What a way to start off the week, right? With the depressing subject of money. Or rather, the possible lack of it.

Do you have enough money set aside?

Here’s a bad idea - quit your in-house design job, hang out your shingle, hold your breath and hope for the best.

A number of designers do this every year. Unfortunately, due to bad financial planning, some are forced back in-house, or need to take non design jobs in the interim.

When you go into business, it’s important to have a positive attitude. But it needs to be a realistic one. If you believe clients will be banging down your door without much effort on your part, you’re in for a rude awakening. Odds are, instead of working solid on client projects, you’ll be spending a lot of time on marketing, promotion and sales. Unless you have marketing and sales staff, taking time away from the creative part is a gotta at any stage of business. But it’s doubly important at the start. It’s not unusual to spend 50% or more of your time reeling in a big fish. Sometimes any fish.

So, how are you going to keep a roof over your head in the meantime? That’s where start up capital comes into play. Float and flow money. It’s money put aside to float you until the cash starts flowing.

How much is enough? For most shops, you’ll need a minimum of three months to keep you going. Six months is better, a year’s worth is great, two is ideal.

Consider your expenses. You’ll have the basics – your personal overheads such as rent or a mortgage, utilities, food, car payments, gas, etc. If you have an outside office, you’ll also have rent, additional utilities, extra computer items, ISP fees, office supplies, etc., right down to coffee and toilet paper. Yes, it gets expensive quick.

Okay, so you know you’ll need money. Where’s it coming from?

Here’s a few options

• Get a loan from your bank
• Personal savings (your best bet)
• Obtain a line of credit (apply before you quit your job)
• Get a loan from relatives (make sure you have a written agreement)
• Take on a partner or investor (again, have it in writing)
• Freelance while working your day job

There are other sources, but these are the most common.

A surefire way to go out of business is by not having enough start up capital, and/or buying everything in sight. So once you do have capital, learn to be frugal. Buy only what’s necessary, when it’s necessary. Draft a budget and live by it. Yeah, it’s tough.

Coming up next is how a few of us designers dealt with the tedious subject of money.

Until then,
The BoDo Team
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