Income range for an ID to start his/her own business

Hi!

I am an ID in a tech company in California with roughly 10 years working experience. Recently I have been thinking about starting my own business, either designing and launching a product or doing design consultancy. This is due to my desire to do more interesting projects and have a more sustainable career path. As anyone can imagine, the projects in a tech company are pretty similar one from another and I personally don’t have a strong desire to take the manager path to manage people.

Since still have a family to raise, financial side of this decision also needs to be considered. In the past weeks, I have been looking for financial information about different business for designer to start, hoping to guide my decision and convince my wife as well. But it’s really difficult to find any information except from those big names.

It would be great if anyone can share what he/she knows about the range of the income for these scenarios below. I hope this is also interesting for other designers as well.

  1. A designer who have a product (e.g vase or lamp) being sold in MoMa design store or other design stores? The designer might fully invest in the manufacture part or partner with a vendor in Asia and get royalty. For this type of products, the volume is relatively low but they are highly beautiful, artistic and welcomed by design lovers.

  2. A designer who only design products for companies and get royalty (e.g. designing furniture pieces for European furniture companies).

  3. A designer who designs and sells a product online for mass market (e.g, designing a versatile iphone case and selling it on its website or amazon). For this type of products, probably they are less ‘designed’ and mostly made for mass market.

  4. A designer who runs a small design studio(1-3 ppl) and do traditional ID consultant for small companies (e.g startup which doesn’t have any ID).

Many thanks!

This is really an impossible question to answer. The short answer is you can make what every you can personally go get. Running your own business is highly dependent on the individual. If you have an amazing and diverse portfolio, a ton of connections, a knack for business development, and the ability to walk people through sometimes difficult conversations of money, IP, legal contracts, and SOWs, you will do great! On top of that throw in some good luck and timing. Those that don’t have those things don’t tend to so well starting their own studio. I’m pretty fanatical about keeping my clients happy and my costs low, so that leads to a brisk business.

As far as making and selling your own things, you really have to do a bottoms up and tops down P&L build to determine what you would make under different scenarios. Things to think about, how long will it take to get from sketch to production (IE, time you need to feed yourself with no income), what retail channels will you need to build connections with, what is the BOM/FOB price of the product, how Manny points of margin will the retailer expect, what are competitive retail prices, how many units do your retail’s partners think they can move in a quarter, what other business expenses will you have (insurance, legal, logistics, marketing), then how much money will you have left per unit after all expenses over time the amount of units sold… that might be a good way to rough is how much you can expect to make. Swap some variables around and you get a range.

I’m not sure about the ranges, but you could probably look through Coroflot salary surveys. It’s a really open ended question. It could be anywhere from -$500k if it failed completely to $10m if you had some crazy successful product/brand that you owned.

Have you thought about doing it as a side hustle and letting it grow until you have enough work to do it full time? I’m not sure I would quit my job if I had a family with no real direction of what kind of business I wanted to start.

@yo, I think my portfolio and experience are not bad. But dealing with client relationship is probably my weakness and my least favourite thing to do.

I just have never done any freelance job before, therefore I have no idea what is the average income for those scenarios.

@AndyMc, I thought about doing it as a side project as well at the beginning. I actually have one of the colleagues did that and eventually left the company. For me, I have probably 1 ~1.5 hours left every day after work and family kind of stuff to do my own thing. Doing it part-time probably is tough for me.

I think the key is calculating your burn down rate. At best, you’ll probably break even the first year, so you’ll need a year of expenses in the bank. After that, you’ll have to feel which way the wind is blowing and make a call if you want to continue.

I haven’t raised capital before, but I did look at buying a business a few years ago. If you are doing a product that you have experience in, a bank will loan you about as much as you are putting in out of your pocket. Also, if you can get a PO from someone, you can get gap loans to cover your cost of goods. It might be hard, but if you can get an appointment with a banker to discuss finance, it would probably be the best thing you can do to get an understanding of finances at this point.

Also, take an accounting course if you haven’t already. Probably the single most important thing you can do before starting a business.

Based on you need for some business experience it might be a good idea to get a job at a small consulting firm or a startup where you can learn more about the business side of things before starting a company.

If you have never done freelance work before and you do not enjoy client relationships then starting a consulting firm might be difficult and not enjoyable for you.

FWIW if you don’t think client relationships are your strong suit, consulting is probably not the gig. Consulting really needs you to have the extrovert sales and people hat on - your job is to make them happy while simultaneously negotiating as much money as you can. Clients will almost always under-value and look to trim their own costs when it comes to working with external vendor, and you need to become a pro at defending why X is worth $Y. I used to do a lot of freelance as a side hustle, and it came to the point where I liked doing the design work but dealing with clients (especially the small inventor types I was getting a lot of) was not worth the stress:dollar ratio.

My brother ran an agency for ~15 years - I think my biggest takeaways from his experience were:
-Prepare for the rollercoaster, especially as you scale. You will have income swings, clients who don’t pay, global downturns that you’ll need to navigate. I know that during the ~2008 recession years my brother had to drain his own bank account and ask for money just to cover payroll while waiting for clients to make good on their payment terms.
-Be prepared for the time and stress commitments. A big corporate job you can usually go home and sleep at night, or go on vacation knowing someone will cover you while you’re out. Running your own gig you will need to be always on to keep clients happy.
-Be careful in who you pick as partners as you scale. I’ve seen agencies be tremendously successful based on partners who could hold each other up with various skills (ie a super great people person + super great designer, or tech lead, etc). I’ve also seen instances where people who both wanted to be in charge of steering the ship wound up creating more conflict than anything else.

