How to open an industrial design studio?
Are you keen to open an industrial design studio but don't know where to begin? Then you're in luck because this guide will lead you through all the steps required to check if your business idea can be profitable and, if so, turn it into a reality.
Our guide is for prospective entrepreneurs who are thinking about starting an industrial design studio no matter how far they are in their journey - whether you’re just thinking about it or in the middle of market research this guide will be useful to you.
Think of this as your blueprint: we cover everything you need to know about opening an industrial design studio and what key decisions you’ll need to make along the way.
Ready? Let’s get started!
Understanding how an industrial design studio works
The very first step when exploring a business idea such as starting an industrial design studio is to make sure you understand how the business operates and makes money (which is what we call the business model).
This will not only give you an initial idea of how profitable the business can be, but it will also enable you to make sure that this is the right business idea for you, given your skills, start-up capital and family or personal lifestyle, in particular.
The best ways to get to grips with the industrial design studio's business model are to:
- Talk to industrial design studio owners with experience
- Work a few months in an industrial design studio already in operation
- Take a training course
Talk to industrial design studio owners with experience
Experienced industrial design studio owners have valuable insights and can provide practical advice based on their firsthand experiences.
They've likely encountered and overcome challenges that a newcomer might not anticipate. Learning from other’s mistakes can save you both time and money and potentially increase your venture’s chances of succeeding.
Work a few months in an industrial design studio already in operation
Obtaining work experience in the industry can be a crucial factor in confirming whether you truly want to start an industrial design studio, as it provides insight into the day-to-day activities.
For instance, if the working hours are longer than expected or if other business requirements don't align with your personal lifestyle or preferences, you might reconsider your entrepreneurial goals.
Even if you've decided that this business idea is a good fit for you, gaining work experience will still be valuable. It helps you better understand your target market and customer needs, which is likely to be beneficial when launching your own industrial design studio.
Take a training course
Obtaining training within your chosen industry is another way to get a feel for how an industrial design studio works before deciding to pursue a new venture.
Whatever approach you choose to familiarise yourself with the business, before going any further with your plans to open an industrial design studio, make sure you understand:
- What skills are required to run the business (compare this with your own skills)
- What a typical week in the business is like (compare this with your personal or family life)
- What is the potential turnover of an industrial design studio and the long-term growth prospects (compare this with your level of ambition)
- Your options once you decide to sell the business or retire (it's never too early to consider your exit)
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Assemble your industrial design studio's founding team
The next step to start your industrial design studio is to think about the ideal founding team, or to go in alone (which is always an option).
Setting up a business with several partners is a way of reducing the (high) risk of launching an industrial design studio since it allows the financial risk of the project to be shared between the co-founders.
This also allows the company to benefit from a greater diversity of profiles in the management team and to spread the burden of decision-making over several shoulders.
But, running a business with multiple co-founders brings its own challenges. Disagreements between co-founders are quite common, and these can pose risks to the business. That's why it's crucial to consider all aspects before starting your business.
To make an informed decision, we suggest asking yourself these questions:
- How many co-founders would increase the project's chances of success?
- Do you and your potential partners share the same aspirations for the project?
- What is your plan B in case of failure?
Let's examine each of these questions in detail.
How many co-founders would increase the project's chances of success?
The answer to this question will depend on a number of factors, including:
- Your savings compared with the amount of initial capital needed to launch the industrial design studio
- The skills you have compared with those needed to make a success of such a project
- How you want key decisions to be taken in the business (an odd number of partners or a majority partner is generally recommended to avoid deadlock)
Put simply, your partners contribute money and/or skills, and increasing the number of partners is often a good idea when one of these resources is in short supply.
Do you and your potential partners share the same aspirations for the project?
One of the key questions when selecting your potential partners will be their expectations. Do you want to create a small or large business? What are your ambitions for the next 10 or 15 years?
It's better to agree from the outset on what you want to create to avoid disagreements, and to check that you stay on the same wavelength as the project progresses to avoid frustration.
What is your plan B in case of failure?
Of course, we wish you every success, but it's wise to have a plan B when setting up a business.
How you handle the possibility of things not working out can depend a lot on the kind of relationship you have with your co-founders (like being a close friend, spouse, former colleague, etc.) and each person's individual situation.
Take, for instance, launching a business with your spouse. It may seem like a great plan, but if the business doesn't succeed, you could find yourself losing the entire household income at once, and that could be quite a nerve-wracking situation.
