Writing a business plan can be daunting. It's the first real stage to properly planning your new design business - and thus it makes your venture even more real.
Your business plan should be the first thing you do; before your website wireframes, before thinking about your studio space. It needs to be focused, readable, but most importantly explain why your business will be a success.
A well-executed business plan will not only help you raise cash from banks and or other investors, but also help you focus on a gap in the market and how your design business intends to fill it and be profitable.
There's no exact formula for writing a business plan, and you should always tailor it depending on who you're writing it for. The best business plans are often not too long and complicated; they simply explain what you want to do, how you will get there and what you need to do to reach that goal.
While there are no set rules, there are some general guidelines you can abide by. I'll take you through 10 of them here...
- Read all our career-related posts
01. Write an executive summary
An executive summary essentially summarises your design business and is a quick pitch: the part that investors or banks will read first. So it needs to be concise and relatively short - no more than a couple of pages. Above all it needs to explain your business idea. For example:
- Why are you different?
- What are your services?
- Who are you selling your services to?
- What is your studio's name and why did you choose it?
Your executive summary should also list your goals in the short term, mid-term and long-term: where exactly do you see your business in five or so years? Which areas will you be working in and what clients do you envisage having?
Financial goals are also important. Explain the turnover you expect to make and the cash you think you'll have at the end of the first year; where you'll get money from (grants etc); and what money you are putting in yourself to start up your studio.
02. Write an elevator pitch
An 'elevator pitch' is a quick summary of your business that can be read in two minutes or less (the time it takes to ride an elevator, in other words). It should include name, your mission, what your business does, who for and why it's different. It should be straight to the point and free from waffle.
03. Talk about yourself (and any partners)
The next section to think about describes you (and your partners if you have them). You should explain:
- Why you want to start this business
- Your experience
- Your training
- Why you will make this business a success
Detail these points for each of the partners in the business. Attach well-crafted resumes of all the partners. This will help show investors why your business will be successful.
04. Define your offering
Next, define the service your business is going to deliver. Are you delivering motion, web design, mobile or everything? Remember that your investor or bank contact will probably know nothing about the subject area – so be thorough describing the exact nature of your business's output.
Don't be afraid to seem patronising. You may know what motion graphics is, but would you expect a suit to? If you are going to begin in web design with a view to branching out into mobile design in the future (for example) then say so here.
05. Describe your clients
Next, talk about your customers - which in the case of a design studio will mean clients. Describe who they are and everything about them. Be sure you understand them, and your investor will as well.
Draw up detailed information about your potential clients. If you've already worked for a specific client in some capacity (maybe a freelance job) explain this here.
If you already have potential clients from past encounters, it proves that you can generate business. You need to describe your typical client, where they are based, what makes them buy into design services, whether you have worked with them before and whether you have any future jobs lined up already.
06. Present your market research
The next section is possibly the hardest to prepare: market research. You may think you know the design industry, but do you really? Check out this research from the Design Council and do as much research of your own as you can.
If you're going to be working internationally, this can be an incredibly time-consuming process, so you could just choose to focus on the UK, stating you have expansion plans in the longer term.
Clear and concise
Present your research in a clear and concise manner - again remembering that your investor will almost certainly have no idea about the design industry. Your business may look good on paper, but when it comes to competing in pitches and finding new clients, what's going to give you the edge?
This research will help to define where there are gaps and where you need to focus. After this research go back through your sections and make sure your studio still seems relevant. Any field research you can do (perhaps talking to some past clients and getting their take on the market) can be included here as well.
07. Define your marketing strategy
Market research will inform your marketing strategy. How are you going to reach potential customers? Word of mouth? Advertising? Self promotional material? Social media? Your own website?
Make sure you factor in the costs for all of these things in your cash-flow section. They aren't free.
08. Do a SWOT analysis
Draw up a list of competing businesses, both big and small, in your discipline. What do they do well and what do they do badly? What gives your studio the edge? This will enable you to do a SWOT analysis - which stands for 'Strengths, Weaknesses, Opportunities and Threats'.
For strengths, show how your business will stand out against competitors. What do you do best? For weaknesses, do the same but opposite.
Opportunities are external things that could make your business thrive (is the market changing and clients demanding a certain kind of work that you do well, for instance?). Threats are the same but opposite (if you're an illustration studio and budgets dry up, what will you do?).
09. Define your USP
What is your unique selling point (USP)? It's incredibly important that you include this in your business plan. Why would a client choose you over another business? What do you do best?
10. Explain how you'll make money
By now, we're getting into the detail of the business plan, and the next section should look at how you'll earn income. Consider details such as:
- how long you spend on projects (if this is likely to be determined by the client then state this clearly)
- how you'll get paid (invoice, almost certainly)
- equipment you'll need (including Macs, MacBooks, iPhones, iPads etc)
- your premises – are you working out of bedrooms to start with or renting a space straight away?
- insurance; staff and even legal requirements such as registering for sales taxes
Also define what your costs are likely to be. This will be of great interest to your potential investors, so pay great attention to it. And if you do charge an hourly rate for some services what will it be?
11. Forecast your revenues
Including a revenue forecast in your business plan can be a good idea. Calculate your total costs per month – including salaries, rent, equipment, bills and other costs of running the business. How much will you get in each month and can you realistically live on the profits?
Also do a cash-flow forecast, which shows how much money will be coming in and out of your studio and - crucially - when. Will you be able to pay the bills on time? An 'IOU' note often offends.
At this point take a step back - can you actually afford to do this? It may be a sobering moment.
12. Outline your backup plan
Finally, you must have a back-up plan. If things aren't working out, what could you change in the short- or long-term to make your business more profitable ? Could you sacrifice international clients/pitches for local ones? Could you employ freelancers as and when they are needed instead of hiring a junior designer?
There's a lot to think about when writing a business plan for a design studio. But with careful planning and making sure you cover everything in-depth, as well as tailoring your plan to the person you're writing it for, it's really not that difficult. And if you're passionate about making your business a success, writing your plan will be the first step on that path. Good luck and let us know how you get on!
This feature is an extended version of the article 'Crafting a Business Plan', found in The Design Studio Handbook - your definitive guide to running a thriving studio. The Design Studio Handbook is the fourth in Computer Arts' six-part series of practical manuals, and it's on sale now in the UK and online - click here
Liked this? Read these!
- The best 3D movies of 2013
- Discover what's next for Augmented Reality
- Download free textures: high resolution and ready to use now
Have you recently launched a design business? Tell us about it in the comments!