HP Buys Logoworks, Entree Into SMEs

HP is serious about working with small businesses and announced today that it is buying Logoworks, the disrupting producer of logos for small businesses. It will be a great acquisition for HP.

When it launched in 2001, the premise behind Logoworks was that most small businesses don’t have logos, and that they’re scared off by the high cost of building a logo, the delay in getting one done and often unsatisfactory results. Without a logo, many small businesses don’t take the next logical steps of marketing (business cards, brochures, newspaper ads, Web sites, etc.).

Logoworks founder Morgan Lynch, part of a group of highly entrepreneurial Brigham Young graduates in Utah, knew there had to be a better way. He was in his 20s and personally knew lots of freelance designers who would be delighted to earn some pocket money. But first they needed the customers.

So Lynch and his team (including Jeff Kearl, who had been with Freeport) constructed a software system that would create a “bakeoff” between designers who would design the best logos for customers. Customers would choose the best design among three to five designers, depending on what they wanted to pay for. And the price would be $300 to $500, just a fraction of the cost of using a design shop. The turnaround could be in three days or less.

Today, with 45,000 logos behind it, the company works with more than 200 designers from around the world, and a core staff of 100 or so in Linden, Utah, near Salt Lake City. It has also branched off into Web sites, business cards, brochures and general graphic design. It even handles some corporate accounts, like Disney, Microsoft and SeaWorld. (It is interesting to see how small-business companies like Spot Runner and Logoworks end up handling larger accounts that want their flexibility, speed and ability to work across the board.)

I did a little consulting work for the company a few years ago. Since then, I’ve never gotten tired of talking about its story. Sure, Lynch had gotten into deals on his own with PIP printing, Mr. Speedy and other printers. The printers understood logos as easy upsells. But the reason he hired me was to see if we could get some traction with some of the major Yellow Pages and local-oriented Web firms that worked with small businesses.

Were we successful? Basically, most of them said they just wanted to resell “Web sites, Web sites, Web sites,” which have bigger margins than logos. It didn’t seem to matter to these companies that their customers probably needed a logo just to get started. From our point of view, logos could serve as their entrie into the small-business world and lead to broader accounts. The only company that really “got it” was Constant Contact, which publishes e-newsletters for small businesses. Today, Constant Contact’s Eric Groves sits on the Logoworks board.

My experience with Logoworks was a great lesson for me. What I learned was that most of the companies that have small-business products are basically there to sell their own, existing products. They don’t actually work with the small business. HP, it seems, is determined to change that.