Similarly, starting a business partnership with a friend has its challenges. If the business doesn't work out or if tough decisions need to be made, it could strain the friendship.
It's essential to carefully evaluate your options before starting up to ensure you're well-prepared for any potential outcomes.
Is there room for another industrial design studio on the market?
The next step in starting an industrial design studio is to undertake market research. Now, let's delve into what this entails.
The objectives of market research
The goal here is straightforward: evaluate the demand for your business and determine if there's an opportunity to be seized.
One of the key points of your market analysis will be to ensure that the market is not saturated by competing offers.
The market research to open your industrial design studio will also help you to define a concept and market positioning likely to appeal to your target clientele.
Finally, your analysis will provide you with the data you need to assess the revenue potential of your future business.
Let's take a look at how to carry out your market research.
Evaluating key trends in the sector
Market research for an industrial design studio usually begins with an analysis of the sector in order to develop a solid understanding of its key players, and recent trends.
Assessing the demand
After the sector analysis comes demand analysis. Demand for an industrial design studio refers to customers likely to consume the products and services offered by your company or its competitors.
Looking at the demand will enable you to gain insights into the desires and needs expressed by your future customers and their observed purchasing habits.
To be relevant, your demand analysis must be targeted to the geographic area(s) served by your company.
Your demand analysis should highlight the following points:
- Who buys the type of products and services you sell?
- How many potential customers are there in the geographical area(s) targeted by your company?
- What are their needs and expectations?
- What are their purchasing habits?
- How much do they spend on average?
- What are the main customer segments and their characteristics?
- How to communicate and promote the company's offer to reach each segment?
Analyzing demand helps pinpoint customer segments your industrial design studio could target and determines the products or services that will meet their expectations.
Assessing the supply
Once you have a clear vision of who your potential customers are and what they want, the next step is to look at your competitors.
Amongst other things, you’ll need to ask yourself:
- What brands are competing directly/indirectly against your industrial design studio?
- How many competitors are there in the market?
- Where are they located in relation to your company's location?
- What will be the balance of power between you and your competitors?
- What types of services and products do they offer? At what price?
- Are they targeting the same customers as you?
- How do they promote themselves?
- Which concepts seem to appeal most to customers?
- Which competitors seem to be doing best?
The aim of your competitive analysis will be to identify who is likely to overshadow you, and to find a way to differentiate yourself (more on this see below).
Regulations
Market research is also an opportunity to look at the regulations and conditions required to do business.
Ask yourself the following questions:
- Do you need a special degree to open an industrial design studio?
- Are there necessary licences or permits?
- What are the main laws applicable to your future business?
At this stage, your analysis of the regulations should be carried out at a high level, to familiarize yourself with any rules and procedures, and above all to ensure that you meet the necessary conditions for carrying out the activity before going any further.
You will have the opportunity to come back to the regulation afterwards with your lawyer when your project is at a more advanced stage.
Take stock of the lessons learned from your market analysis
Market research should give you a definitive idea of your business idea's chances of commercial success.
Ideally, the conclusion is that there is a market opportunity because one or more customer segments are currently underserved by the competition.
On the other hand, the conclusion may be that the market is already taken. In this case, don't panic: the first piece of good news is that you're not going to spend several years working hard on a project that has no chance of succeeding. The second is that there's no shortage of ideas out there: at The Business Plan Shop, we've identified over 1,300 business start-up ideas, so you're bound to find something that will work.
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How should I position my industrial design studio on the market?
The next step to start your industrial design studio is to define precisely the market positioning your company will adopt in order to capitalise on the opportunity identified during your market research.
Market positioning refers to the place your product and service offering occupies in customers' minds and how they differ from the competition. Being perceived as a low-cost solution, for example.
To find a concept and a market positioning that will resonate with your customers, you need to address the following issues:
- How can you differentiate yourself from your competitors?
- Is it better to start or buy an industrial design studio already in operation?
- How will you validate your concept and market positioning before investing in the business?
Let's look at these aspects in more detail.
How can you differentiate yourself from your competitors?
Opening an industrial design studio means starting with a major disadvantage compared with competitors already active on the market.
While you will have to create everything from scratch, your competitors already have everything in place.
Your competitors' teams know the business well, whereas yours has only just been recruited, their customers are loyal and they benefit from word of mouth that you don't yet have.
So you're going to need a solid plan to succeed in taking market share from your competitors and making your mark.
