One of the most common questions we get at New Kind is “how much should a startup invest in branding and when is the ideal time to make the investment?”
Since it is difficult to find simple, straightforward information on this subject online, I thought I’d share what we have learned from our experiences. We have the opportunity to work on branding projects with companies in many different stages of the startup lifecycle, so we have a pretty clear sense when certain types of branding investments make sense.
After all, a well-positioned, beautifully visualized brand with a compelling story can give a startup a tremendous advantage in the marketplace. But it is critical to time and budget for this investment correctly. Spending too much, too early can drain the business of the financial resources it needs for growth. Invest too little, too late, and the startup might underperform its true potential or disappear in a crowded field.
A typical startup branding package might include any of the following elements:
- company or product name
- visual identity system (e.g. logo, typography, color, supporting visual elements)
- brand story, positioning, and messaging
- additional brand materials (e.g. business cards, signage, brochures, social media, etc.)
(To bring it to life, if you’d like to see a few examples of startup projects we’ve worked on involving many of these elements, check out the stories of our work with NGINX, Anchore, Diamond Candles, Continuum Analytics, and Ansible.)
For some organizations, it makes sense to bring in an outside branding firm to help develop these elements. In other cases it makes more sense to save the money and complete the work internally, or even combine the two approaches.
When we begin talking to a potential client and are helping them weigh whether an outside investment in branding makes sense for them, here are the two key questions we ask:
Question 1: How is the startup funded?
Startups come in all shapes and sizes. Some are funded out of personal savings or are unfunded and developed on the side while working a full-time job (what we’ll refer to as pre-seed funding startups). Others are funded by wealthy family members, friends, incubators, crowdfunding efforts, or early angel investors (which we’ll call seed-funded startups).
Once startups gain a certain amount of traction, they may even be able to attract additional investment from late-stage angel investors, venture capitalists, or even other corporations. These are what we’ll refer to, for simplicity, as venture-funded startups.
We recommend a different branding approach for startups at each of these three stages.
Question 2: Is the startup currently generating revenue? If so, how much? If not, is there a clear path to revenue in the near future?
Everyone has to start somewhere. There was a time before Google and Apple earned their first dollar, or before they made it to $1 million in revenues. So you should be proud of wherever you are in your startup journey, but you should also use your current financial outlook to make a responsible decision about when and how to spend money on branding.
Against that backdrop…
Here is how to think about making investments in branding:
Pre-seed funding startup
If you are funding the startup yourself, either by moonlighting on it while working another job or using your own savings, a good general rule of thumb is to spend no more than 5–15% of your total startup budget on a branding project.
So if you are investing $30,000 of your own savings in your startup, plan on spending no more than $1,500–$4,500 of that on branding. If you are investing $100,000, plan on spending no more than $5,000–$15,000. If you are investing $0 in your startup, well, 5–15% of $0 is still $0. There will always be time to make a larger investment later once you have money to spend!
I’ve emphasized “no more than” above because in many cases, you should spend much less. Use 5–15% as a rough sense of the scale of investment, but the exact amount will definitely vary depending on your business. For example, if you are in a deeply technical business-to-business industry where coming out of the gate with a strong brand matters less, you may not need to make a large investment in brand right away.
Or if you are an experienced marketer, you may be able to save money by doing a lot of the basic positioning and messaging work yourself, and only outsourcing pieces like design or website development where you have less experience. Just remember that every hour you spend on these projects yourself means you can’t work on some other part of the business, so account for the opportunity cost of the time investment while making your calculations.
If your startup is in a category where “brand is everything,” (like a clothing line or a product that will be sold in retail), you may want to spend 15% (or possibly even more) of your startup budget on branding. We’ve heard of several examples where organizations have invested up to 50% of their startup budget on branding, but this should only happen in the rarest circumstances. If you do decide to budget for branding at the top end of the range, or go above 15%, we just urge you to do so very carefully, and make sure you don’t shortchange other important investments in product development, infrastructure, sales, marketing, or operations.
For many startups, the most valuable branding investment to make at this stage in the lifecycle is in educating yourself and your team about the branding process. If you only have $100 or less to spend, I’d spend it buying books. Start with Positioning: The Battle for Your Mind by Al Ries and Jack Trout. Then get Designing Brand Identity by Alina Wheeler. If you have a few dollars left over, The Ad-Free Brand: Secrets to Building Successful Brands in a Digital World (which I wrote, sorry for the plug) was written specifically to address the needs of startups with limited branding budgets wanting to learn how to position and market themselves more effectively.
As far as the brand assets you’ll need, at this stage most startups can get by with a name, logo/basic visual identity, basic positioning/messaging, and a good website and web domain.
You can learn how to generate a good name for your company if you don’t already have one using freely available tools like this naming guide from naming agency Igor.
