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The business value of design (for small businesses & startups)

Jon Persson
Jon Persson Brand identity designer

Great design is good for business.

As a designer, that seems about as obvious as daylight. When I ask my fellow business owner friends, most of them agree. But even the assumptions you take for granted require justification. Perhaps especially them.

So if great design is good for business, that begs the question: in what ways?

What is the concrete business value of design?

The business value of design consists of increasing revenue and decreasing costs. Good design leads to higher customer satisfaction. It increases the perceived value of your products and enhances your brand image. It can also increase productive output through effective use of resources.

I’ll elaborate on this with concrete examples. But first, let’s get an important distinction out of the way.

Most of the research is not useful to small businesses

In the last decade, a body of research has emerged, examining the impact of design on business performance.

Studies by think tanks like the Design Council and the Design Management Institute, and consulting firms like McKinsey and Forrester Research, have convincingly shown that companies that put design at the forefront of their operations outperform their non-design oriented competitors—often by wide margins.

McKinsey, for example, has found that design-driven companies outperform the market by two to one:1

The problem with this research is that it focuses on enterprise-level, usually publicly traded companies—and it often defines design very broadly as a process, rather than a set of discrete activities. The recommendations made by McKinsey include “embedding design in the C-suite” and “convene cross-functional teams and break down silos.”

Modern corporations don’t need to be convinced of the value of “design-as-discrete-activities”. They already spend countless millions every year on external agencies and internal design teams. That’s why the research addressing these companies talks about “design-as-process.”

The story is different when it comes to small businesses.

Often, these are run by domain experts who are predisposed to discount the value of anything that isn’t “doing the thing.” If you own an accounting firm, chances are you put a lot of stock into the accounting capabilities of your firm. Marketing and design, and the thought of investing money into them, are probably afterthoughts at best.

Design as process

Like I mentioned, most of the research on the value of design addresses large corporations, and treats design as an abstract process—”a structural enabler,” as Paul Batterham calls it.2

“Design-as-process,” or “design-as-structural-enabler,” is about embedding design thinking, lean methods, and other methodologies concocted by Harvard MBAs across an organization in order to (hopefully) make it less bureaucratic and more efficient. So far as it has anything to do with design in concrete terms, it involves re-designing the way corporations operate.

If you’re a Fortune 500 CEO, that sort of thing may interest you quite a bit. But to those of us who are actual entrepreneurs, running our own businesses (with small teams or on our own), its usefulness is limited.

Design as activity

It’s way more useful to define design as a set of discrete activities. When you’re considering hiring a brand identity designer, or a web designer, you don’t care at all about the value of “design as a structural enabler.” You want to know what impact the concrete activity of rebranding your business, or overhauling your website, will have on your bottom line.

Design activities include a number of things:

  • Service design
  • Brand identity design
  • User experience design
  • User interface design
  • Process design
  • Packaging design
  • Product design
  • Etc.

These things are what I’ll talk about in the rest of this blog post.

The two ways good design adds business value

There are many ways that something can add value. You may argue (and I would agree) that “beauty” is an intrinsically desirable value, at least if you don’t want to live in an ugly world. “Usefulness to humanity as a whole” might also be a desirable value.

And depending on how strongly you feel about these things, they may even motivate you to invest money and time into design.

But as a business owner, I find it difficult to justify investments that don’t noticeably improve my profitability or make my life considerably easier. So I’ll leave all idealism aside and focus on the bottom line. The most basic reason all companies exist, after all, is to make money.

Good design can improve the bottom line in two ways:

  • By increasing revenue
  • By reducing costs

How good design can increase revenue

The most obvious way to increase profitability is to pull in more money. Usually when prospects ask to work with me, that’s what they’re trying to do.

There are two basic ways that companies grow their revenue:

  • By attracting more customers (market reach)
  • By increasing the value of existing customers (engagement & loyalty)

Good design is a very effective means to achieve both.

Example: Exploiting the halo effect to grab more customers at a higher price point

For enterprise-level companies, visual identity design is table-stakes. All of them put millions into it, because they know customers—consciously or subconsciously—make snap judgments about the quality of products or services based on how they are packaged visually. This is a phenomenon known in psychology as the halo effect, and you can click here to read my article on how the halo effect affects marketing.

For most small business owners, improving their visual identity design is a foolproof way to close the gap between them and enterprise-level competitors, and to gain a massive competitive edge on other small businesses. Effective visual identity design increases revenue by:

  • Differentiating and enhancing your brand image3
  • Increasing customer trust4
  • Increasing the perceived value of your products or services5

Most small-business brands are terrible, and it doesn’t take much to differentiate yourself from them. One of my clients increased their revenue by 77% after investing $17,000 in overhauling their brand identity.

Example: Using design to increase conversion rates

User experience (UX) design is a powerful tool for getting users to interact with your website in ways that make you money.

One of my clients—Spruce, an e-commerce company that makes potent CBD oils—has been hitting record conversion rates for new visitors after I overhauled the design and messaging of their homepage.

The ROI of the work I did with Spruce also demonstrates how multi-disciplinary design (and marketing more broadly) is: the work I did was informed by UX best practices and my expertise in brand messaging, and validated by user testing that I conducted. If you manage to find a designer who’s not just a one-trick pony, hold on to them.

How good design can decrease costs

The other way to increase profitability is to reduce costs.

This, funnily enough, is often overlooked by prospects who contact me. It’s easy to neglect inefficiencies in your operations, especially if you’ve always done things a certain way.

There are two basic ways that companies can reduce costs:

  • By reducing fixed costs (overhead, salaries, etc.)
  • By reducing variable costs (acquisition costs, COGS, etc.)

