Let’s face it, things were hard in 2003. But though the jury’s still out on 2004, there’s a feeling that the worst of the bad weather is over.
Looking back, last year also saw a raft of start-ups in the design sector, as many experienced professionals set out alone. With honourable exceptions, a lot of those setting up their own business haven’t done it before. They’ve usually lived the corporate life.
Going for broke and ‘doing it yourself’ is an attractive notion to most of us. It holds great emotional appeal. After all, in the design sector barriers to entry are low; you become your own boss; you can live out your business vision and ideas unfettered by corporate clap-trap and politics; you can earn more, and maybe, just maybe, build the business and sell out, if you want, for a tidy capital sum. Attractive, isn’t it?
But there are times to start up and times to stay put, and now may actually be a better time than 2003 to take that risk. Starting up just as the industry comes out of a gloomy period at least provides hope on the back of the cyclical upswing. Lenders know this, and if you need to borrow money interest rates are low. Moreover, more and more clients are starting to understand (at last, thank God) that creativity is not necessarily dependent upon a consultancy’s size. Execution and international delivery may be – but not creativity per se. This is why we have seen so many advertising accounts moving to small to medium-sized groups, away from major consultancies, in recent times.
If you want to do it yourself, the question is, ‘Do you feel lucky?’, as Clint Eastwood said, because there’s a lot more to starting up successfully than meets the eye.
If you are thinking of going it alone (or with a partner or two) it is crucial to understand that being an entrepreneur is very different to being a paid employee, however senior you are. A commitment and desire, bordering on the fanatical, are critical. Without these you will be looking for excuses for why failure was ‘outside my control’. So self-motivation, a supportive partner at home, and a willingness to work inhuman hours are all called for. You will be, in every sense of the words, on your own – with no support teams or corporate resource to draw upon. So, if you’re up for it – remember first, it’s an over-supplied marketplace – ask yourself what distinguishes and differentiates you and your offer? What specialist expertise or added-value services will you offer? Better not to launch as a ‘me too’; why will the market want to buy you? Why would you exist?
Assuming you can crack that nut then you are on to the nitty gritty. And it can get gritty if you do not abide by your service agreement with your present employers in terms of confidentiality, non-solicitation and non-competition. If you plan to start up with clients from your old company, see a lawyer. Or be prepared for a very unpleasant start in life.
Historically, most start-ups tended to be on a sole trader or limited liability company basis, depending upon how ambitious the principals were. These days you may be better off as a limited partnership; a relatively new form of corporate existence which has significant advantages in terms of financial flexibility and taxation. Again, you should speak to your friendly lawyer.
Then there’s the question of what you are going to use for money and how you are going to plan financially. If you have to, try the bank for a fluctuating overdraft first. It’s cheaper, mitigates the equity problem and with profitability and strong cash management you can reduce your borrowings progressively.
You will, whether you go out for cash or not, need a business plan – no plan, no sense of direction or priorities (see table left). Moreover, the involvement of a skilled finance person is crucial. They can offer you sensible and practical guidelines for the whole plan as well as crunching the necessary numbers, but they cannot be the architect or author of your business plan: it has to come from you.
Finally, there is all the operational stuff to resolve: name; domain name registration; office space; office supplies; VAT registration; terms of business; employee contracts; and a host of other such fun items. But if you really want to do it yourself, you’ll do it all. The rewards and the sense of fulfilment and achievement are enormous. Scary? Yes. A dream? Not necessarily.
Your business plan should contain:
The nature of your proposition, its points of distinction and differentiation; the role and opportunities for your new venture.
The nature of the market and how your proposition fits into the market.
How you are going to market the company and its services.
The management team and why you are well qualified for the task – your experience, your achievements, your track record (you will need, in particular, this bit for the bank).
The financial forecast and budget. The more detailed the better. A cash flow forecast, which shows clearly the peaks and troughs in the cash position.
Recent design sector start-ups
â€¢ Dave sets up with defections from Wolff Olins
â€¢ Bernard Gormley leaves Ziggurat to set up Badge Consulting, then Nude
â€¢ Mother backs the launch of Saturday, the design consultancy focusing on fashion and luxury brands
â€¢ Dunning Eley Jones is set up by three ex-Lambie-Nairn executives
â€¢ David Davies 517 is set up by David Davies and Stuart Barron of FutureBrand
â€¢ All Of Us is set up by ex-Digit directors
â€¢ The Brewery is set up by Paul Stead and Julian Ingrams
â€¢ Bibliotheque Design is set up by senior creatives from Farrow Design and North Design
â€¢ Promise is set up by Charles Trevail, ex-FutureBrand
â€¢ 35 is set up by ex-Bamber Forsyth Fitch staff