Starting a design business is pretty easy. Growing it and then maintaining it is pretty hard. That’s something designers don’t usually hear in art school. Only later, when they are neck deep in running their businesses, does the realization really hit them. When designers do get together to talk business, they nearly always focus on the design of the work—not what it took to land the work, get it done and then get paid for it. It’s way more fun to focus on design details like layouts, imagery, color palettes or typography rather than the tediousness of project management or the continuous challenges of client relationships. Let’s face it—although typography is a complex subject, it’s a knowable one for a designer. On the other hand, mastering a business is an ever-changing, endless pursuit.

In recent interviews with some successful Los Angeles-based design business owners, discussions of the evolution of their businesses yielded more than a set of dry metrics. Instead, these entrepreneurs revealed a series of candid stories about the joys and tribulations, the ups and downs and the sometimes white-knuckle ride of owning a design business. Here’s what they had to say about the life cycles of their firms.

STAGE 1: FORM
On Starting Up & Structuring a Business
At some point, design business owners had to make the big leap and start a company. Maybe they had freelance work that organically grew and grew, prompting them to make it official. Or perhaps two creative people gradually decided to formalize their collaboration and open shop. Some simply got fed up with their day jobs and decided to become their own bosses. In legal terms, many of these firms are sole proprietorships or partnerships. Whatever the motivation for starting up, reality soon kicks in and the questions become, “How serious am I about starting a company and being in business?” and “What do I need to do—besides great design—to get this thing off to a good start?”

Marci Boudreau and Vesna Petrovic had worked together as designer and client when Boudreau was on staff at the Los Angeles Museum of Contemporary Art (MOCA) and Petrovic was freelancing. They took the plunge and formed Picnic Design a little over a year ago. Even though it’s just the two of them and they maintain separate home offices, they are very clear about their business goals, having gone through the process of developing a formal business plan.

They meet to discuss projects biweekly and take twice-a-year retreats to focus on business issues. “There’s something different psychologically about actually forming a company, rather than being freelancers. We treat it differently. We act differently,” says Petrovic. They also have a clear division of labor: While both act as creatives on projects, Petrovic handles the firm’s self-promotion and marketing activities, while Boudreau deals with the money and operations sides of things. “Our division of labor is working out. Plus we have really similar life goals, and that makes a big difference,” says Boudreau.

On the opposite side of the spectrum, Hamagami/Carroll Inc., a visual communication design firm with 45 employees, has issues that Picnic Design doesn’t face, even though both companies require cohesive leadership. John Hamagami and Justin Carroll have been partners for over 18 years. “Longer than some of our marriages,” quips Carroll.

“I’d recommend that you and your partner come to an agreement on clear roles and responsibilities,” he suggests. “We eventually evolved and worked it out, but it’s much better to figure that stuff out from the very beginning.” Carroll also references the idea of committed-versus-reluctant leadership, and says, “You’ve got to be committed to running your business like a business. That’s what it really takes to be successful. Get a financial structure in place right away. Seek out the help of expert advisors. Take it seriously.”

David Lai, CEO, and Hiro Niwa, creative director, of the 20- person interactive design firm Hello Design, formalized the structure of their company after co-pitching and winning a large client project. Within six months of opening their doors they had 10 employees, a situation that demanded professional accountability. Plus, as Lai puts it, “You never intend for things to go wrong when you’re starting a company, but sometimes they do. A formal agreement protects you and your partner.”

STAGE 2: BUILD
On Getting More Structure & Growing Pains
Once they’ve been around for a while, most design businesses—especially those in California—become an LLC. It may not be as advantageous in other states, but this particular legal structure gives a business owner some of the tax benefits of sole proprietorship/ partnership and some of the liability protection of a corporation. Regardless of laws, however, a move toward more structure in the business is inevitable at a certain point in a firm’s evolution.