There are a number of aspects to consider in order to try to avoid direct confrontation if possible:
- Can you target a different customer base than your competitors?
- Can you offer products or services that are different from or complementary to what your competitors already sell?
- How will your competitors react to your industrial design studio entering their market?
- Can you build a sustainable competitive advantage that will enable you to compete with your current and future competitors?
Is it better to start or buy an industrial design studio already in operation?
The alternative to setting up a new independent business is to buy out and take over an industrial design studio already in operation.
A takeover is a good way of reducing the risk of your project compared with a pure start-up.
Taking over a business has two enormous advantages over setting up a new one: you start out on an equal footing with your competitors since you take over the team and the customer base, and you don't increase the supply on the market enabling you to maintain the existing balance on the market where the business operates.
However, the capital requirements for a takeover are higher because the business will have to be bought from its previous owners.
How will you validate your concept and market positioning before investing in the business?
However you decide to set up your business, you will need to ensure that there is a good fit between what you sell and what customers are looking to buy.
To do this, you'll need to meet your target customers to present your products or services and check that they meet their expectations.
Where should I base my industrial design studio?
The next step in our guide on starting a industrial design studio involves making a key choice about where you want your business to be located.
Picking the ideal location for your business is like selecting the perfect canvas for a painting. Without it, your business might not showcase its true colors.
We recommend that you take the following factors into account when making your decision:
- Visibility and foot traffic - An industrial design studio may benefit from a high visibility and foot traffic location, as it can attract potential clients and showcase their work to a larger audience.
- Parking space, road and public transport accessibility - Clients may need to visit the studio for meetings or to view prototypes, so having adequate parking space and accessibility to roads and public transport is important.
- Availability of skilled labor - An industrial design studio requires skilled labor to create and produce designs, so being located in an area with a pool of talented and experienced workers is essential.
- Competitor presence - It can be beneficial for an industrial design studio to be located in an area with other design studios, as it can create a sense of community and foster collaboration.
This list is not comprehensive and will have to be adjusted based on the details of your project.
The parameters to be taken into account will also depend on whether you opt to rent premises or buy them. If you are a tenant, you will need to consider the conditions attached to the lease: duration, rent increase, renewal conditions, etc.
Lease agreements differ widely from country to country, so it's essential to review the terms that apply to your situation. Before putting pen to paper, consider having your lawyer look carefully at the lease.
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Choosing your industrial design studio's legal form
The next step to open an industrial design studio is to choose the legal form of your business.
The legal form of a business simply means the legal structure it operates under. This structure outlines how the business is set up and defines its legal obligations and responsibilities.
Why is your industrial design studio's legal form important?
Choosing the legal form for your industrial design studio is an important decision because this will affect your tax obligations, your personal exposure to risk, how decisions are made within the business, the sources of financing available to you, and the amount of paperwork and legal formalities, amongst other things.
The way you set up your business legally will impact your taxes and social contributions, both at a personal level (how much your income is taxed) and at the business level (how much the business's profits are taxed).
Your personal exposure to risk as a business owner also varies based on the legal form of your business. Certain legal forms have a legal personality (also called corporate personality), which means that the business obtains a legal entity which is separate from the owners and the people running it. To put it simply, if something goes wrong with a customer or competitor, for example, with a corporate personality the business gets sued, whereas without it is the entrepreneur personally.
Similarly, some legal forms benefit from limited liability. With a limited liability the maximum you can lose if the business fails is what you invested. Your personal assets are not at risk. However, not all structures protect you in such a way, some structures may expose your personal assets (for example, your creditors might try to go after your house if the business incurs debts and then goes under without being able to repay what it owed).
How decisions are made within the business is also influenced by the legal form of your industrial design studio, and so is the amount of paperwork and legal formalities: do you need to hold general assemblies, to produce annual accounts, to get the accounts audited, etc.
The legal form also influences what sources of financing are available to you. Raising capital from investors requires having a company set up, and they will expect limited liability and corporate personality.
What are the most common legal structures?
It's important to note that the actual names of legal structures for businesses vary from country to country.
But they usually fall within two main types of structures:
- Individual businesses
- Companies
Individual businesses
Individual businesses, such as sole traders or sole proprietorships, are legal structures with basic administrative requirements.
They primarily serve self-employed individuals and freelancers rather than businesses with employees.
The main downside of being a sole trader is that there's usually no legal separation between the business and the person running it. Everything the person owns personally is tied up with the business, which can be risky.
