Why most businesses fail, and solid tips for design business success

Most businesses fail not because their owners aren’t good at what they do.

A design studio doesn’t generally fail because they create poor designs.

A dentist doesn’t generally fail because he cannot fix your teeth.

Most businesses fail because their owners don’t understand how to run a business.

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As a design entrepreneur, this is the single most important fact you need to understand. If you as a designer can learn how to run a business well, your business has a much greater chance for success.

As a Millo reader, you are already well on your way to becoming a better entrepreneur! Follow the tips below to avoid several less talked about mistakes that business owners make.

(A note from Preston: the following information from April is priceless! If you enjoy it as much as I did, I invite you do dig even deeper. The theory she discusses here is explored in more detail in one of my favorite business books The E Myth by Michael Gerber.  A definite must-read for any entrepreneur. I’ve read it and highly recommend it! Now, back to April…)

Set Aside Time for Marketing

“If you don’t set aside time for marketing your business, you’ll soon find that you have too much time for marketing your business.” – business adage

Simply put, if you’re too busy with client work to market your design business, when you finish you’ll have no work at all. Especially in the design world where clients aren’t required to need design work (unlike a CPA firm – everyone has to file a tax return), you should spend at least 30% of your time marketing your business. In a 40-hour week, that means 12 hours, or 1.5 working days, devoted to marketing. It seems like a lot, doesn’t it?

My Approach to Finding New Business

  • I read LinkedIn, craigslist, and receive weekly emails from Monster and Career-Builder about freelance/contract design jobs. My goal is an average of one response per day – yes, that’s 365 (or 366 in 2012) responses to calls for work per year!
  • I spend a good amount of my time networking (via LinkedIn as well as locally) with some of my best potential clients – other designers. As Preston notes in this post, repeat business often comes from in-house teams that need an extra hand or design firms who need to subcontract. (PS – I also count writing for Millo as networking.)
  • I’m preparing a brochure/book to send to potential clients after reading this post by Preston.
  • I’m also working through the exercise in Preston’s From Passion to Profit on creative ways to find new clients. (I’m planning to share my experience with the Millo community very soon!)
  • Periodically, I check in with old clients and ask them how my solution is working for them and to keep me in mind for future needs. I also send them a Christmas card.
  • Long-term, I’m developing the Greer Genius brand.
    • Last year, I bought Preston’s From Passion to Profit.
    • Last week I unveiled my new business name, Greer Genius, on Millo. (A huge thank you to YOU, the Millo community, for your amazing comments and enthusiasm!)
    • The next two weeks will be devoted to developing the Greer Genius logo. Stay tuned!
    • Following that, the Greer Genius website will be in development! (Domain name purchased this morning!)

Understand the Consequences of Working for Free

When client work gets thin and money gets tight, our panicked bank account sometimes deludes us into thinking that if we can just get our foot in the door with a free project, the client will be a great paying customer for years to come.

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I have never heard of or personally experienced this to be true. EVER. If you don’t believe me, read the many discussions on LinkedIn.

What Really Happened to Me

As one of my first projects, I took a job redesigning a website for peanuts with this philosophy, especially since I saw how poor quality their marketing materials were. I got the sob story about how they didn’t have enough money for a marketing budget and would I be willing to trade services. I said yes, naively, and (not wanting to burn bridges) I’ve been distancing myself as gracefully as possible since 2005.

  • First it was the website, which I made less than $10/hr redesigning.
  • Then they wanted me to join their club so that I could create a club logo pro bono – it’s for the club, not the business, right? And then a “simple website” for the club.
  • Then they had a friend with a small business who also doesn’t have money for marketing but could really use my “help.”
  • And on and on if I had let it…

Now, I’m not saying pro bono work is a bad thing.

Non-profits or causes you champion make great pro bono or low-rate work. Right now I’m working on a logo for a month-long animal welfare campaign for my local humane society, and I couldn’t be happier that they asked for my services (I also volunteer there on a personal basis).

I hope to get some positive community exposure and it makes me, an animal-lover, feel good.

Learn about Operating a Business

I’ve long since thought that a liberal arts degree ought to require at least a basic business class for non-majors, and that liberal arts colleges should offer an entrepreneurial class/es as well.

Unfortunately, most business classes are for business majors (or are offered only in the graduate program). At any rate, now most of us are out of school. What options do we have?

  • Take a continuing education business class. This is especially true if you lack confidence in your accounting/bookkeeping skills.
  • Learn from others’ mistakes and advice.
    • The Millo archive has tons of great posts on understanding business, and new posts are regularly posted.
    • Join groups on LinkedIn devoted to small business development and design businesses.
  • Find a mentor with a successful business (they don’t have to be a designer).
    • Ask them who they would recommend for advice if they weren’t available any longer.
  • Hire a business consultant who is also an accountant, or vice versa.
    • Now you have one person familiar with your situation who can offer sound financial & business advice and prepare your taxes.

Luckily for me, my dad was a financial consultant and CPA who owned his own very successful firm, so I have received excellent free personal and business financial advice throughout my life (whether I wanted it or not).

However, my dad passed away unexpectedly in October 2011, so I hired one of his best friends and most trusted business partners as my CPA and adviser.

It’s your turn, Millo readers

Do you have any words of wisdom that have increased your business knowledge? Sources of advice and tips that you look to for guidance? Leave a comment on this post and add to the conversation!

