This is the question I often ask people who are thinking about starting their own design business. It’s a very valid question, too, as you need to be aware of some critical factors before starting any business – knowing what resources or equipment you’ll need to start up your web design company is only natural.
In this article, I’m going to give you an overview of what it takes to run a small web design business. The essential information provided here should help point out some critical issues and provide an idea of whether or not setting up your own company is the route you want to take.
While having many years of experience in running my own successful web design agency (a little under four years now),we completed a numerous number of projects including ZeMotor I also have an accounting background and plenty of experience in the field, so I hope that you find what follows to be a balanced and accurate appraisal of the challenges involved in becoming a web design agency owner.
Is Web design a profitable business?
“So, what do I have to know about starting a web design company?” Well, that depends on the type of business you want to establish. A sole proprietorship is one of the simplest forms of doing business, and it’s straightforward to set up yourself. Some people who start their companies don’t incorporate at all – they go ahead and do it themselves! This makes sense for someone whose designs will be self-promoted via a website anyway. Everyone sees your name linked with a domain, so why not capitalize on this? But before you take this route, there are two issues you need to be aware of:
Your credit rating will be used as security for any bank or building society loan you try to secure. If you fail to keep up with business payments, your credit rating will suffer.
You are personally liable for anything that goes wrong in the course of your company’s business (see below).
For more information on incorporating a company, check out this article or read about Company Incorporation. You can also look at my suggestions for other people thinking about starting their design agency here.
What kind of money do I need?
The level of investment required to start your own web design company depends very much on how you intend to operate it. For example: if you go down the route of building sites for others, you’ll need some capital. But even if you plan on designing sites only for yourself, you will still need some initial money to get started. So, where do you start? Well, it’s advisable to establish the business within the boundaries of your home, so you’ll need enough money to rent an office space, and I’d suggest this cost at least $500/month (remember that if you work from home, there are no commuting costs).
So can I keep costs down?
You may think that it might be possible to reduce your setup costs by operating out of your own home – not necessarily! The essential office equipment required is probably all new to you. Before you commit yourself to any expenditure, it’s worth making sure that the design software(s) of your choice is compatible with any existing hardware that you have. This is a pretty simple task, but if your computer doesn’t have enough memory or processing power, you might need to upgrade it – that’s going to be an additional cost!
It would help if you also considered the workstation you’re working on before spending out any cash. If you regularly work on more than one computer, then a good quality docking station is essential, and again, these can cost quite a bit of money (around $300). All in all, I’d budget for around $8-12k as this will provide enough equipment and office space to get started with – do remember, though, that overheads such as insurance and administration fees can quickly increase this figure.
Do I need employees?
This depends on how much work you intend to put through your business. Do you want to do it all yourself, or will you be employing staff? For example, if I were starting as a web design agency to build sites for others, I would undoubtedly have used the team within the first year of trading – that’s how busy we were! But, of course, if you’re going down this route, then there are various personnel issues relating to wages and tax – more info on this here.
If, however, your focus is on designing sites for yourself and perhaps one or two freelance clients from time to time, then I’d suggest operating as a sole trader. It’s not uncommon for freelancers to do their bookkeeping, so this shouldn’t be a problem. Not only will you save yourself the cost of employing an accountant, but also your profits will remain under your umbrella and won’t be subject to corporation tax (instead, they’ll be added to your income with all associated taxes payable).
What terms should I operate under?
This depends really on what type of client you’re looking for – again; there’s no right or wrong answer here as it’s down to personal preference. If you want work from smaller clients, then I’d suggest charging either at an hourly rate or by way of a project fee and trying and keep this as low as possible unless the job is particularly time-consuming. If, however, you’re looking for larger contracts, then becoming VAT registered is your best option, and there’s a lot of info on the subject here.
What about marketing?
Marketing is an essential component of any business, and I’d suggest designing yourself some business cards (these don’t have to cost much). You can get decent-looking cards printed for under $100, but make sure you include your company name and web address (or email) as this is how people will find you online. A website is also an absolute must, and there are more tips on that here. If you can afford it, then investing in a professionally designed site should pay dividends. Saying that, though, if the plan is to build sites for others, then your client may be more than happy with your portfolio. Just remember to add a contact page with your email address and phone number, though!