This means that if there are problems or the business goes bankrupt, the entrepreneur's personal assets could be taken by creditors. So, there's a risk of personal liability in case of disputes or financial issues.
It is also not possible to raise equity from investors with these structures as there is no share capital.
Despite the downsides, being a sole proprietorship has some advantages. There is usually very little paperwork to get started, simpler tax calculations and accounting formalities.
Companies
Companies are all rounders which can be set up by one or more individuals, working on their own or with many employees.
They are recognized as a distinct entity with their own legal personality, and the liability is usually limited to the amount invested by the owners (co-founders and investors). This means that you cannot lose more than you have invested in the business.
This separation ensures that in legal disputes or bankruptcy, the company bears primary responsibility, protecting the personal assets of the founder(s) and potential investor(s).
How should I choose my industrial design studio's legal structure?
Deciding on the legal structure is usually quite straightforward once you know how many co-founders you'll have, whether you'll have employees, and the expected revenues for the business.
A good business idea will be viable whatever the legal form you choose. How businesses are taxed changes every year, therefore one cannot rely on specific tax benefits tied to a particular structure when deciding to go into business.
One easy way to proceed is to take note of the legal structures used by your top five competitors, and assume you're going with the most commonly chosen option. Once your idea is mature and you're prepared to formally register the business, you can validate this assumption with a lawyer and an accountant.
Can I switch my industrial design studio's legal structure if I get it wrong?
You can switch your legal setup later on, even if it involves selling the old one to a new entity in some cases. However, this comes with extra costs, so it's better to make the right choice from the beginning if you can.
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Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
Calculating the budget to open an industrial design studio
The next step to opening an industrial design studio involves thinking about the equipment and staff needed to launch and run your business on a day-to-day basis.
Each project has its own characteristics, which means that it is not possible to estimate the budget for opening an industrial design studio without building a complete financial forecast.
So be careful when you see estimates circulating on the Internet. As with all figures, ask yourself these questions:
- Is my project similar (location, concept, size, etc.)?
- How recent is the information?
- Is it from a trustworthy source?
Startup costs and investments to open an industrial design studio
For an industrial design studio, the initial working capital requirements and investments may include the following elements:
- Industrial Design Software: As an industrial design studio, you will need software specifically designed for industrial design tasks. This may include 3D modeling software, CAD software, and rendering software. These tools are essential for creating and visualizing your designs before they are brought to life.
- Prototyping Equipment: In order to bring your designs to life, you will need prototyping equipment such as 3D printers, laser cutters, and CNC machines. These machines allow you to create physical models of your designs and test them for functionality and aesthetics.
- Workstations and Tools: Your studio will also require workstations for your designers to work on and tools for them to use. This may include computers, drafting tables, and various hand tools. These assets are essential for the day-to-day operations of your studio.
- Office Furniture and Equipment: In addition to the necessary design equipment, you will also need office furniture and equipment to create a functional workspace for your team. This may include desks, chairs, filing cabinets, and office supplies.
- Studio Space: Depending on the size of your team and the scale of your projects, you may need to invest in a studio space. This could include renting a warehouse or renovating a commercial space to accommodate your design studio. Keep in mind the cost of rent or mortgage, utilities, and any necessary renovations or repairs.
Of course, you will need to adapt this list to your company's specific needs.
Staffing plan to operate an industrial design studio
To establish an accurate financial forecast for your industrial design studio, you will also need to assess your staffing requirements.
The extent to which you need to recruit will of course depend on your ambitions for the company's growth, but you might consider recruiting for the following positions:
Once again, this list is only indicative and will need to be adjusted according to the specifics of your industrial design studio.
Other operating expenses required to run an industrial design studio
You also need to consider operating expenses to run the business:
- Staff Costs: This includes salaries, bonuses, and benefits for all employees of your industrial design studio.
- Accountancy Fees: Your industrial design studio will need to hire an accountant or accounting firm to manage your finances and ensure compliance with tax laws.
- Insurance Costs: You will need to purchase insurance to protect your industrial design studio from potential risks and liabilities.
- Software Licenses: As an industrial design studio, you will need to invest in software licenses for design programs and other necessary tools.
- Banking Fees: Your industrial design studio will incur fees for bank services such as wire transfers, check processing, and account maintenance.
- Rent: If you do not own a workspace, you will need to budget for rent or lease payments for your industrial design studio.
- Office Supplies: You will need to purchase basic office supplies such as paper, ink, and pens to keep your industrial design studio running smoothly.
