vital for graphic design agencies to stand out in an increasingly competitive industry. Tactically leveraging visual assets and marketing collateral helps reinforce expertise and quality to prospects.
Get a Business Phone Number
Acquiring a unique business phone number via providers like RingCentral enables listing key details across online and offline directories for easy discoverability. Call routing functionality also redirects calls seamlessly across devices.
Design a Logo
A sleek, memorable logo designed through online services like Looka forms the cornerstone of all brand imaging. Bold, vibrant designs aligned to the specialty like responsive web templates convey niche focus. Complimentary letterheads, social media, and website assets ensure cohesion.
Print Business Cards
Business cards from Vistaprint enable conveniently introducing the agency during client meetings, conferences, and networking events. Collecting contact details from potential customers to follow up on project opportunities leads to deals. Outdoor signage at office entrances also assists walk-in visitors.
Buy a Domain Name
Securing aligned domain names via registrars like Namecheap provides an anchor web presence to highlight services, work samples, and achievements. Exact match domains with area codes in names like ChicagoGraphicDesign.com optimize SEO as well.
Design a Website
Leveraging DIY website builders like Wix offers easy drag-and-drop solutions to publish online portfolios for as low as $10 a month. For advanced custom designs, specialized freelancers on Fiverr provide affordable packages too.
12. Join Associations and Groups
Beyond online platforms, graphic designers can exponentially expand professional networks and opportunities by engaging local industry communities.
Seeking out regional creative alliances like the Ohio Design Association provides visibility at open networking events, conferences, and mentoring programs. Learning best practices from seasoned visual experts in person often leads to referrals.
Regularly attending marketing meetups via Eventbrite and Meetup surfaces potential clients too. Tradeshows enable showcasing portfolios to various vendors and businesses seeking branding services. The connections made seed longer-term partnerships.
Facebook also hosts various relevant groups like The Interior Designer’s Business Launchpad spanning over 10,000 global members. Seeking feedback on portfolio pieces receives constructive critiquing for improvement from thousands quickly. Job openings get posted here widely as well.
13. How to Market a Graphic Design Business
Implementing marketing campaigns helps graphic design businesses continually acquire new clients. Balancing digital and traditional promotion based on target customer preferences maximizes returns on investment.
Leveraging existing client networks to source referrals remains invaluable initially. Offering referral bonuses or discounts on future services for customers who recommend the agency helps incentivize endorsements organically.
Digital channels then enable scalable outreach to local prospects online. Tactics like:
- Google/Facebook Ads target buyers seeking related services in the area.
- YouTube Tutorials showcase expertise to both clients and talent prospects.
- Guest blog posts for regional publications highlight specific competencies.
- Cold emailing/calling campaigns tap relevant small business databases.
- Optimized LinkedIn profiles position services to corporates seeking vendors.
Traditional options like:
- Print ads in local lifestyle magazines and trade journals increase visibility.
- Direct mail campaigns with service brochures target neighborhoods with many SMBs.
- Networking at Chamber events offers opportunities to impress prospects in person.
- Billboards strategically build brand awareness during commutes when attention is higher.
- Sponsoring art gallery showcases provides access to engaged prospects.
The optimal marketing mix includes digital and traditional channels prioritizing leads most likely to convert based on past clientele. Local events also enable making memorable impressions leading to referrals.
14. Focus on the Customer
Delivering exceptional customer service is pivotal for graphic design agencies to drive referrals and repeat business in a highly competitive sector. going beyond the creative execution of projects also earns trust and loyalty. Some ways to focus on customers in your own business include:
- For instance, being available promptly for scope changes and providing design iterations patiently ensures clients feel heard and prioritized.
- Meeting tight deadlines for last-minute projects accommodates urgent needs too.
- Checking in with clients proactively as deliverables get executed provides reassurance on progress and quality.
- Offering continued post-launch support for assets like logo files or brand guidelines retains accounts long-term as well.
- Surprising and delighting customers with value-adds also get noticed.
- Sending personalized cards during the holidays or even small gifts like printed mugs and t-shirts with their brand logos conveys the agency truly cares.
With exceptional service experiences, the odds of securing testimonials, reviews, and referrals to new leads increase substantially. This organic growth can accelerate profitability more than any marketing channel over time.