Business Planning: Part One

By Shel Perkins

November 05, 2005

Conventional wisdom is that a business plan must be written before a company is launched, especially if outside financing is needed. So why wasn't this article in the very first issue of AIGA Design:Business? Frankly, it's because many design firms do not have a business plan. If they do, there's a good chance that it was written several years after the business started. Many of us ease into business based on project opportunities that come our way. A few big projects and a few loyal clients can enable a freelance career to gradually expand into a successful small office. Often there's no outside pressure to produce a business plan. If you've been freelancing for a while, you might already own most of the equipment and software required for the company, and start-up capital needed for other purposes may be minimal. So, if your design firm is already operating successfully, why would you want to write a business plan after the fact? The answer is that the document itself is part of a larger strategic planning process.

Planning Process

Writing a business plan involves asking yourself a series of hard questions about the work that you're doing and the direction in which you're heading. Young firms tend to take shape in a reactive way, accepting any project that comes along. Eventually, though, you'll decide that it's time to become more proactive and exercise greater control over the evolution of your firm. The business planning process is an opportunity to evaluate your situation, think through every aspect of your operations in a thorough and systematic way, and bring everything into alignment. You'll analyze recent trends, then project them forward in order to set realistic goals for the next three years. Most importantly, writing a business plan is not a one-time effort. It's just one part of an ongoing strategic planning process that can help your firm reach its full potential.

Business Plan Contents

The structure of the business plan document reflects the logical sequence of issues that need to be considered. It starts with a very broad-brush description of the company, gradually becomes more specific, and ends with detailed projections of financial activity. The exact details of the document vary somewhat from industry to industry. For creative firms, the outline usually looks like this:

  • Executive summary
  • Values statement
  • Vision statement
  • Mission statement
  • Goals
  • Description of services
  • Business environment and market trends
  • Client profile
  • Evaluation of your competition
  • Sustainable advantage
  • Marketing plan
  • Operations plan
  • Human resources plan
  • Technology and physical facilities plan
  • Financial plan for the next three years

Let's look at each of these sections individually and discuss the content that you need to prepare.

Executive Summary

Even though this is the first section in the document, it's actually written last. It summarizes the most important information from each of the other sections and shows how all of the pieces are working together toward the same goals. It identifies the critical success factors for your type of firm. The executive summary should not be more than one or two pages long. It provides an overview of the firm for any reader who's not already familiar with the company, such as a loan officer at a bank or a potential investor.

Values Statement

A lot of books have been published about the process of writing a business plan. However, most of them make no mention of a values statement. That's because many entrepreneurs are simply looking for a market opportunity that will support a successful launch and produce a profit. For example, if research indicates that a particular neighborhood needs a dry cleaner or a car wash, that's the type of company that many entrepreneurs will be happy to launch—not because they're passionate about the nature of the business but because they recognize that it's in demand, will generate a profit if planned and managed efficiently, and can easily be sold to a new owner at a future date. There is no larger philosophical context.

The situation is different for designers. We're passionate about our profession and the positive impact that our work can have on society. For us, design is a problem-solving process and we're painfully aware that the world is full of important problems crying out for solutions. Through the design of companies, products, services, environments and systems, we have the opportunity to create value, increase understanding, and improve the quality of life.

This strong sense of purpose must be reflected in your business plan. A clear values statement will lay out the principles that guide your business activities. It should be concise, compelling and sincere. These core values do not change over time. They will guide your decision-making whenever you're faced with tough choices. For example, your values statement might emphasize:

  • Using the power of design to _________.

Vision Statement

From a statement of values and philosophy we now turn to a statement of business objectives. Write a sentence or two describing the long-term objectives of your firm. This announces where your company wants to go—the ultimate level to which you aspire. Make it ambitious but attainable. Your business aims may be lofty, but they must still be within the realm of possibility. Here are some examples:

  • Attaining a reputation for world-class _________.
  • Becoming the leading provider of _________ in the _________ region.
  • Achieving a dominant market position in _________.

It's important to have a solid understanding of your own intentions. You must define where you want to go so that you can chart a course. Like your values statement, the business vision will remain constant. You will be continually working toward these long-term objectives.

Mission Statement

From a future-oriented statement, we now turn to a snapshot of where you are today. This is your “elevator speech”—a capsule description of your firm. It should only take a few moments to recite. It should not be vague. Make it specific and understandable to a layperson. Write a couple of sentences that state clearly:

  • What kind of firm you are
    (Is your primary discipline graphic design, interaction design, product development, advertising, or something else?)
  • What you sell
    (Name the two or three specific services that comprise most of your billings.)
  • Who buys your services
    (These are your markets—the client categories where you have the most experience.)
  • Your competitive advantages
    (Why do clients buy from you instead of someone else? What sets you apart from other firms that provide similar services?)