- Marketing and Advertising: To attract clients and promote your industrial design studio, you will need to budget for marketing and advertising expenses.
- Utilities: Your industrial design studio will need to cover the costs of utilities such as electricity, water, and internet.
- Travel Expenses: If you need to travel for meetings or projects, you will need to budget for transportation, accommodation, and other related expenses.
- Professional Memberships: Joining professional organizations and associations can provide networking opportunities and resources for your industrial design studio, but they may come with membership fees.
- Legal Fees: You may need to hire a lawyer to help with contracts, intellectual property protection, and other legal matters for your industrial design studio.
- Training and Development: To keep your skills and knowledge up-to-date, you may need to invest in training and development programs for yourself and your employees.
- Office Equipment Maintenance: Your industrial design studio will need to budget for regular maintenance and repairs of office equipment such as computers and printers.
- Employee Benefits: In addition to salaries, your industrial design studio may offer benefits such as healthcare, retirement plans, and paid time off for employees.
This list will need to be adapted to the specifics of your industrial design studio but should be a good starting point for your budget.
How will I promote my industrial design studio's?
The next step to starting an industrial design studio is to think about strategies that will help you attract and retain clients.
Consider the following questions:
- How will you attract as many customers as possible?
- How will you build customer loyalty?
- Who will be responsible for advertising and promotion? What budget can be allocated to these activities?
- How many sales and how much revenue can that generate?
Once again, the resources required will depend on your ambitions and the size of your company. But you could potentially action the initiatives below.
Your industrial design studio's sales plan will also be affected by variations in consumer demand, like changes in activity during peak holiday seasons, and the dynamics within your competitive environment.
Can your business idea be profitable?
Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
How do I build my industrial design studio financial forecast?
Let's now look at the financial projections you will need to prepare in order to open an industrial design studio.
What is an industrial design studio's financial projection?
Your financial forecast will help you budget your project so that you can evaluate:
- Its expected sales and growth potential
- Its expected profitability, to ensure that the business will be viable
- Its cash generation and financing requirements
Making your financial forecast is the only way to determine the amount of initial financing required to create your industrial design studio.
There are lots of business ideas out there, but very few of them are viable, and making a financial forecast is the only way to ensure that your project makes economic and financial sense.
Creating an industrial design studio financial projection is an iterative process, as you'll need to refine your figures as your business idea matures.
You'll start with a first high-level version to decide whether or not to continue working on the project.
Then, as your project takes shape, your forecasts will become increasingly accurate. You'll also need to test different assumptions to ensure that your idea of starting an industrial design studio holds up even if your trading environment deteriorates (lower sales than expected, difficulties in recruiting, sudden cost increases or equipment failure problems, for example).
Your financial forecast will be part of your overall business plan, which we'll look at in more detail later. Your financial partners will use your business plan to decide if they want to finance you.
Once you've launched your business, you can compare your actual accounting figures with your forecasts, to analyze where the discrepancies come from, and then update your forecasts to maintain visibility over your future cash flows.
Financial forecasts are, therefore, a financial management tool that will be with you throughout the life of your company.
What does a financial projection look like?
The following financial tables will be used to present your industrial design studio's financial forecast.
The projected P&L statement
Your industrial design studio's forecasted P&L statement will enable you to visualise your industrial design studio's expected growth and profitability over the next three to five years.
The projected balance sheet of your industrial design studio
The projected balance sheet gives an overview of your industrial design studio's financial structure at the end of the financial year.
The cash flow projection
A cash flow forecast for an industrial design studio shows the projected inflows and outflows of cash over a specific period, providing insights into liquidity and financial health.
What is the best financial forecasting tool for starting your industrial design studio?
The simplest and easiest way to create your industrial design studio's projections is to use professional online financial forecasting software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- The software helps you identify and correct any inconsistencies in your figures
- You can create scenarios to stress-test your forecast's main assumptions to stress-test the robustness of your business model
- After you start trading, you can easily track your actual financial performance against your financial forecast, and recalibrate your forecast to maintain visibility on your future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Choose a name and register your industrial design studio
The next phase in launching your industrial design studio involves selecting a name for your company.
This stage is trickier than it seems. Finding the name itself is quite fun; the difficulty lies in finding one that is available and being the first to reserve it.
You cannot take a name that is similar to a name already used by a competitor or protected by a registered trademark without inevitably risking legal action.
