A good model railroad layout design must start with establishing a theme for your layout - no matter what size it might be.
Some examples might be:
~A logging layout with shay locomotives transporting logs from a forest logging camp to sawmills and then freight locos carrying the cut wood to furniture stores or paper mills or lumber distributors.
~Long coal trains running through the Appalachian Mountains carrying coal from the mines to power companies, steel mills or to residential areas where coal was once a requirement for heating individual homes.
~Refrigerator cars carrying produce from farms or orchards to processing plants or distribution centers.
~Tank cars carrying milk from dairy farms to local distributors.
~Sleek passenger trains carrying people to and from various cities and towns, shopping areas, etc.
~Hoppers carrying grain from farms to grain mills and feed stores.
~Steam trains carrying freight from town to town and industry to industry through scenic mountainous areas across rivers and streams, with lots of rock formations.
~Freight and passenger trains weaving through streets of large industrial cities.
~Large freight yards requiring lots of switching to put trains together for journeys into the next state, where there's another freight yard.
You get the idea. Your railroad should have a purpose. Your trains should have destinations. Otherwise, if you're just running trains around and around a loop, you'll get bored with this pretty fast.
Your model railroad layout design should also have a sense of location. This may help you decide what kinds of trains you'll be running as well. For example, if you like western desert scenes, you may want to run Union Pacific or ATSF locos. If you like Appalachia, you will probably want to run trains that are located in that area - like Chesapeake and Ohio, Norfolk and Western or Norfolk Southern depending on the era you are modeling.
You may pick an exact location, like a small stretch of railroad between one specific town and another. Or you may prefer to model your trains and scenery to just give a sense of where they are -- in the Canadian Tundra, the Blue Ridge area, the plains of Kansas, the Rockies, etc.
For your model train design to be somewhat realistic, you should choose a general time frame in which it makes sense for your railroad to operate. Some examples might include:
The so-called transition period in the late 1940's to early 50's. This is a very popular time to model since you have the option of running both steam and diesel engines at the same time.
If you model the 1920's you're going to be mostly using steam engines.
If you're doing modern times, you can run Amtrak, Norfolk Southern, and other modern diesel engines.
Your surrounding scenery and towns should try to capture the essence of the era. Billboards and signs on buildings are sometimes helpful in establishing the general era of your layout.
The time of year that you're modeling should also be a strong consideration for your model railroad layout design.
Your decision will have a tremendous effect on your landscaping, ground cover, types of trees and foliage that you will be using.
The whole idea is to create an artistic and realistic environment in which to operate your trains - a blending of machine and nature.
Or, perhaps, in the case of cityscapes, a blending of machine and people.
There are many model railroaders who would put this first on the list of things to think about when planning and developing their model railroad layout design.
~What kinds of trains will be operating on the layout?
~Where will the staging yard(s) be located?
~How will the trains move in and out of the staging yard?
~How will the operating sessions be run and what kind of control panels, train power and walkaround units will be necessary?
If you carefully consider all the options above, you will be well on your way to an excellent model railroad layout design or concept that will help you build a railroad that is interesting, has a purpose, exists in a real time frame and a region that will be recognizable and realistic. You should do this even if your railroad is completely made-up or freelanced.
You may now want to consider how to get your main concept, theme and design into a tangible track plan that you can work with to start actually building your layout. Train layout design elements on the "Layout Design 2" page will help you do this.
Once again, you should not get too bogged down in the decision-making process, Just make a decision based on what appeals to you the most and go with it. Keep moving forward. If you can't decide between one option or another, just pick one or flip a coin. You'll have fun with it whatever you decide.