The logo and visual identity are a bit harder to do inexpensively unless you know someone who is a designer or have some design skills yourself. Some people may point you to websites like 99designs.com where you can get a logo designed for a few hundred bucks. We aren’t big fans of this sort of design competition ourselves because it means lots of people end up doing work they don’t get paid for, which just doesn’t seem very fair or efficient. You also don’t get to take advantage of a partnership between yourself and a designer, which can yield unexpected and valuable results.
If you have a small design budget and don’t have any design-minded friends or family, one alternative outlet you may want to consider is sending a note to your local AIGA chapter (AIGA is the professional association for design) to see if there are any young designers, perhaps just out of school or still in school, who would be interested in completing the identity work at a discounted rate in return for the experience and an opportunity to build their portfolio.
And if you decide to do the visual identity and logo yourself, our recommendation is to keep them very simple, maybe even just a type treatment of the company name and one or two basic colors. You’ll be able to build from this base gradually over time.
When it comes to brand positioning and messaging, you’ll be well-versed and should be able to do the basic positioning work on your own once you have read the books above. Or for a shorter course, consider downloading our free publication, The 4 Critical Building Blocks of Great Brand Positioning and learn the basics in 15 minutes or less.
If your startup has received significant funding beyond the level described in the section above, first off, congratulations!
Startups that have received over $100,000 in seed funding or are already seeing revenue in excess of $250,000 per year are clear candidates for investing in outside branding help. It certainly still helps to read the books and take advantage of the free or inexpensive branding resources I mentioned above. This will only help ensure you understand key branding concepts better and can plan your branding investments wisely.
For the most part, the same rules and exceptions apply for seed-funded startups. We still recommend spending no more than 5–15% of your total startup budget on a branding project. But because the total investment is higher, the budget available for branding-related projects will be robust enough that it makes sense to bring in external freelancers or a branding firm.
The table below should help you decide what sort of professional branding resource you should seek out. Keep in mind that you (usually) get what you pay for, so the more you are able to invest, the more experienced help you’ll be able to afford.
If your startup is funded at the $1,000,000+ level and you have not made an outside investment in branding (or made a smaller investment like those described above at an earlier stage), you should seriously consider bringing in a professional firm to help you.
Again, finding the right fit is key. Look for a firm that has significant work experience in your market. If you are starting a chain of health clubs, look for a firm that has helped launch other lifestyle or health-related businesses before. If you are developing a new SaaS (software as a service) business, look for a firm that is technology-oriented and has technology work examples on their website.
Once you get to agencies with about 15+ people, fit and experience is usually more important than size. Expect to spend roughly somewhere between $70,000–$200,000 on your branding (the higher end for projects that include complex website development), depending on deliverables. Here are a few rough guidelines for what you could expect to pay for each element of a branding project with a typical branding firm:
- Company name development project: $15,000–$75,000
- Brand story/positioning/messaging: $35,000–$80,000
- Logo / Visual Identity: $20,000–$75,000
- Website: $30,000–$200,000
Some final thoughts
Hopefully this post has given you a sense for the costs of branding projects and how much companies at each stage of the startup lifecycle should consider investing. And while this post has been about the cost of branding projects, it has made me realize the need for another post to help you quantify the value an investment in branding will create.
After all, if you are making the investment, you have an expectation that it will help you grow the business faster, right? So I’ll be working on that, stay tuned.
To re-emphasize a final caveat: there will be many exceptions to the guidelines you see above. This post was intended to give people a very rough idea of the cost of typical branding projects, but individual results may vary. You may find an extremely talented brand genius who is willing to do the work for a lot less. Lucky you!
Or you may fall in love with an agency in high demand that is looking to charge 2x or more what you see here. Our intent with this post was to give you a baseline that you can use to compare estimates you receive and help plan your budget.
And while we are at it, another aside: At a certain point, you may even want to consider whether it makes sense to hire full-time employees to manage your branding effort rather than using the services of an outside firm. At some points in the startup lifecycle, this approach can make a lot of sense. But alas, it is also fraught with peril, so tread carefully. In fact, that subject is probably also a good one for another post. Damn. Making a lot of work for myself here.
And, yes, one final aside: You may also find some branding firms that are willing to take some part of their compensation in equity in your startup (we do this at New Kind from time to time). From experience, I would say that it is complicated to work out the details, so don’t go into this sort of arrangement lightly. But we’ve found that this can be a great way to make the financial proposition work for everyone when the fit is good and levels of trust are high.
If you have any further questions or would like me to follow up with additional information, please feel free to reach out via email (firstname.lastname@example.org) or find me on Twitter. If I get any interesting questions, I’ll either add the answers as Q&A on this post or, if the question warrants, write up the answer as a new post.