Starting a Product Design Company
My goal for this post is to share with you what I have learned during my journey of starting and growing a successful product design (PD) and manufacturing company (CM), aka Jaycon Systems.
I have been operating Jaycon Systems for the past 7 years. My business partner, Jiten Chandiramani, and I have always been very passionate about bringing ideas to life. We didn't have experience running a design firm back in 2011, so we started by selling electronics and other components online in which makers and engineers would use to bring their product to life. In less than 2 years we had learned so much — we got plenty of exposure to our clients' process of making things — mostly from the countless emails and calls from clients asking for our expertise in integrating our web store components into their hardware product.
Two years into the e-commerce business and we decided to take a stab at product development ourselves — how could we ignore that opportunity since so many of our current clients were asking us to design their products?
Why do you want to start your own PD firm?
Your reasons for wanting to start a product design firm may be different to mine — you may be a recent college grad or someone who has done design work for other people and is ready to go on your own. You are passionate about engineering, design, innovation, and technology. You like working on new inventions and are curious about what it’s like starting a company. You have dreams of working for yourself and becoming your own boss. Whatever your reason is, remember to be real about it and remember that the grass isn't always greener on the other side, and the road to success is rather paved with spikes than asphalt.
Well, the best part about starting a company is building the company from the ground up and seeing its evolution. Each client and employee you add is a huge achievement. Growing a team and exploring the unexplored is exciting. But the only way you are able to grow is through sales, which can be one of the most fun, but hardest activity in a business. Do you have what it takes to be a great product designer while being a great salesperson? If you're starting on your own without a team or a business partner, you may suddenly feel overwhelmed with all the different hats you will have to wear. If you have a business partner, divide and conquer the tasks according to your strengths, and if you are an engineer with not-so-great sales skills… Well, then you better start learning.
Structuring your business
You will need to become educated in how to structure your business. If you start by yourself just remember that sole proprietorship isn't a legal entity, so as you add more employees, that goes out the window. In most cases you would be looking at three main business structures: LLC, S Corp, and C Corp. Do your research before you file with the Secretary of State since each of these has very different tax implications. Some issue stocks and others have membership shares. If you plan to take on angel investment in the future, you might want to structure it correctly so your angel investor doesn't walk away because of its improper structure. I'd highly encourage you to read SBA's guide: 10 steps to start your business. Check the table below for a comparison between the different entities:
Building your online presence
It's the 21st century… If you don't have a good website in this day and age, you may as well not exist at all. People pay attention to websites and judge your service quality by the quality of your website. You don't have to be a web designer to build a good website, let Squarespace, Wix, and Wordpress do most of the work for you with their pre-populated templates. And if you need good images, Unsplash will be your best friend.
Remember to showcase your best work. If you haven't worked on too many different projects to showcase in your website, then you should be using your weekends to work on projects similar to the ones you believe your customers will request from you. Are you more of a medical product designer? Consumer electronics? Mechanical design? Then put your free time to good use and build beautiful pieces to include on your website to wow your future clients.
Marketing your business
Your website is just the tip of the iceberg, it's what customers land on. And just because you have a website doesn't mean you will get traction. Spend some time creating awareness.
Content is king
Start by generating some organic traffic. Reach out to your professional network and let them know about your website. Start blogging about topics that you are passionate about. After each post, make sure to let your network know about it.
Reach out to your local newspaper and see if they are interested in writing an article about your company for free. Although most news outlets are paid, if you have a compelling enough story, they may just write a story about you. If you have the budget, publish press releases with news distribution agencies —they range anywhere from $500 to $10,000 per article depending on your target audience.
Invest in paid ads
Understand where your audience is and pay to reach out to them. Paid ads can do wonders for a business, especially new ones with low organic traffic. From LinkedIn + Facebook Ads to Google Adwords, you will find that a little goes a long way. Once you get to know your audience, see what categories they fall into. Let's say you do medical product design. If 3 out of 5 customers you had the past month are doctors who run their own medical practice, then you may want to run a campaign on LinkedIn to target all people within your geographic area whose job title is Surgeon, doctor, MD, Entrepreneur, Founder, etc in the Medical field. The possibilities are endless — check the screenshot below (see estimated target audience on the top right of the page):
Try out different trade shows
Trade shows and conferences may be expensive to go to, but you can go as an attendee to see if it's worth setting up a booth in the future. Use your lunch break at the conference to start a conversation with potential clients. Just don't try to reverse sell to booths, that's just rude since they paid the big bucks to be there and you didn't.
Setting up operations
The doing is the fun part of running a product design company. You get to translate what’s in your customers’ minds into physical products they can touch and feel. However, it certainly isn't as easy as it seems. You have to establish a design process that will work with any type of customer and for any type of project.
The design process
When you first meet with your potential customer, what kind of information are you collecting? Create a standardized questionnaire that will help you and your team follow when designing their product. Google "Statement of Work" to understand how this single document can be a lifesaver when dealing with customers who want to change design requirements every two minutes. Establish policies for change orders to restrict customers from "changing their mind."
