Options for Setting up a Design Business

Professional Practice Essay

 During the course of this essay I will discuss and evaluate the options available in choosing to set up a design company with a colleague and the corresponding steps taken in creating one. I will begin by establishing the types of businesses which would be most suitable for my venture while also pointing out the ones that would not work and the reasons why.  This will then bring me to examine the necessary processes involved in dealing with a client, setting up a design brief and the different types of design management tools associated with it. In doing so, I will be able to make a judgement on what is the best business type for me.

 When setting up a design company with a colleague, the most likely type of business which would be the most suitable for at least a two-person company, would either be a partnership or a designated activity company. Both are private limited companies which means that the shares are owned by the company’s stakeholders. A partnership is a company which is set up, owned and managed by two or more partners[1]. It may have up to fifty members in total[2]. A partnership involves members coming together to pull their resources together such as money or talents. An example would involve a furniture designer and an interior designer coming together so that they can work more closely together in the hopes of making a profit and dividing the company responsibilities between themselves according to their skill sets. They would both have joint ownership and responsibilities in running the company. A deed of partnership should be drawn up by a solicitor in the event that any disagreements arise between any of the members[3]. Such a contract would be beneficial to all and would usually set out the roles of each member, as well as their salary and what would happen if the company should close down. If a partner breaks any of the terms he or she could be sued for breaching the contract which is why it is important to have an agreement drawn up to protect everyone in the business. A big advantage of setting a partnership as opposed to being a sole trader is the fact that the more people that come together in the partnership, the more money or capital is contributed into the business allowing the company to have more money to work with from the start and to help it grow much quicker. However, a big disadvantage to a partnership is the fact that it has unlimited liability[4]. This means that if things don’t go well and the company goes bankrupt each partner is jointly responsible for any debts the business has. This could even mean that partners may have to sell their personal assets if they are unable to repay the debts owed by the company. Therefore, it is a great risk when setting up a partnership.

 The second option for a design company would be the designated activity company[5]. A designated activity company must have at least two directors and can consist of up to 149 members. The memorandum and articles of association must be prepared when setting up a DAC. The memorandum of association is a document which sets out the relationship of the business with the public[6]. It specifies general information such as the company’s name, address, their objectives and aims, their share capital and the list of all the shareholders. The articles of association on the other hand contain the company’s internal rules and regulations for the running of the company. It includes procedures on arranging meetings, voting in meetings and for electing and replacing directors. It also indicates the roles and duties of the directors and the strategy for closing the company down. The designated activity company is required to hold an Annual General Meeting and has to have “Designated Activity Company,” at the end of their name. One of the biggest advantages of setting up a DAC is the fact that it has limited liability, unlike a partnership which has unlimited liability. This means that if the company were to fail or go bankrupt its members would only lose the money that they invested into the company and not be accountable for the debts owed by the business. However, a DAC has to publish its accounts annually just like a private limited company while a partnership does not. This means that the company is not as confidential as a partnership, however the fact that it releases its accounts to the public could inform the publish that it is a legitimate trading company which pays its taxes. 

 In order to form a company a memorandum of association, articles of association and a form A1 must be submitted to the Company Registration Office along with the type of company you are forming. A designated activity company must register to the incorporation of companies and receive a certificate of incorporation before they are allowed to trade while a partnership is advised to draw up a deed of partnership. A company name will have to be registered to the CRO but it can be refused if it is similar or exactly the same to another company, if it is offensive or if it suggest to be sponsored by the state in any way. When selecting a business name, I should keep in mind that the name is the thing that customers see first when looking at the company and it should reflect my business in an informative way. Anyone is allowed to set up a company as long as they are over the age of eighteen, are of a sound mind and are not serving a prison sentence. According to all of the above points I would be more inclined to set up a DAC instead of a partnership. The main reason for this is that you have limited liability if you set up a DAC whereas a partnership does not meaning that if anything were to go wrong with the business and if it were to go into serious debt I’d be liable to pay it all and be in the risk of losing any of my personal assets if I did not have sufficient funds to repay the debts.