So you need to find a name that is available, and be able to register it before someone else can.
In addition, you will probably want to use the same name for:
- Your company’s legal name - Example LTD
- Your business trading name - Example
- The trademark - Example ®
- Your company’s domain name - Example.com
The problem is that the procedures for registering these different names are carried out in different places, each with their own deadlines:
- Registering a domain name takes only a few minutes
- Registering a new trademark takes at least 12 weeks (if your application is accepted)
- The time taken to register a new business depends on the country, but it's generally fast
You will therefore be faced with the choice of: either registering everything at once and hoping that your name will be accepted everywhere, or proceeding step by step in order to minimise costs, but taking the risk that someone else will register one of the names you wanted in the meantime.
Our advice is to discuss strategy with your legal counsel (see further down in this guide) and prioritise your domain names and registered trademarks. You'll always have the option of using a trade name that's different from your company's legal name, and that's not a big deal.
To check that the name you want is not already in use, you should consult:
- Your country's business register
- The relevant trademark registers depending on which countries you want to register your trade mark in
- A domain name reservation company such as GoDaddy
- An Internet search engine
In this area too, your legal counsel will be able to help with the research and formalities.
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Develop your industrial design studio's corporate identity
The next step to launching an industrial design studio: defining your company's visual identity.
Your corporate identity defines how your company's values are communicated visually. It makes you unique and allows you to stand out visually from your competitors and be recognized by your customers.
Defining your corporate identity can easily be done by you and your co-founders, using the many free tools available to generate color palettes, logos and other graphic elements. Nevertheless, this task is often best entrusted to a designer or agency to achieve a professional result.
Your industrial design studio's visual identity will include the following elements:
- Logo
- Brand guidelines
- Business cards
- Website theme
Logo
The goal is to have stakeholders identify your business logo quickly and relate to it. Your logo will be used for media purposes (website, social networks, business cards, etc.) and legal documents (invoices, contracts, etc.).
The design of your logo must be emblematic, but it's also important that it can be seen on any type of support. To achieve this, it should be easily available in a range of colors, so that it stands out on both light and dark backgrounds.
Brand guidelines
The brand guidelines of your industrial design studio act as a safeguard to ensure that your image is consistent whatever the medium used.
Brand guidelines lay out the details like the typography and colors to use to represent your company.
Typography refers to the fonts used (family and size). For example, Arial in size 26 for your titles and Tahoma in size 15 for your texts.
When it comes to the colors representing your brand, it's generally a good idea to stick to five or fewer:
- The main colour,
- A secondary colour (the accent),
- A dark background colour (blue or black),
- A grey background colour (to vary from white),
- Possibly another secondary colour.
Business cards
A rare paper medium that continues to survive digitalization, business cards are still a must-have for communicating your industrial design studio contact details to your customers, suppliers and other partners.
In principle, they will include your logo and the brand guidelines we mentioned above.
Website theme
Likewise, the theme of your industrial design studio website will include your logo and follow the brand guidelines we discussed earlier.
This will also define the look and feel of the main visual elements on your website:
- Buttons
- Menus
- Forms
- Banners
- Etc.
Navigate the legal and regulatory requirements for launching your industrial design studio
The next thing to do in getting an industrial design studio off the ground is to handle all the legal and regulatory requirements. We recommend that you be accompanied by a law firm for all of the steps outlined below.
Intellectual property
One of your priorities will be to ensure that your company's intellectual property is adequately protected.
As explained before, you can choose to register a trademark. Your lawyer can help you with a detailed search to make sure your chosen trademark is unique and doesn't clash with existing ones.
They'll assist in preparing the required documents and steer you in picking the right categories and locations for trademark registration.
Moreover, your lawyer can offer guidance on additional measures to protect other intellectual property assets your company may have.
Getting your industrial design studio paperwork in order
For day-to-day operations, your industrial design studio will need to rely on a set of contractual documents.
Your exact needs in this respect will depend on the country in which you are launching your industrial design studio, the number of partners and the envisaged size of the company.
However, you will probably need at least the following documents:
- Employment contracts
- General terms and conditions of sale
- General terms and conditions of use for your website
- Privacy Policy for your website
- Cookie Policy for your website
- Invoices
- Etc.
Applying for licences and permits and registering for various taxes
Operating your business legally may require licences and business permits. The exact requirements applicable to your situation will depend on the country in which you set up your industrial design studio.
The lawyers who advise you will also be able to guide you with regard to all the rules applicable to your business.