Your mission statement is your message to the marketplace. Keep it brief. You'll analyze your services, clients, and competitive advantages in much more detail in the remaining sections of the business plan.

Your company's mission statement must be updated periodically. Because it's a snapshot of the firm at a given moment in time, the contents must change to keep pace with the evolution of your business activities. You should also keep it visible to clients and employees. Many design firms post it on the home page of their website and feature it prominently in their marketing materials.


Business goals are short-term aims that are stated in numeric terms, such as the number of client accounts, total annual billings, size of staff, or number of offices. Goals should include timeframes and deadlines. For example, one of your goals might be to reach one million dollars in annual sales by the end of the calendar year. Setting specific short-term goals is a way to motivate yourself and focus your energies. You define the successful end result, then determine the steps that will get you there. Each goal is accomplished through a series of next actions. In the remaining sections of the business plan, you'll explain exactly what you'll do to reach these goals.

Description of Services

Chances are that your firm will be providing more than one type of creative service, but it's important to recognize that you can't be everything to everybody. To be successful, each firm needs a primary focus. As the founder, you get to decide what that focus will be. Make a choice that emphasizes your strengths and your professional experience. What are you best at and what do you enjoy the most? Take a look at your past work—what has been most successful and profitable for you? As a smart businessperson, you'll steer away from things that you don't enjoy, are not good at, or lose money on.

This section of your business plan describes your core competencies—the categories of work that you specialize in. For example, within the field of graphic design, the primary emphasis of a new firm could be on corporate identity, or packaging systems, or collateral materials, or other specialties. In interaction design, the primary focus might be on Web development, or mobile application development, or another type of work. In product development, you could focus on industrial design, or engineering, or a related service. In advertising, the initial creative focus of your firm could be on broadcast, or print, or online marketing, or a related specialty.

Many firms identify two or three primary categories that are closely related to one another. If your clients make other requests, you will, of course, accommodate them if you are able, but you can't effectively position yourself in the marketplace as a leading expert in ten different specialties. Trying to do so would stretch the resources of even the largest creative organization. It's a mistake to take a scattershot approach. Trying to be all things to all clients runs the risk of sending a negative message to the marketplace. Your firm could appear desperate—perhaps even a bit schizophrenic.

Select your areas of specialization carefully because much of your later planning will depend upon these decisions. If you select specialties that are not closely related, then your planning must be in two or three tracks to reflect the fact that different resources and processes will be involved and that different pricing and marketing strategies may be necessary. Keep in mind that innovative services involving newer technologies tend to command premium prices and produce wider margins, but they also place continual pressure on you to stay one step ahead of the competition.

Business Environment & Market Trends

In selecting your areas of specialization, it's important to focus on areas where there will be ongoing demand. For this part of your plan, ask yourself some tough questions: How much demand currently exists for the services that you want to provide? Will it be increasing or decreasing over the next three years? Where are the greatest opportunities? Your answers need to be based on research, not personal opinion or wishful thinking.

Chances are that you're already aware of trends in the overall economy. Recurring cycles of expansion and recession have a great impact on consumer confidence, corporate spending, and the availability of financing. Beyond this, though, you need to analyze trends in your clients' industries. The opportunities for you will not be the same in all industries—some will stand out.

You will be preparing an overview of each client industry that you're interested in. The goal is to describe the current trends and future prospects—are they shrinking, stable, or growing? In each industry, the current condition and the anticipated growth rate are important factors in determining the approach that companies will take to such matters as new product development, marketing initiatives, and advertising campaigns.

Many designers say that this is the most challenging section of the entire document to write. Your research will take time and, along the way, you should be prepared to spend some money if necessary for key bits of information. The following advice will help you through the research process.

To start your research, look up the industry codes for your major client categories. There are two sets of codes currently in use. The SIC (Standard Industrial Classification) system has been used by the U.S. government to track economic activity for a many years. In fact, because of the age of the system, it doesn't track newer industries very effectively. Emerging industries tend to be lumped in with their predecessors, even though data that mixes several different business activities together can be misleading. For this reason, the SIC system is gradually being replaced by a newer set of codes called NAICS (the North American Industry Classification System). To look up the SIC and NAICS codes for your clients' industries, use these online indexes:

These codes will come in handy for tracking down statistics and industry forecasts. While you're at it, be sure to get the codes that apply to your own type of business as well. (For example, graphic design is NAICS 54143 and SIC 7336, industrial design is NAICS 54142 and SIC 7389, and advertising is NAICS 54181 and SIC 7311.)

Lots of free information is available from the federal government in databases like the following:

  • U.S. Census Bureau Economic Programs
    (The government conducts a census of U.S. businesses every five years, then publishes economic statistics by industry and by location.)
  • U.S. Department of Commerce, Bureau of Economic Analysis
    (The BLS updates its Occupational Outlook Handbook every two years. Each type of business activity has a “job outlook” section with current employment information plus a ten-year projection.)

