Five Reasons Why You Shouldn’t Expand Your Design Business

May 27 2010 by Mathew Carpenter | 24 Comments

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

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

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

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

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

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

Mathew Carpenter is an 18-year-old-business owner and entrepreneur from Sydney, Australia. Mathew is currently working on Sofa Moolah, a website that teaches you how to make money online. Follow Mathew on Twitter: @matcarpenter. Follow Sofa Moolah on Twitter: @SofaMoolah.

24 Comments

Scott Corgan

May 27th, 2010

Ok, I see some progress in our greedy little lives. We have to know that a bigger business means nothing except more responsibility. I am perfectly happy with a smaller amount of money and a better family than a bigger business and a broken home.

Project Center

May 27th, 2010

Even as we grow our businesses with the addition of new employees/contractors we must still spend a certain amount of time managing, etc. This in itself can lead to huge amounts of stress.

From your 10 Ways post:
#2 Keep a network of contracted designers for project overflow and using some type of affiliate program can all lead to extra income. Selling info products can also be beneficial, if there is a market for the item.

As small businesses we often want to take on everyone and everything – however, when we end up with a client/customer that is not ideal it can be the source of frustration and discontent.

IMHO, better to focus on working only with the people that “feels” best to us – and saying NO to others.

Lourens

May 27th, 2010

I don’t agree. You can have a bigger company without losing the things you just pointed out. Excellent ways to do this is with scrum managing and different kinds of hierarchy in a business. I do agree on your point of doing that what you do best.

esranull

May 27th, 2010

very good post thanks a lot

Matt Tarr

May 27th, 2010

Interesting article, although I’m not necessarily sure I agree with all of your reasoning.

Personally, I tend to agree with Scott. If a smaller operation suits your personality and lifestyle better, then stay small. I’ve worked in a larger agency setting and found the culture to be really inspiring and creative, but I also like the simplicity I now have with my small shop.

I think it’s just a matter of creating the environment that works for your lifestyle and personality.

Laira

May 27th, 2010

Nice post..thank you so much for this valid information….

ngassmann

May 27th, 2010

Mathew, I am thoroughly impressed every time I read one of your articles. Only 18 years old, and so much knowledge. Maybe I’m just jealous. :D

Jordan Walker

May 27th, 2010

Those are excellent points when not to expand.

Keith Mountifield

May 27th, 2010

All these points are valid and useful, but surely whether to expand or not is more to do with your own aspirations and expectations than a few general negative points.

I’d be very interested to see a similar post from the opposite viewpoint, perhaps ’10 reasons why expanding your design business is a good thing’?

I’d love to write it, but since I’m a single home office based freelancer i’m not really qualified to do so :o)

However, an interesting article none the less. Thanks.

Jacob Gube

May 27th, 2010

@Keith Mountifield: I was just about to comment about this. I think Mathew’s point wasn’t “You should never expand your business.” The way I interpreted it was, “If you’re thinking of expanding, take these things into consideration before blindly expanding.”

Yes, I’d love to see someone write about the other side of the story, “reasons why you should expand your business”

Send me an email about writing about this.

Arlington

May 27th, 2010

Mathew, very well written article with some great insights.

Our design business has been in a growth pattern for the last 3 years. As the owner, it has been exciting and challenging trying to navigate the growth process while maintaining our quality and customer service.

A great resource I found recently is a book called “Awesomely Simple” where the author lays out 6 key elements of any successful business: Vivid Vision, Best People, Robust Communication, Sense of Urgency, Disciplined Execution and Extreme Customer Focus. It has been a great read so far and I recommend it highly to other design business owners.

bryan zmijewski

May 27th, 2010

Jacob, I’m sure we can highlight great reasons for expanding your business.

Jennifer

May 27th, 2010

Agree but just for specific not big scale design studeo i thought…

Jennifer

May 27th, 2010

for individual art studio indeed

Brad

May 28th, 2010

This is a brilliant post. Great thoughts about providing great service without getting wrapped up in the “bigger is better” idea.

I decided to not expand my business with employees or partners simply because of the headache and complications it brings. There’s not much drama when it’s just me.

Brian

May 28th, 2010

This is something I’ve been kicking around for the past year or so. Should I, and if so, how would I go about hiring my first full-time employee?

I’ve been relying on my own work ethic and occasionally hiring contractors to help out, but the idea of truly “expanding” – just a little – always crosses my mind.

Dawn

May 28th, 2010

I particularly agree with #4 – about investing in additional revenue streams. While that approach can potentially fracture a company, in today’s market we’ve discovered our small business clients have a wide variety of needs, and our successes are based on meeting those. We’ve never had a client yet that was “in the box”.

Zach

May 28th, 2010

Matt:
Excellent post. I was just addressing a similar theme about the unique challenges of design businesses on my blog. I found an interesting parallel to the differences between car manufacturing and airplane manufacturing. One is assembly line and one is almost all by hand.
if you’re interested the full article is here:
http://plasticsturgeon.com/?p=113

I have to say, I’m pretty impressed for such circumspect advice from someone so young. Keep up the great work.

ddeja

May 28th, 2010

There are alwasy advanteges and disadvantages for expanding your business. I think mostly good and conscious company managind is the key. Whithout it there is no differece if you are small company or big company, you are going down…

Nikos

May 29th, 2010

Great article indeed! There are several factors that you should consider while expanding… It is not an easy process and it can leave your company hurt if not done carefully.

Ayush Jain

May 31st, 2010

Nice article, though there are opinion differences. If we say that we should stay away from volume and complexity to keep things simple, we are ruining the essence of a subject called management science. I agree to the fact that it is far more difficult to manage a creative business, but that does not infer that it cannot be done at all. I talk of this from my experience at my company http://www.cheesecare.com where we have outgrown expectations of all sorts doubling our volumes each year in all aspects. The challenge does come with a lot of stumbles with process and the unpredictability of art and creativity. But the fun lies in accounting for this dynamism. Though, even we are still learning and experimenting while we grow and are working hard to put things in place, but I would like to leave everyone with a thought here. When you say that small units function and large units do not, why don’t we try to define a large unit as a conglomeration of these smaller units. I understand the dynamics that come along, this is just a thought.

Wesley Lynch

June 3rd, 2010

I agree with the benefits of smaller teams. Have you given much thought to larger companies comprised of smaller independent teams. I would be keen to hear your thoughts?

pw

June 9th, 2011

interesting thoughts! anyway I feel companies are destined to expand if they are successful. just need to make sure we choose the right strategy :)

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