Similarly, your accountant will be able to help you take the necessary steps to comply with the tax authorities.
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Writing a business plan for your industrial design studio
The next step in opening an industrial design studio is to draw up your business plan.
What is a industrial design studio's business plan?
A business plan serves as a comprehensive roadmap outlining the objectives, strategies, and key components of your venture.
There are two essential parts to a business plan:
- A numerical part, the financial forecast we mentioned earlier in this guide, which highlights the amount of initial financing needed to launch the business and its potential profitability over the next 3 to 5 years,
- A written part, which presents in detail the project of creating an industrial design studio and provides the necessary context to enable the reader of the business plan to judge the relevance and coherence of the figures included in the forecast.
Your business plan helps guide decision-making by showcasing your vision and financial potential in a coherent manner.
Your business plan will also be essential when you're looking for financing, as your financial partners will ask you for it when deciding whether or not to finance your project to open an industrial design studio. So it's best to produce a professional, reliable, and error-free business plan.
In essence, your business plan is the blueprint to turn your idea into a successful reality.
What tool should you use to create your industrial design studio business plan?
If you want to write a convincing business plan quickly and efficiently, a good solution is to use an online business plan software for business start-ups like the one we offer at The Business Plan Shop.
Using The Business Plan Shop to create a business plan for an industrial design studio has several advantages :
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete startup business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can create scenarios to stress test your forecast's main assumptions
- You can easily track your actual financial performance against your financial forecast by importing accounting data
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using our solution, you can try The Business Plan Shop for free by signing up here.
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The Business Plan Shop makes it easy to create a financial forecast and write a business plan to help convince investors that your business idea can be profitable.
Financing the launch of your industrial design studio
Once your business plan has been written, you’ll need to think about how you might secure the funding required to open your industrial design studio.
The amount of initial financing required will of course depend on the size of your industrial design studio and the country in which you wish to set up.
Financing your startup will probably require you to obtain a combination of equity and debt, which are the primary financial resources available to businesses.
Equity funding
Equity refers to the amount of money invested in your industrial design studio by founders and investors and is key to starting a business.
Equity provides your company with stable, long-term (often permanent) capital. It also demonstrates the commitment of the company's owners to the project, since these sums can be lost in the event of bankruptcy.
Because the equity invested by the founders may be lost if the project doesn't succeed, it signals to investors and other financial institutions the founders' strong belief in the business's chances of success and might improve the likelihood of obtaining further funding as a result.
In terms of return on investment, equity investors receive dividends paid by the company (provided it is profitable) or realise capital gains by reselling their shares (provided they find a buyer interested in the company).
Equity investors are, therefore, in a very risky position. They stand to lose their initial investment in the case of bankruptcy and will only obtain a return on investment if the business manages to be profitable or sold. On the other hand, they could generate a very high return if the venture is a financial success.
Given their position, equity investors are usually looking to invest in business ventures with sufficient growth and profitability potential to offset their risk.
From the point of view of the company and its creditors, equity reduces risk, since equity providers finance the company and are only remunerated in the event of success.
From a technical standpoint, equity consists of:
- Share capital and premiums: which represent the amount invested by the shareholders. This capital is considered permanent as it is non-refundable. In return for their investment, shareholders receive shares that entitle them to information, decision-making power (voting in general assembly), and the potential to receive a portion of any dividends distributed by the company.
- Director loans: these are examples of non-permanent capital advanced to the company by the shareholders. This is a more flexible way of injecting some liquidity into your company than doing so as you can repay director loans at any time.
- Reserves: these represent the share of profits set aside to strengthen the company's equity. Allocating a percentage of your profits to the reserves can be mandatory in certain cases (legal or statutory requirement depending on the legal form of your company). Once allocated in reserves, these profits can no longer be distributed as dividends.
- Investment grants: these represent any non-refundable amounts received by the company to help it invest in long-term assets.
- Other equity: which includes the equity items which don't fit in the other categories. Mostly convertible or derivative instruments. For a small business, it is likely that you won't have any other equity items.
The main sources of equity are as follows:
- Personal contribution from the founders' savings.
- Private investors: business angels, friends and family.
- Crowdfunding campaigns to find investors or collect donations (usually in exchange for a gift).
- Government initiatives such as loans on favourable terms to help partners build up their start-up capital.
Debt funding
Another option for partially funding your industrial design studio is to borrow.