“Of course, as soon as you have an employee, rather than relying on freelance help, you must deal with payroll and employment tax issues,” states Petrula Vrontikis. “It’s a lot more complicated.” Vrontikis established Vrontikis Design Office—a graphic design firm with a focus on branding and print communications—in 1989 and has since had as many as eight employees working for her. She’s experienced the pleasures and the pains of dealing with staff. “Growing and adding employees is always a gamble. Will business continue as it is or will you experience a downturn? You never know,” she notes. “Then, once you do have good employees, you want to keep them, and keep them happy.”

Jonathan Notaro, founder of Brand New School, a bicoastal directing collective with offices in Los Angeles and New York, sums it up this way: “Nothing tries your patience more than employee issues.” Since starting his company in 2000, Notaro has been at the helm of a business that has gone from a single person (himself) to 32 employees, augmented by a revolving group of freelance talent that easily doubles the size of the firm. That meteoric rise has given him access to choice projects in the motion graphics and live-action commercial industries, and it has caused Notaro some sleepless nights for shouldering all that responsibility before the age of 30.

Within six months of starting Brand New School, Notaro was in a bad automobile accident and sustained near-fatal injuries. As a result, he knew he needed someone senior to handle the business while he recovered. Notaro hired Jens Gelhaar, whom he’d known both at school and as a coworker. In this instance, making the hire might just have saved the company. Gelhaar stayed with Brand New School and, in 2006, became a partner in the firm.

“You’ve got to find the right person,” says David Lai of selecting the people on whom the business will depend. “You have to delegate to people you trust. You need people with a good work ethic, who want to be there, and who are proud to be part of the company.” For Lai and his partner Niwa, it’s also been critical to outsource certain tasks to experts. For example, Hello Design has an outside attorney who writes and negotiates all client contracts.

STAGE 3: THRIVE/SURVIVE
On Growing & Maintaining The Business (Or Not)
For Fabian Geyrhalter, who began his full-service design agency, Geyrhalter Design, four years ago, growth has been steady from the start. He’s gone from working solo from his garage at home to running a seven-person firm with an office on Main Street in Santa Monica. “I’m going to cap it at eight people. I had the opportunity to open an office in New York City, but ultimately decided against it. When I really thought about how my life would change, I realized it was something I wasn’t truly interested in. I decided that bigger isn’t necessarily better.”

“You need to get clear about what you really want, not what you’re supposed to want,” advises Kim Baer. “We live in a culture that’s all about more, bigger, faster. Maybe that’s not right for you.” At its largest, Baer’s strategic branding and design firm, KBDA, was 14 people, but, as of May 1 of this year, she has recon- figured her firm to be a small core staff that works with key collaborators on larger projects. “I just didn’t want to run a large firm anymore. I want to get back to a more creative role, plus I don’t want to worry about having to take on work just to support salaries and keeping a staff busy and happy.”

On the flip side, those business owners who like having a large staff must do what it takes to maintain it. “One thing that becomes an issue after three or four years in business is talent retention,” says Notaro. “Keeping a good crew working and challenged and not interested in going off and starting their own competitive firm is important. We’ve had employees leave after two or three years and start their own thing, which in some way is a testament to our company’s success in the market. It’s gotten ugly at times, but everybody learns from it. You have to just go with the changes.”

Sometimes the issue isn’t employees leaving, it’s having them stay. “The more employees you have, the more headaches you have,” says Carroll, “but if you don’t have the manpower and the perceived benefits of a certain size, your firm just won’t be considered viable by some clients.” Hamagami/Carroll has noticed real changes in the challenges brought on by the expansion of their company. “You hit different plateaus at different stages of growth,” explains Carroll. “Up to 10 people, as owners we directed employees, maybe with a project manager to help. When we hit 20 people, we needed a creative director and an art director. At 35 people, things expanded exponentially. You really have to start acting like a serious business with a specialized support staff, like full-time IT and a human resources consultant. Now at 45 people, it feels stable. John and I feel like we’re in management and it works for us. Of course, the overhead is huge. It’s a lot of pressure.”

The problem with running a larger company is that owners must place trust in employees to do the creative work as well as the owners would personally. “When I got really large,” admits Vrontikis, “there were instances when I was presenting work to clients that wasn’t as it should be. For one reason or another, I had to go with what my staff designed. Now, being smaller, I have more control over the work, and I know that it’s the right solution.”