  When dealing with clients it is imperative that a brief is written up so that an understanding can be established between myself and the client[7]. A verbal brief is not very suitable as a lot of details may be lost in translation but there is also no written proof of what was discussed and cannot be proven later on. It is usually written by a project or design manager and defines any crucial information needed such as the ultimate goal of the project, what the client wants to achieve, who the target markets is and what the client wants or if the client isn’t sure then what they don’t want could also be specified to give the designer some sort of direction with the project[8]. It should also include any technical or functional specifications[9] such as if a chair is being commissioned the client should specify who is going to be the prime user of it and how will it be used. A chair that is only used in meetings as opposed to a chair that will be used all day may be different comfort wise as the one that’s used for longer periods of time will need to be much more comfortable than a chair that is only used for a brief moment. The materials needed for each one may also differ. A deadline and key milestones may also be pointed out in a brief so that each party knows what is going on at each stage of the project and is not confused and in the dark about it. If for some reason the brief has been agreed through a verbal method, then the designer or myself should put the details of the brief in writing and email it out to the client for approval. Ultimately there must be some form of a written agreement in place. There should also be constant communication between the client and designer to ensure the smooth running of the project[10]. It is very important to have one as it saves a lot of time and money. A sense of clarity and understanding is put in place and protects the designer when the client starts to change things that weren’t specified in the contract. If the client wants extra work to be done on the project that wasn’t specified in the original brief, then a new or additional brief may be drafted[11]. Nevertheless, it is very important a design brief is in place to give the designer a peace of mind and a direction to go in with the project without feeling lost.

 A Service Level Agreement is also important and goes along with the design brief. It formally describes the level of service that is to be provided to the client. It gives a full description of the agreement that is based off the design brief and includes details such as the services that are to be supplied, the fees and payment terms, the client representative, the rights of both the client and the provider as well as out of pocket expenses and details about the termination of the contract[12]. It will also define the strategies that would come into play in the case that the project needs to be rush for some reason. For example, if a client wishes to speed up the process by a couple of weeks earlier than scheduled then an extra payment may be needed in order for that to happen[13]. It will be detailed in such a way as to specify everything that the designer will do for the time and money during the duration of the project. The company could already have a general service level agreement in place and may tweak and modify it for each client if necessary and to specify any different services that arise. The payment method might also change in each SLA to state a breakdown of charges, taxes and the way the company is to be remunerated. Issued regarding intellectual property should also be highlighted in the agreement to avoid infringement on other people’s intellectual property. Sometimes it is possible to create something very similar to other designers’ work by coincidence, but it is important to be aware of the design market and do some research to avoid copying someone directly. You cannot take someone’s work and make it your own, but you can however sell the copyright of your design to your client which they can then take and do with it what they please. If in my design company I were to create a piece of furniture that had some form of new industrial design that I’d like to claim as my own due to its colour, texture, shape, ornamentation or anything else relating to its form then I could register it under the Industrial Designs Act 2001 to protect it from being copied by other companies or individuals. I could also trademark my work if I designed my interiors in such a way that it was unique in some form where by looking at it you could tell straight away who the designer was. An example of an architect who has very distinguishable work is Zaha Hadid whose architecture and furniture can be spotted straight away due to its organic nature and form.

 A major aspect of managing a design company is design management. This involves the strategic management of a company by allocating different design projects to different designers in the company. A design manager would be aware of the strengths and weaknesses of each designer and would make sure to allocate projects efficiently[14]. They will make sure that there is some form of organisational in place in the company and that everything runs smoothly as well as identifying appropriate opportunities for the company. The design management might not always be working on a project but rather overseeing other employees’ projects and make sure that no one is having issues while also helping out where such issues arise[15]. On top of managing projects and employees, the design manager would also deal with suppliers and clients to ensure everything is communicated in a proper manner. A good design manager should have good leadership and communication skills as well as being persuasive and have a very good understanding of design to be able to guide others who work under them.

 In order to flesh out new opportunities for the business to take a design manager can use design management tools to identify where the company stands in relation to other companies in the world[16]. The tools that can be used include a SWOT analysis, a competitive analysis, a product life cycle or an Ansoff matrix. If I were to form a design company the tools that I would most likely use is a SWOT analysis and a competitive analysis. A product life cycle would not be very beneficial for my company as it shows the stages in the life of a product and by being an interior design firm, I do not produce products but provide a service instead. If I were to design some furniture products for one of my designs, I could potentially use this design tool. The Ansoff matrix compares your existing and new products against an existing and new market in an effort to increase sales[17] and while I could use it to learn how to increase the revenue for my services, I think it would be more beneficial with a product rather than a service. Therefore, the other options that could work for my type of business is a Strengths, Weaknesses, Opportunities and Threats Analysis (SWOT), a competitive analysis or a design audit. The SWOT analysis identifies the company’s internal strengths which show what it is good at and what gives it an advantage over its competitors while also highlighting its internal weaknesses that may place it at a disadvantage against its competition[18]. This can include a disorganised structural running of the company or team members who are having difficulties. The weaknesses can be fixed by providing training for any staff members who are struggling and providing assistance when needed. Communication is also imperative to the smooth running of a company[19]. The opportunities involve external chances that the business can avail of to increase its sales, profits or public image while the threats show external factors which could endanger the business. The SWOT analysis can therefore tell the company what they must change in order to improve their business as well as what they are doing right. The competitive analysis can be used to pinpoint a gap in the market and tell the company what they must do to compete with other companies on the market[20]. Therefore, the SWOT analysis and competitive analysis would be the best tools to use as they would provide a lot of beneficial information for the company in terms of what it needs to achieve to become competitive and increase its sales and profits.

