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

Good design adds value to a small business in two ways: it raises revenue and it cuts costs. A stronger brand identity lifts trust and perceived value, so you win more customers at higher prices. A design system and a repeatable process cut the hours you spend on every asset and every project. One of my clients, a flooring retailer, grew revenue 77% in the year after a $17,000 rebrand.

Does design ROI research apply to small businesses?

Mostly not. It studies large, usually listed companies, and it treats design as a company-wide process rather than something specific you can buy, like a rebrand or a new website.

A body of research has examined 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.

The Design Management Institute’s 2015 Design Value Index found that 16 design-led public companies returned 2.11 times as much as the S&P 500 over ten years.¹

McKinsey, for example, tracked 300 listed companies for five years. The quarter that scored best on design grew revenue 32 percentage points faster than their industry peers over that period, and beat industry-benchmark growth by as much as two to one.²

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.³

“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.

How does good design add business value?

In two ways: it increases revenue, and it reduces costs.

Good design can improve your bottom line in two ways:

• By increasing revenue
• By reducing costs

How does design increase revenue?

Design increases revenue by winning more customers and making each one worth more. A stronger identity lifts trust and perceived value, and better UX lifts conversion.

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 image⁴
• Increasing customer trust⁵
• Increasing the perceived value of your products or services⁶

Most small-business brands are terrible, and it doesn’t take much to differentiate yourself from them. One of my clients, Creme Carpets, a flooring retailer in Canberra, Australia, grew revenue 77% in the year after a $17,000 rebrand in 2019: new positioning, a new name, a new visual identity and a new website.

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.

After I redesigned the homepage and messaging for Spruce, a CBD oil e-commerce brand, in 2021, it set new daily records for new-visitor conversion.

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 does design reduce costs?

Design reduces costs by removing repeated decisions and repeated work. A design system ends the small choices that eat your week, and a standardized process removes custom proposals, manual onboarding and most project management.

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 a long roster of 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.⁷

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.

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 was called Launch Pad, and it helped entrepreneurs short on cash or time 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 the deliverables and the process required to create them—and automated the client onboarding. I could charge just $8K, and still do things for clients that any other agency would charge at least $20K for.

The margins stayed very healthy, because I had stripped out all the things that cost a lot of time:

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

I chose to use most of the cost savings to reduce my fees because I wanted 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.

Launch Pad was retired in 2023; its successor is the Brand Sprint: positioning, identity, a website and a voice kit in ten working days.

How do you make sure a design investment pays off?

Set clear goals and benchmarks before you start, and hire a designer who’s good enough to see them through.

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 our Brand Audit Checklist. It gives you a list of things to look at in order to figure out where there’s room for improvement. 👇

Footnotes

1. Design Management Institute. “2015 Design Value Index results.” DMI ↩

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

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

4. 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. ↩

5. 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. ↩

6. 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. ↩

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