Five Reasons Why You Shouldn’t Expand Your Design Business
Few industries are as primed for expansion and scale as web design. With a successful sales and marketing routine in place, gaining extra income can be as simple as hiring, researching, and delegating. From contracted designers to highly optimized business processes, scaling an online business tends to be a significantly less stressful process than expanding a more traditional offline company.
However, the relative simplicity of online scale doesn’t necessarily mean that it’s the path your business should take.
There’s an alarming perception in business, one that supposedly dictates that small businesses can’t become highly profitable. It’s surprisingly common, rarely questioned, and almost completely wrong.
What the internet has shown us — particularly in the last five years — is that ultra-small businesses can often be some of the most profitable in the world.
A great example that comes to mind is 37Signals‘ insistence on keeping things small with only 19 employees, allowing their company to remain manageable and still immensely successful.
The biggest online successes of the last five years haven’t been press-grabbing Web 2.0 services (many of which remain unprofitable), but smaller businesses that offer innovative products. There are big opportunities out there, even for small and specialized design businesses.
So here are five reasons to stay small. If you’re at a turning point with your design business — maybe you’re thinking of hiring extra staff, connecting with contractors, or searching for more international clients — let these five reasons serve as an incentive not to.
1. Design businesses aren’t designed for mass scale
Look at any list of huge, ultra-profitable companies and you’ll see that they share one common feature: they’re all at least somewhat product-based.
Just about every major online business (think Amazon.com and eBay) is based on a model that doesn’t revolve around a human-powered service, but rather, its products.
On the other hand, service-oriented businesses (which design/creative businesses are) when assigned thousands of clients can often fall out of sync with their goals. Human error can quickly enter a system where results are dependent on output, leaving you with lots of extra kinks to even out.
While it’s possible to run a service business at a massive scale, it’s certainly not a business template that favors it.
2. Stress and overwork isn’t good for business
Shipping a product incorrectly is easily fixed: box another, ship it off, and eat a slight profit loss. If you happen to employ a fulfillment company, the process is even easier: report a missed shipment and have things replaced without any real input, all for a slight fee. When a product-based company expands, the emphasis is on expanding processes and creating more customers rather than taking on more employees.
However, a service business is dependent on staff for its results, with design and media companies more dependent than any other.
While staffing processes and management do become more simple over time, there’s an inevitable stress barometer that tends to peak all too often.
Successful staffing can make a huge design company work, but it tends to suck away morale before it succeeds.
3. Bigger businesses are more prone to error
Successful businesses depend on more than just ideas and ability — they’re highly dependent on processes. The most profitable online businesses tend to have processes honed to a tee before they even think about employing extra staff and expanding their client base.
However, in an industry as subjective and personal as design, processes often don’t mesh effectively with clients’ needs.
You’ll undoubtedly run into hurdles — personal design preferences, a business model that doesn’t fit into your process sheets, or a client that’s so big it throws off your system — that will quickly leave you struggling to maintain your business, let alone expand it.
4. Investing in additional revenue streams is better than expanding just one
There’s a slight dependence on the 80/20 principle (80% of the outcome only comes from 20% of your inputs) online.
Businesses, particularly service businesses, optimize the one most profitable part of their operation until it’s bringing in the bulk of their income. They advertise almost endlessly, hire extra workers to aid the single process, and ultimately leave themselves highly vulnerable to changes in demand.
Comment on any freelancer’s "lucrative" income and you’ll likely get a horror story in return about income stability and the huge gaps that can come between profitable months.
Structuring your design business around a single process and expanding will result in one thing: huge vulnerability.
Rather than constantly aiming for the 20 percent with 80 percent returns, consider keeping your design business focused on a variety of revenue streams and client types instead.
(See some ways designers can earn more out of projects.)
5. With size, service can suffer
There’s no escaping it: When you expand your operation, you’re often forced to dilute the amount of personal contact you have with clients. Small businesses pride themselves on their ability to act quickly, while large companies are as slow as a tortoise.
As a designer, you need to offer more than just a great product. While large design companies can certainly produce quality work, it’s often devoid of the personal contact, specific ideas, and creative decisions that clients love.
It’s tempting to think that service isn’t part of the design process, but when removed, it’s very easy to see how important it really is.
What’s a good business size for design businesses? Can you offer reasons why you should expand design businesses?
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About the Author
This was published on May 27, 2010