Good design can increase profit margins by reducing both.

Example: Creating a design system to reduce salary costs

Most small businesses suffer from a lack of systems. This is true across the board, but especially true when it comes to design.

Design systems are the reason giant corporations like Nike are able to present a coherent image—visually and verbally—across thousands of brand touchpoints, in every country they do business in, despite employing thousands of creative staff and working with hundreds of different ad agencies and creative agencies.

A design system is basically a (continuously evolving) rule book for how you present yourself as a brand. Companies, regardless of size, need a single source of truth to achieve the level of consistency required to build brand equity over time.

One way to think about a design system is that it reduces "design debt." Design debt accrues when you don’t put in the effort to make the correct design decisions upfront. As a result, you outgrow the solution quicker, and have to go back and fix things.6

When you don’t have a design system, you have a lot of design debt right out of the gate.

It forces you to constantly reinvent the wheel. You’re forced to revisit the same decisions: What should this typographic scale look like? Should this heading be 64px, or 72px? Should our call-to-action buttons be this blue color, or this green one? Do we add rounded corners to things, and if so, should the corners be rounded by 4px, 8px, or 250px?

All of these decisions, aside from inevitably producing inconsistencies over time, cost money to make.

Sure, each individual decision may be relatively cheap. Maybe you (or your in-house designer, or your social media manager, or whoever is tasked with creating outward-facing assets for your brand) only spend 1 minute on each decision.

But over the course of days, weeks, and months, all those minor decisions add up.

If you’re the one in charge of creating assets—ads, social media posts, newsletter emails, sales decks, proposals, website edits, etc.—you may be wasting tens of thousands of dollars every year on this alone.

The cost of constantly making tiny design decisions

Let’s say your time as a business owner is worth just $200 per hour. Let’s also say you spend a mere two hours per week on these small decisions:

2 hrs × 52 weeks × $200 = $20,800 per year

Good design can increase your profitability by tens of thousands of dollars every year just by eliminating the need to make extraneous decisions—even if you’re a very small business.

The best part is that a thoughtfully crafted design system will not only eliminate the need to make these decisions. It will eliminate the need to do repetitive tasks related to content production altogether, by providing a set of ready-to-use editable templates for things like sales decks, proposals, Instagram posts, and YouTube thumbnails—guaranteeing consistency and reducing time spent on content production.

Example: Designing a productized service to reduce variable costs

In late 2020, I designed my first productized service. It’s called Launch Pad, and exists to help entrepreneurs short on cash or time to create an effective brand identity.

I took a service that I would normally charge $20K+ for, stripped out the things that weren’t absolutely essential to producing a great outcome, compressed the timeline into a fast-paced two-week sprint, standardized what deliverables I offer and the process required to create them—and automated the client onboarding. I’m able to offer this service for just $6K, and still do things for clients that any other agency would charge at least $20K for.

I still make very healthy margins on the work I do as part of Launch Pad. The reason for this is that I have stripped out all the things that cost a lot of time:

  • I’ve reduced my client acquisition costs by about $1,000 per project, because I’m not spending hours creating custom proposals
  • I’ve reduced my onboarding costs by another $1,000 per project, because 90% of it is automated now
  • I’ve completely nuked project management costs, because the process is the same for every project (this saves me about $2,500 per project)
  • I’ve cut the amount of labor I put into doing the actual creative work in half, because I do the same things every time and have gotten really efficient through repetition (also, see: Parkinson’s Law)

I chose to use most of the cost savings to reduce my fees because I want more small businesses to have access to top-quality creative services (reading that back I cringe a little, but it’s true).

But I could just as easily have kept charging what I used to charge—or more, seeing as faster time to market is valuable in and of itself. Had I done so, I would’ve more than doubled my profitability.

How to make sure your design investment is profitable

By now, there should be no doubt in your mind that good design is indeed valuable, even to small businesses. But notice the conditional: good design is valuable.

Not all design is good design, and there’s frankly no guarantee that your design investment turns a profit. A design investment is like any other investment: You need to be smart, or you'll get burned.

To make sure that doesn’t happen, you need to have a plan. Successful design initiatives have two things in common:

  • Clear goals, and benchmarks to measure them by
  • A competent designer or team of designers to see things through

A good designer will talk to you to help you define what objectives are worth pursuing, and how to set realistic goals given whatever budget you happen to be working with. Of course, it helps if you already have an idea of what needs to be done.

Towards that end, I recommend grabbing my Brand Audit Checklist. It’s free, and gives you a checklist of things to look at in order to figure out where there’s room for improvement. Get it for free below. 👇


References

  1. Sheppard, Benedict, et al. “The business value of design.” McKinsey Quarterly. October 25, 2018. McKinsey & Company. 

  2. Batterham, Paul. “How to qualify the value of design.” Kainos Design (blog). September 8, 2020. 

  3. Jin, ChangHyun, et al. “The influence of brand color identity on brand association and loyalty.” Journal of Product & Brand Management 28 no. 1 (February 20, 2019): pp. 50–62. 

  4. Shahrokh, Zohreh, et al. “The impact of social identity of brand on brand loyalty development.” Management Science Letters 2 no. 4 (March 2012): pp. 1425–1434. 

  5. Wang, Edward. “The influence of visual packaging design on perceived food product quality, value, and brand preference.” International Journal of Retail & Distribution Management 41, no. 10 (September 2, 2013): pp. 805–816. 

  6. Brian Beaver, VP of Design at Eventbrite, quoted in “How to Communicate the ROI of Design.”. Designer Fund (blog). November 30, 2016. 

Jon Persson

About

Brand strategist, identity designer, and owner of CultMethod. I help small business owners create brands that attract customers and command premium prices.

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