By definition, debt works in the opposite way to equity:
- Debt needs to be repaid, whereas equity is permanent.
- Lenders get a contractually guaranteed return, whereas equity investors only generate a return if the company is a success.
When a company borrows money, it agrees to pay interest and repay the borrowed principal according to a pre-established schedule. Therefore, lenders make money regardless of whether the company is profitable and their main risk is if the company goes bankrupt.
To limit their risk, lenders are usually conservative and cautious in their approach. They only finance projects where they are confident that they will be repaid in full.
Companies borrow in two ways:
- Against their assets: this is the most common way of borrowing. The bank finances a percentage of the price of an asset (a vehicle or a building, for example) and takes the asset as collateral. If the company cannot repay, the bank seizes the asset and sells it to limit its losses.
- Against their future cash flows: the bank evaluates the company's financial forecast to estimate its borrowing capacity and assesses the conditions (amount, interest rate, term, etc.) on which it is prepared to lend, taking into account the credit risk posed by the company.
It's difficult to borrow against future cash flow when setting up an industrial design studio, because the business doesn't yet have historical data to reassure lenders about the credibility of the forecasted cash flows.
Borrowing against assets is, therefore, often the only option available to entrepreneurs. What's more, the assets that can be financed with this option must be easy to resell, in the unfortunate event that the bank is forced to seize them, which may limit your options even further.
In terms of possible sources of borrowing, the main sources here are banks and credit institutions. Bear in mind, however, that each institution is different, both in terms of the risk it is prepared to accept and in terms of how the risk of your project will be perceived and what items it will agree to finance.
In some countries, it is also possible to borrow from private investors (directly or via crowdlending platforms) or other companies, but not everywhere.
Things to remember about financing an industrial design studio
There are various ways you can raise the initial financing you need to open your industrial design studio. A minimum amount of equity will be needed to give the project credibility, and bank financing can be sought to complete the package.
Launching your industrial design studio and monitoring progress against your forecast
Once you’ve secured financing, you will finally be ready to launch your industrial design studio. Congratulations!
Celebrate the launch of your business and acknowledge the hard work that brought you here, but remember, this is where the real work begins.
As you know, 50% of business start-ups do not pass the five-year mark. Your priority will be to do everything to secure your business's future.
To do this, it is key to keep an eye on your business plan to ensure that you are on track to achieve your goals.
No one can predict the future with certainty, so it’s likely that your industrial design studio's financial performance will differ from what you predicted in your forecast.
This is why it is recommended to make several forecasts:
- A base case (most likely)
- An optimistic scenario
- And a pessimistic scenario to test the robustness of your financial model
If you follow this approach, your numbers will hopefully be better than your optimistic case and you can consider accelerating your expansion plans. That’s what we wish you anyway!
If, unfortunately, your figures are below your base case (or worse than your pessimistic case), you will need to quickly put in place corrective actions, or consider stopping the activity.
The key, in terms of decision-making, is to regularly compare your real accounting data to your industrial design studio's forecast to:
- Measure the discrepancies and promptly identify where the variances with your base case come from
- Adjust your financial forecast as the year progresses to maintain visibility on future cash flow and cash position
There is nothing worse than waiting for your accountant to prepare your year-end accounts, which can take several months after the end of your financial year (up to nine months in the UK for example), to realise that the performance over the past year was well below the your base case and that your industrial design studio will not have enough cash to keep running over the next twelve months.
This is why using a financial forecasting solution that integrates with accounting software and offers actuals vs. forecast tracking out of the box, like the financial dashboards we offer at The Business Plan Shop, greatly facilitates the task and significantly reduces the risk associated with starting a business.
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Key takeaways
- To open an industrial design studio you need to go through each of the 15 steps we have outlined in this guide.
- The financial forecast is the tool that will enable you to check that your project can be profitable and to estimate the investment and initial financing requirements.
- The business plan is the document that your financial partners will ask you to produce when seeking finance.
- Once you have started trading, it will be essential to keep your financial forecasts up to date in order to maintain visibility of the future cash flow of your industrial design studio.
- Leveraging a financial planning and analysis platform that seamlessly integrates forecasts, business plans, and real-time performance monitoring — like The Business Plan Shop — simplifies the process and mitigates risks associated with launching a business.
We hope this practical guide has given you a better understanding of how to open an industrial design studio. Please do not hesitate to contact our team if you have any questions or if you would like to share your experience of setting up your own business.
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Founder & CEO at The Business Plan Shop Ltd