 Having assessed any relative information needed to set up a company, a DAC would be the best option for me as it would carry less risk with it for the stakeholders due to its limited liability and credibility as accounts have to be published annually. As for the design tools a SWOT and competitive analysis would be most beneficial especially if my design company would be provide a service and not a specific product.

Bibliography

Published Sources

1. Best, Kathryn. Design Management: Managing design strategy, process and implementation. Switzerland: AVA Publishing, 2006.
2. Foote, David. The creative business guide to running a graphic design business. New York: W.W. Norton & Co., 2009.

Web Sources

• Airey, David. “On late client payments, sticking to the brief, and the value of design”, https://www.davidairey.com/late-client-payments/, posted on January 25, 2016. Last accessed December 4, 2018.
• Company Formations. “Designated Activity Company (DAC) in Ireland”, https://www.companyformations.ie/company-formations/designated-activity-company-dac-in-ireland/. Last accessed December 3, 2018.
• CRO. “Limited Partnership”, https://www.cro.ie/Registration/Limited-Partnership. Last accessed November 30, 2018.
• Drumm, Perrin. “Famous Creatives on How to Write the Perfect Brief in New Short Documentary “Briefly””, https://www.aiga.org/aiga/content/inspiration/famous-creatives-on-how-to-write-the-perfect-brief-in-new-short-documentary-briefly/, posted on September 17, 2014. Last accessed December 4, 2018.
• Long, Toni Y., “7 Reasons Your Business Should Have a Written Partnership Agreement”, https://www.lexology.com/library/detail.aspx?g=a5055dd7-3814-4e7b-a53b-c63beeaafeb2, posted on June 29, 2016. Last accessed December 2, 2018.
• Nathan Trust Company. “Comprehensive guide to a Designated Activity Company (DAC)”, https://www.nathantrust.com/insights/comprehensive-guide-to-a-designated-activity-company-dac. Last accessed on December 3, 2018. 
• Rutledge, Andy. “Design Project Contracts,” https://andyrutledge.com/design-project-contracts.html, posted on April 25, 2013. Last accessed December 5, 2018.

[1] David Foote, The creative business guide to running a graphic design business. New York: W.W. Norton & Co., 2009, 19.

[2] “Limited Partnership”, https://www.cro.ie/Registration/Limited-Partnership. Last accessed November 30, 2018.

[3] Toni Y. Long, “7 Reasons Your Business Should Have a Written Partnership Agreement”, https://www.lexology.com/library/detail.aspx?g=a5055dd7-3814-4e7b-a53b-c63beeaafeb2, posted on June 29, 2016. Last accessed December 2, 2018.

[4] Foote, The creative business guide to running a graphic design business. 19.

[5] “Designated Activity Company (DAC) in Ireland”, https://www.companyformations.ie/company-formations/designated-activity-company-dac-in-ireland/. Last accessed December 3, 2018.

[6] “Comprehensive guide to a Designated Activity Company (DAC)”, https://www.nathantrust.com/insights/comprehensive-guide-to-a-designated-activity-company-dac. Last accessed on December 3, 2018. 

[7] Foote, The creative business guide to running a graphic design business. 224-225.

[8] Kathryn Best, Design Management: Managing design strategy, process and implementation. Switzerland: AVA Publishing, 2006, 94.

[9] Best, Design Management, 94.

[10] Perrin Drumm, “Famous Creatives on How to Write the Perfect Brief in New Short Documentary “Briefly””, https://www.aiga.org/aiga/content/inspiration/famous-creatives-on-how-to-write-the-perfect-brief-in-new-short-documentary-briefly/, posted on September 17, 2014. Last accessed December 4, 2018.

[11] David Airey, “On late client payments, sticking to the brief, and the value of design”, https://www.davidairey.com/late-client-payments/, posted on January 25, 2016. Last accessed December 4, 2018.

[12] Andy Rutledge, “Design Project Contracts,” https://andyrutledge.com/design-project-contracts.html, posted on April 25, 2013. Last accessed December 5, 2018.

[13] Airey, “On late client payments, sticking to the brief, and the value of design”.

[14] Foote, The creative business guide to running a graphic design business. 117.

[15] Foote, The creative business guide to running a graphic design business. 115-117.

[16] Best, Design Management, 30.

[17] Best, Design Management, 38.

[18] Best, Design Management, 30.

[19] Best, Design Management, 84.

[20] Best, Design Management, 30-31.