Crossing Over pt2: Freelancer to Small Studio

July.17.2009 · Posted By - Rex

Last week I talked a little bit about turning your passionate graphic design hobby in to an income. Those who do not enter a CG related career through the traditional education and employment method have a daunting path – that of learning the trade and learning business principles. Is it right for you? Where do I start?

Is Small Business for me?

First of all I do not consider myself to be necessarily a good business manager. It clearly is not what I imagined it would be like in terms of what I would be doing and the things that I would be worrying about. Clearly not everybody is cut out to run a small business, I am still deciding if I am or not. When you make a commitment to start a small business it is a lot like a marriage. You are making a serious commitment that will have long term implications and consequences. You will make serious legal commitments and you will have liabilities that you do not need to deal with as a happily employed artist. There are many facets of being involved with a business that you never imagined would take so much time or so much expense. So let me be clear, if you really just love the art and want to spend almost all of your time doing just that – a career in art as someone’s employee, whether it be graphic design, cg, post production or whatever … may be the path that will be the most satisfying to you. I sometimes wonder about that, at 3:30AM when I am trying to get something done for a client, and have to pay some bills before I go to bed.

Making the Leap

Assuming you are willing to swallow all the extra responsibility and tasks that running a small business will consume, which of many paths do you take to get there? Where are you now? Are you employed, with benefits? Do you have a family to support? Does your spouse work? Does your spouse support you with this crazy idea? Do you work with other trusted friends or potential partners in the field for which you want to start a business?

· Financial – How much money do you bring home with your freelancing today? What are your expenses? Do you have clients or contracts that help make this decision? Take some time and figure out what you really make in a year doing this work and how much it costs you. When you cross over to doing this full time or with others, the income is not going to suddenly leap forward. And you will have real expenses like bookkeeping, taxes, perhaps a lease and other expenses – not the least of which are software and hardware expenses that can be very high per artist to get started on the right foot. Does it make sense to start out the business part time and build the income or clients until you can untether yourself from other income sources? The next step can help with this decision. How are you going to pay yourself? Your business income is going to be up and down especially when you are small, and you may have to settle on a small salary and the rest as distributions and bonus depending on how things work out month to month or quarter to quarter.

· Strategy – You need to generate a business plan. Plan the phases of your business. What is your eventual goal? How big do you see your operation getting? How will it be phased in? What will it look like with two of in the business? Four? Eight? You need to figure out how your team is going to evolve to changing business conditions and hopefully those conditions are favorable as you work towards this goal. Generate a real business plan. A number of templates exist out there. And don’t just use the plan when you incorporate, revise it at least once per year. You need to cross your dreams with a reality check on a frequent basis.

· Mentor – You really should find a mentor. Someone who has ‘done it’ that can tell you about all of the adventures he or she has had along the way. Possibly in your own area or market so you have access to them, or at least since you will have a bit higher density of clients in your area than you have halfway around the world. You can get coupled with a Mentor by attending industry or business functions relative to what you do, educational outreach programs, your local Small Business Administration, or even by opening up a directory and making a few strange phone calls. People in artistic industries are usually friendly to their peers and willing to share ideas and experiences.

· Legal – If you are considering starting a business – Something you will make hundreds of thousands or millions of dollars doing, isn’t it worth a few hundred dollars you may not even have, getting some legal advice? I would visit a tax attorney and one specializing in small business setup. You don’t need to spend thousands incorporating your business. But a few sessions with an attorney and some questions you have thought out is a very wise investment. Such questions may include what type of business to set up – an LLC? An S-Corp? and so forth. We are not going to pretend to give you legal or tax advice here but get some.

How Many Hats can You Wear?

When you run a small business in art/graphic design or I suppose any sort of business, you go from having one or two bosses to having many bosses. They are your clients. You are going to need to satisfy all of them exactly the same way that you maybe had to satisfy your manager as an employee. And you will also for much of the time, need to find new bosses. Some will come and go. Some of your clients may leave because new management comes in and have their own preferred vendor or supplier. Some go in and out of business. Some are startups who can pay little and you may not see any repeat business from.

Depending on who you go in to business with, in terms of if you do an LLC or an S-Corporation etc. you will have to do a number of things you perhaps did not have to do as an employee or as a freelancer. Speaking back on the subject if you have partners make sure that the administrative, marketing, project management responsibilities are shared. Do not leave them undefined or undecided. Here are some of the hats that must be worn in a small graphic design business:

· Accounting – Pay Bills, Invoicing, Taxes, Payroll, Budgeting, Invoicing, Accounts Receivable. Somebody needs to balance the checkbook each month and watch the tax calendar. And figure out if the whole thing is floating or not. This is time consuming even for a one person business. I at the time of this writing, work with 5 others in my business and still spend a day or a day and a half each month strictly on accounting. And I have an accountant taking care of my taxes and payroll to boot!

· Sales Person – Okay, you are super busy with 2 projects. You will need to make time to book that project that will start in 2 months from now. If you don’t you will have long periods of inactivity that can be catastrophic to a small business. You have to pursue leads and solicit them if you are not booked out in advance at least 60 days. This can be incredibly hard when the work is piled up.

· Producer / Project Manager – Every project needs somebody as a central point for monitoring progress, revisions, and artistic vision or editorial intent. If you are in a partnership you may find that not everybody does this as well as the next guy. Who gets this job? It can be time consuming in the early stages of the project even time consuming before a project is approved or a client is won. You will probably need to focus as a micro creative agency and spin ideas back and forth to clients sometimes with concept art or storyboards just to win their business. I guess this crosses over to Sales Person in some respect, but when you get more than one artist working on a project coordination takes time and you need to develop a good workflow and system for production in order to succeed.

· Human Resources – Who will keep track of things like vacation, figure out payment increases, find new or temporary talent?  When you go to hire a new position who will screen the potentially hundred resumes or contacts you will get for a position?

· Artist – Finally, when all of the administrative fun is done, you have to do the actual work.  This is what you got in to it for right?  This is the rewarding part. 

I just wanted to remind you about all of the other things you will need to pay attention to on the way to your vision of a future design business.  Keep in mind not trying to discourage you!  But these are just some of the things you will want to ponder.

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