Keep IP, or intellectual property, in mind. Especially in the product design field, most customers are concerned about protecting their idea and will require you to offer an NDA in order to even speak to you about their project. And that's just to start. Once you've completed the project design, who owns the IP — you who designed it or your client who came up with the idea? Different PD firms offer different ownership options.
The realm of services you offer
Once you've designed their product, are you going to offer prototyping or manufacturing services? If so, are you doing it in-house or are you outsourcing? If you want to do it all yourself, how much money do you need to invest in a good 3D printer or CNC machine? Ask yourself a few questions related to each piece of equipment you're thinking to own:
- Will they become old technology next year?
- Who runs the machines?
- How much time and many does it require for maintenance? Who maintains them?
- What supplies and/or other resources does it need to operate?
- Are you buying it cash or financing it to help cash flow?
If you are going to outsource prototyping or manufacturing services, learn how to properly vet your vendors. Do they have certifications your customers require? What are their payment terms? What about lead time? When working with vendors, always try to establish a trustworthy relationship. You will see that with time they will give you special treatment because you're bringing them a constant flow of business.
Remember that the more service capabilities you offer to your client, the more oversight each one will require. Only offer what you really know how to do otherwise you may spread yourself too thin.
Things to consider when you’re outgrowing yourself
Consistency in communication
You and your business partner did a pretty good job answering the phone for the first years. But now that you're growing you don't want to excuse yourself from a meeting with a potential client to answer the phone. For 3 years from when Jay and I started Jaycon Systems, we had the phone calls covered between the both of us. The problem was that as we started growing, so did sales calls to sell us services. Sometimes we thought it was a customer and we would excuse ourselves from a meeting just to find out they were trying to sell us insurance. And then when we thought it was someone trying to sell us something, it was actually a potential customer. So we decided to outsource the answering system altogether so we could focus on the current projects and only get calls transferred to us from genuine customers. We certainly do not regret paying for this service.
Oh, emails! So many emails… Yeah, don’t forget to reply to emails. Customers expect on-demand answers regarding their projects — remember that their project is pretty much their baby, and they are protective parents. Look at each customer as an opportunity to fine-tune your communication skills so you can build a relationship with them and set boundaries to how often you should be communicating.
Handling shipping
If you are creating a physical prototype for a customer, most likely you will need to ship and receive items — especially if you are manufacturing them. If you need to handle too many units, will you use your time to pack + ship or are you going to use your time a bit more wisely, like handling projects and actually designing new products? You may want to consider hiring a part- or full-time fulfillment specialist to do that for you. You may also consider looking into shipping software that helps you with labeling, inventory, and tracking numbers.
Moving to a new [and bigger] location
Once you have grown large enough that your design company needs new office space, you will want to shop around for real estate. It helps to hire a real estate agent who has access to the MLS and can help you understand what fees will be involved in renting. For example, certain states charge sales tax that are passed on to the lessee, and some landlords charge common area maintenance fees (CAM). Make sure to ask your realtor what amenities and fees are included.
The not-so-fun part of running a business
If only we could keep all the money we make as a business, right? Well, you can certainly learn about business items that are tax write-offs —but mostly, by the moment you set up your business, you start paying fees and/or other local, state, and federal taxes.
Bookkeeping
A good bookkeeper and accountant will assist you in learning about tax laws, and help the financial part of the company to run smoothly. Here are some of the things you should know:
- Establish your financial records on a financial software like Quickbooks
- Learn how to collect payments
- What happens when your customer goes bankrupt
- Who is going to reply to the IRS when there is an audit
Insurance
You’re designing new products for people. So much can happen during the process of making a product and even after the product has been delivered. It’s important to protect yourself from the many problems that can arise from this process. I’d encourage you to be familiar with the many types of business insurance available. For a PD firm, it will be extremely important to have E&O (Errors and Omissions) insurance to protect you from lawsuits regarding harm produced by your work. An example would be a TV mount you designed that over the years got worn out and fell from the wall, hurting somebody.
Human resources
How hard can hiring people be, right? Well, human resources encompasses so much more than just hiring. Learning how to deal with people isn't as easy as it sounds and it can be one of the most important factors on the success of your business. Ensuring a high morale, offering enough benefits, always having a pipeline full of work for employees, having flexibility… These are all things that fall under HR and they should be considered from day one.
Conclusion
It took us several years to learn that running a product design company is all about processes. From when you're just meeting with a client, to when you're hiring. It took us a long time of trial and error to understand what processes worked and which didn't. But nonetheless, we never stopped experimenting.
Running a product design company is a lot like running an ultra-marathon. Dedication and training will help you win the race. Having the right equipment, surrounding yourself with the right team, constantly learning and improving, and having a supportive network will help you move forward. Just like any race, it will have its ups and downs — and it certainly won't always be easy —but when you finish it, it’s very rewarding.
It’s not about the destination, it’s about the journey.
About the Author
Hi, I’m Derek. I have been an entrepreneur in Tech for the last 10 years. In my blog I share with you what it’s like to keep up with the ever-changing world of technology; the highs and the lows of being an entrepreneur; what it’s like to do business in China; and how to simply be successful at managing work-life balance. If you like what you read, give it a nice round of applause and add me on LinkedIn — I love connecting with my readers.