Based on your couple of options, you also need to evaluate where you can add the most value. Making mass market phone cases is no longer a real value situation - theres a thousand premade options on Alibaba and most people on Amazon just try to buy and resell them as a race to the bottom in hopes of getting the highest SEO.

If you wanted to build your own product, theres a lot of opportunity, but coming up with the idea that makes you willing to put it all on the line is a tough one. I’d like to go that route personally, but I’ve yet to find something that I feel enough conviction about or feel confident enough to execute to tell my wife we’re taking out a home equity loan.

Ditto above points on freelancing and time commitments. With a full-time job and a family to feed/shelter/help with multiplication homework there isn’t much time left for other work. I’m quite sure however that the time commitments doing 10 hours of freelance in addition to all other normal duties will be LESS than that involved in running one’s own gig, whether that be making widgets or keeping clients happy.
I’ve only ever had a maximum of two clients at a time (in addition to F/T job). You have to be honest about how much quality work you can do, or how client schedules might interact. Its ideal to have a ‘cash cow’ client who needs easy/tedious type work, in addition to a more demanding or challenging project.
I have friends who have a small (“boutique”) ID firm and they have no desire to expand. They bring in as much work as the two principals can handle, and very infrequently have to rely on freelance help. Both have families and all the other commitments, though it does help that their spouses also make decent salaries.

For #1 and #2 it assumes that the designer has a brand name which is worth something to the outlet selling the product. Either that, or a contract that is favorable to the designer, will produce enough income to probably be worthwhile. For some odd discretionary widget I would not expect that income to be out of the $1000-2000 range per month. (I am basing these numbers off a small percentage of probable MSRP expected in outlets like a MoMA store.) No idea about furniture for European companies, though I’d expect unless you are a big name, it would be a normal fee-for-service or they would buy the rights. You’d get a lump sum and be done.
For #3 its getting the right mix of clients and ensuring no hiccups. People like Yo will have way more insight on this, but its theoretically possible to support yourself and a family if all the pieces are in place. Self-promotion, some amount of charisma, and disciplined time management are key to succeeding in this kind of role. Baseline though I would expect you’d need to be billing ~$10K at minimum a month.

yup, except I try to double to triple that minimum per month number. It is super important to be organized with biz dev efforts, and tracking outputs to inputs (IE how much did it cost in time to get that client). Top 5 clients get extras, bottom 5 clients I try to move away from, that kind of thing. Monthly and quarterly sales and billings targets, tracking potential projects in the sales funnel. Luckily I’m a nerd and enjoy a lot of that stuff.

@yo, yup, that sounds like a good practice. End of the day it is a ‘business’ after all. Gotta relish all the business processes.

@Mr-914, I have thought about setting a limited amount of money for the new business to burn, either for a year or two. Once it’s all gone, I might go back to work in a corporate.

But getting a loan from the bank is an interesting idea. That might help to reduce the impact on family temporarily.

@slippyfish, thanks for your information. They are helpful. For your friends who have a ‘boutique’ ID firm, if they really like the projects and get paid well, that is perfect. This is exactly what I dream of.

Also, I know a friend, who also doesn’t like dealing with client relationship and negotiating contracts. He has pretty good design skills and sense and runs a small ID firm of 3 designers. In order to get new business, he hires a part-time business manager. Basically that business manager represents him and ‘sell’ him to various potential clients and get contracts signed. That seems to be working very well for him.

@Cyberdemon, yeah. defending your design worths a certain amount of $$ is tougher than coming up with great design in my mind. That’s why I still like working in a corporate. Most of the time I spent is on design or working with engineers to preserve the design intent.

There is a friend of mine who used to work in a car company as an automotive designer. After quitting the job, he designs and sells cool looking badge holders on amazon. He never tells me exactly how much he makes. But he seems to be very satisfied since he says his products are the top seller on amazon. I think from business point of view, it might be very successful. But for a designer, it probably has less fulfilment. It’s tough to find the sweet spot.

That’s fine if you have free capital. You might burn 6 months of wages just to win your first project, which I think was said above. At first it will be just you doing everything from the design to the accounting and admin to stay lean, and you can’t scale staff without projects. Could you move to a consultancy to see if you like this style of work?

In any case it seems that it would be beneficial for you to do some research and really understand how different businesses function before committing to a decision. I’m not sure that you’ve considered just how much time is involved in the day-to-day tasks that you can’t charge for.

You might want to read Emily Cohen’s book “Brutally Honest”

Also, “The Business of Design” by Keith Granet

Well that brought back a flood of memories.

I moved away from my own firm almost 12 years ago, and always being in consultancies prior, my current corporate job is definitely a different beast. Especially when when we went from a medium-private company to a behemoth-public company. The best part though is there are some many gigs to choose from now and I moved into an ous role a year ago. Something is pretty cool when you meet a clinician from Brazil at a conference in Geneva and hopefully will setup a clinical trial in Sao Paulo.

But back to the OP. As others eluded, when running my own firm, I’d estimate 600-800 hours per year were devoted to sales efforts. I didn’t care about the gig I had, I worried about getting the next gig. I was certainly capable of “wooing” business customers, but it is not a strength and took a lot of mental effort on my part. Currently, I “woo” clinicians, but it is different because in that case the subject of their problems interests me more than the problems of my business customers.