*Author’s Note: I’d like to express my very heartfelt gratitude to Malcolm Smith, owner of Fidelity Business Consulting Services, Inc. and my business consultant/accountant, for his sage advice.

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  1. How can junior designers judge the value of their work? I’ve heard of many stories of unknown designers working at a low rates to just get a job experience…and sadder stories of some fresh graduates willing to work for free… But people don’t normally speak about how much young designers should charge clients for their work? Are you suppose to just pull a number out of a hat?

  2. Your post is very informative and certainly has assured me in my business plan. We too are a small company and just started off with brand identity projects. Marketing a design firm can be tedious considering the low cost requirements and high overhead costs. However are print ads helpful in this field?

    However, we wish you the very best in your venture and thank you for this wonderful and informative post. Cheers.

  3. Very informative and original article. While running a business, I have found balancing marketing and day to day project execution can be a real challenge and marketing actually gets ignored. Stability of business comes only when cash coffers are ringing frequently.

  4. I share the same experience with you bro. I have also worked with clients who happened to be close friends who at the end of the day it turned out to be a sympathetic bad finance story like you said.
    I just made a up my mind before stumbling on your article on not working for anyone regardless of the relationship without charging them. it’s so frustrating after spending much time trying to create a business for someone, only to tell you stories in the end. Thanks. And I think your point as really affirmed what i m have proposed to do. Good job.

  5. Michael Pingree’s comments makes a lot of sense and incidentally, it mirrors exactly what we done too. When we first started out, we had the business plan, approach and etc all properly mapped out and then slowly evolved our trade which was primary print design at that time to become what it is currently, website design and development. We’re still the essentially the same small team that we were and we have extension plans coming up in the 3rd quarter of this year.

    1. Morgan & Me:

      Interesting to read about different approaches to starting a business – some of us start out with the business and find the work, and others of us start out with the work and build a business. Either way can work with the proper drive, planning, and execution!

      And congratulations on your upcoming expansion plans! 🙂

    1. Peggy:

      Thanks for the link – great source for anyone needing their questions answered, and to find a mentor!

  6. Great advice, but FYI – Pro Bono work is not tax deductible. You can’t get a deduction for services. You can get a deduction for your expenses in doing the work, but not for your time. Learned that the hard way. Have also learned the hard way to never let up on marketing. I had a 4 month waiting list for my services, then realized that I only had 2 weeks of work left and nothing in my pipeline. I had to get busy fast!

    1. Jenny,

      Thanks for the tip!

      It’s easy to stop marketing when you’ve got lots of business – after all, if you’re busy, then you can’t start on new projects for a couple of weeks (months?) and you don’t want to disappoint new clients by pushing their work out. However, sometimes you have to plant the seed and let it grow before potential business decides to become new business!

  7. I can definitely relate to this in many ways as I have just recently transitioned into running my design business full-time. It has been an ongoing learning experience day in and day out. Some days it seems like for every step forward I’m taking three back. However, as Michael mentioned above you have to always working at getting better with a focus and intent on being successful even if only in small yet measurable ways to start. And April has provided some excellent insight here on relevant aspects to achieving success in business. Always strive for continued betterment of yourself and never be afraid to ask questions and utilize the shared knowledge of your peers.

    1. Chris:

      Always moving forward – you are so correct. Even if it feels like you’re going backwards, progress and shaping yourself (for the better) is always important!

      For example, my dad (as I mention above, was a CPA) got me started on QuickBooks last August. For the first 3ish hours, I hated it and cursed his name repeatedly. Now I love it. It’s definitely not pretty like a FreshBooks, but it’s super-sophisticated and keeps track of a ton of details, and my financial preparer (Malcolm, also mentioned above) integrates it easily into his programs for taxes.

      1. Thanks for the reply April. And a great example of how reaching out to people you know for advice can prove to be very beneficial. Never be afraid to ask questions and look for advice.

  8. It is so very critical to understand the operation of running a business and the unseen costs that so many overlook. They go into shock when they realize (if they every realize) what it takes, the commitment, the long hours, the sacrifice, and the basic accounting knowledge it requires!

  9. I have come across so many people who were experts in their trade but didn’t know the first thing about how to run a business. Being a graphic designer and running a graphic design business are NOT the same thing. When I started out, I took the opposite approach. I started with a solid foundation in business basics and then learned how to do my trade as time went on. I consider myself to be an average graphic designer/web designer(working to get better), but I have built a solid business offering these services because I know how to run a small business.

    If you need to expand your business knowledge and have a community college in your area, there is a good chance they might have a Small Business Development Center. Here in Salem, we have a fantastic one, Chemeketa SBDC. These places are great resources for free/low cost training in many aspects of business management.

    1. Michael,

      One great point you make (that I left out) is know your strengths and weaknesses. You know what you’re good at and you know how to sell that – the makings of a great business! It also sounds like you know what you’re not good at, and hopefully you’ve got some names to refer when you know it’s not a good fit.

      Thanks for the info about Chemeketa SBDC – I’ll check out the training!

  10. This article is full of valuable information. The best advice I can give is to go with your gut feeling, do not repeat a bad experience. Also speaking on the phone with potential clients reduce email correspondence and is a great way to get a feel for the prospects requirement. I think many times personality issues gets in the way of productivity. I say choose your prospects carefully, do your research.

    1. DesignFacet:

      Excellent advice. If you get a bad feeling, gracefully decline – even if there’s a big price tag involved. Most often, if it seems to good to be true, it is, and if you just don’t get along with a client, refer them to someone else!

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