When looking at government information, keep in mind that some of it may not be very current. For this reason, your next task is to find non-governmental sources of data. Fast-moving industries with new categories of products and services are often profiled in general business publications like the Wall Street Journal and BusinessWeek. You can use search engines like Google and Yahoo! for industry outlook articles. Be sure to visit:

Next, identify trade magazines and specialized journals for the industries you're interested in. They're great sources for articles on trends. Often, subscribers are able to search past articles online. You might also consider requesting a media kit, which is a packet of information sent out to advertisers with statistics on audience size, demographics and purchasing habits.

Every industry has its own trade associations. They often conduct surveys and publish information about current conditions and trends that are affecting their members. Here's a good resource that you can find in most libraries:

  • NTPA Directory / National Trade and Professional Associations of the United States
    (Published every year by Columbia Books, this directory lists national membership organizations by name, subject, location, and annual budget.)

Many trade groups produce annual conferences. Identify the business events that are most important to your clients. Here's a helpful site:

  • TSNN / The Tarsus Group
    (This is an online tradeshow directory that you can search by industry.)

Many tradeshows have websites that are kept online after the event. Visit the sites of recent conferences to learn about presentations and exhibitors. If possible, attend upcoming events to conduct in-person research. This is a great way to identify the major players, view the products, pick up literature, and meet marketing representatives. (It may also be possible for you to buy lists of attendees that you can use for promotional mailings.)

Now that you've analyzed the industries, you're ready to focus in on individual companies.

Visit the sites of key players. Research the companies that caught your interest at tradeshows. If a corporation is publicly traded, you can request a free copy of their most recent annual report. It will provide you with detailed information about their business. Some companies place a PDF version of the report on their website. Others make copies available through independent services such as:

There are many investment-oriented sites with profiles and financial summaries of publicly traded companies. Take a look at:

  • / Lycos
    (They have company overviews, summaries of stock performance, and recent news.)
  • U.S. Securities and Exchange Commission
    (The EDGAR database contains registration statements and periodic reports by domestic and foreign companies.)

At this point in your research, you'll have to make a judgment call—if there are still gaps in the information that you need for your business plan, you may want to use paid information providers. It's possible to buy a wide range of current information about industries and companies. Many of these services provide basic information for free, but the objective is to tempt you into buying more comprehensive reports (and, in some instances, subscribing to ongoing research services). Here are a few sources for you to consider, along with some current pricing information:

  • Dun & Bradstreet, D&B Small Business Solutions
    (Their $24.99 “Industry Report” provides an overview and analysis, with profiles of top companies.)
  • Hoovers
    (Hoovers is owned by D&B. Their free information about companies and industries includes overviews and lists of key people. You can pay to build a custom list of companies that match criteria you define. You can also purchase a range of in-depth D&B reports.)
  • Goliath database by Thomson/Gale
    (For $29.95, you can request a “Company Profile” or an “Industry and Market Report” by SIC code. The site also has a “Business News” database of recent articles that can be searched by keyword. Payment is required to view the full text.)
  • IBIS World
    (You can order $595 “Industry Reports” for approximately 700 different types of manufacturing, wholesale, retail, and service businesses. Each contains detailed information about key players, current conditions, and the outlook for the future.)

Don't forget: While you're gathering information about your target clients, you need to gather information about their competitors as well. This will allow you to compare their services, products, distribution channels, marketing strategies, and customers. It's important to understand how the companies differentiate themselves from each other.

Client Profile

Now you need to answer some questions about how your clients make purchasing decisions. If you've been in business for a while, start with your current relationships, then add the new clients that you're targeting. Chances are that you've already gathered information about key executives during your industry research. Look at the organizational structure and pay attention to recent changes. It's not unusual for a new president or marketing executive to be brought in with a mandate for change. Think about the following:

  • What are the job titles of your primary contacts?
  • How are they positioned in the hierarchy?
  • What decision-making authority do they have?
  • What do they buy?
  • Why do they buy it?
  • What are the key factors that drive their decision-making?
  • What is their buying process?
    (For example, in many large companies, you must first be added to list of approved vendors before you can participate in competitive bidding for individual projects.)
  • When are purchases made?
    (For example, are some projects tied to an annual business cycle? Do major product launches happen on a different schedule?)

Sometimes geography can be an important factor as well. Some clients prefer to work with firms that are nearby. If proximity is an issue, think of ways to deal with it. For example, it might be difficult for a design firm in Montana to service a major corporate account in Florida without having at least one team member physically located there. You might consider hiring a local account executive or even opening a local office, as ad agencies often do when they land major accounts.