Notaro says of maintaining creative excellence, “We made some choices in the formative years to keep growing creatively. That means we don’t repeat ourselves. We’re always trying new things. Not using set stylistic or formulaic solutions every time does have consequences.”

It’s a fine line balancing creative and account services. To maintain success, an owner sometimes has tough decisions to make. “Back somewhere along the way we had to choose: be a large, fullservice agency or stay small and be a boutique,” Carroll explains. “We went large to serve three or four client relationships. We didn’t get big for the sake of getting big, we did it to pursue opportunities that presented themselves.” The impact of such a choice has additional implications. “As we got bigger, it changed the pro- file of our hires,” says Carroll. “Now we look a lot more at personality and attitude. We ask, ‘Will this person fit in?’ When you’re small, you can have nuttier, more eccentric personalities, but a larger firm demands a team culture.”

It’s interesting to note that many of the business owners talked about the changes in their day-to-day activities now that they own their own companies, however large or small. “I spend about 30 percent of my time on design and 70 percent on the business,” says Boudreau. It’s a very similar situation for Carroll: “Eighty percent of my day is taken up with human resources and moneymanagement issues,” he says. “Twenty percent is focused on project- related issues.” Geyrhalter echoes this as well: “Two years ago I stopped designing and started managing. I know now that I don’t have to design everything, I need to be a leader. I need to be inspired, so that I can inspire others.”

STAGE 4: EXIT
On Reinventing & Transitioning
Sometimes, business owners face circumstances beyond their control that seriously impact their businesses. “When 9/11 hit, the economy forced me to rethink my size,” says Vrontikis. “It was actually a blessing in hindsight. I’ve been able to regroup as a smaller firm, focus on relationships with fewer clients and, ultimately, enjoy my work more in this smaller configuration. I like being agile—it keeps me energized about my business.”

If necessity is the mother of invention, time itself may be the mother of reinvention. Baer calls her transition from a large firm to a nimble consultancy “KBDA 2.0,” and she is excited about the prospects this new iteration of her business will bring. “Technology has made this new model of interconnected strategic partners possible. I really prefer peer relationships with other designers, rather than being the ‘boss.’ This wouldn’t have worked 20 years ago. I’m looking forward to working in this more decentralized model.”

Other firms have undergone major structural changes as well. Hello Design sold an equity stake in the firm to MDC Partners, becoming part of the MDC Network, which also includes Crispin Porter + Bogusky, Kirshenbaum Bond, fuseproject, Cliff Freeman and Bruce Mau Design. “MDC is great,” says Lai. “Their philosophy is to keep significant ownership of their companies with the original owner. There is a very entrepreneurial focus. We made this move because we wanted help with growth as well as financial stability. Plus we’re excited to be part of such a great creative network, part of a bigger puzzle.”

At Brand New School, new partner Gelhaar experienced his first April 15 as an owner and had to deal with financial accountability for the partnership. “For me, it’s a relief having someone to share this stuff with,” says Notaro. “I really like having Jens as my partner. I’m looking forward to what’s next for us.”

Graceful Departures
“Our next step is to develop an exit strategy,” says Carroll. “I sometimes have this fantasy of freelancing again or working part time on my own stuff, but the truth is, there are a lot of benefits I’d have to give up.”

One person who has actually stepped away from it all is John White. “Now I just want to teach a few days a week, paint, and the rest of the time play golf,” says White, who shuttered the doors of his advertising design agency Perceive in 2005 after 17 years in business, as many as 35 employees and billings of over $28 million. “It was an interesting ride,” he says. “I wouldn’t have missed a minute, but I’m happy not to have the ups and downs of running a creative business anymore!”

RESOURCES:
Brand New School—www.brandnewschool.com
Geyrhalter Design—www.geyrhalter.com
Hamagami / Carroll, Inc.—www.hcassociates.com
Hello Design—www.hellodesign.com
KBDA—www.kbda.com
Picnic Design—www.picnicdesign.com
Vrontikis Design Office—www.35k.com