Boosting Profits for Interior Designers

Published: May 15, 2023

This article was originally published on May 15, 2023; it was updated on June 6, 2023.

Owning and operating an interior design business can be both rewarding and challenging – particularly when it comes to boosting profits. While you may find yourself grateful that you have found success doing what you love, you may also feel as if financial growth has reached a plateau. Worries about covering expenses, paying yourself and investing in marketing can be overwhelming, especially if you’re uncertain about the changes needed to yield better results.

This guide is designed to provide insights and solutions you need to enhance your financial management, so you can free up more income to invest in marketing your business. By following these tips, you’ll be better equipped to overcome financial challenges and ensure your interior design business not only survives, but thrives.

Identify Financial Obstacles to Boosting Profits in Your Interior Design Business

Addressing common financial management issues is vital for improving your stability and growing your business. With improved financial stability, you will find yourself better equipped to navigate the ups and downs of the industry and achieve your long-term goals.

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Limited Financial Visibility: You may struggle with limited financial visibility if you consolidate all finances into a single account, making it challenging to determine if you have enough funds to cover your bills and other expenses.

Inefficient Time Tracking: If you’re not tracking your time effectively, you might be uncertain about how much to charge for your services, potentially affecting your profitability.

Unexpected Expenses: Unexpected expenses can catch you off-guard, causing stress and impacting your financial stability, especially if you do not have contingency plans in place.

Uncertain Pricing Strategy: You might find it difficult to determine the appropriate pricing for your services, which can lead to lost revenue or underpricing your work.

Insufficient Marketing Investment: Lack of adequate funds for marketing can limit your ability to grow your business and reach new clients.

Inadequate Progress Tracking: Failing to track your progress can impact your ability to identify issues and make informed decisions, affecting the optimization of your business’s ability to grow.

By having a system in place to track expenses, you can gain visibility on what expenses are still due and ensure you have enough funds in your account to cover them. This can help you avoid unexpected financial surprises and manage your cash flow more effectively.

In the following section, we will explore an easy way to track your finances and guarantee you have enough for bills, taxes, payroll, marketing and other expenses.

Banking Account Allocations: Manage Your Finances for Boosting Profits

A critical aspect of managing your finances effectively is organizing your banking account allocations for all direct costs and creating a financial cushion for business stability. This will not only give you visibility into whether you have enough to pay your bills, but also help you set aside funds for marketing, payroll, taxes and other expenses. Aim to have enough savings to cover at least three months’ worth of expenses and allocate your weekly income into separate accounts, using the Profit First system.

The “Profit First” approach, written by Mike Michalowicz and highly recommended by many entrepreneurs for business success, involves setting up separate accounts for various financial purposes. This approach enables you to clearly understand how much money is available for expenses, taxes and other financial obligations, preventing overspending and providing the opportunity to build a financial buffer for emergencies.

Here’s how to follow the Profit First system in nine steps:

Step #1: Determine your income and expenses.

Step #2: Set up separate accounts for:

● Income (Checking account)
● Operational and Marketing Expenses (Checking account)
● Owner’s Pay or Payroll (Checking account)
● Profit (Savings account)
● Taxes (Savings account)

Note: Some designers find it helpful to also have a separate account for large purchases.

Step #3: All revenue is deposited into your “Income Account.”

Step #4: On a weekly basis, transfer a percentage of your revenue from your “Income Account” into your other accounts. For example:

● Operational and Marketing Expenses (45%)
● Owner’s Pay or Payroll (35%)
● Profit (5%)
● Taxes (15%)

Step #5: Use the Operations and Marketing Account to pay your expenses.

Step #6: Use the Owner’s Pay or Payroll account to make sure you have money set aside to pay yourself and your team.

Step #7: Use the Profit account to give yourself and your team a bonus.

Step #8: Use the Tax account to make sure you always have the right amount set aside to pay taxes.

Step #9: Monitor your cash flow and accounts regularly to ensure you stay on track.

How to Create Profitable Interior Design Services & Products

More income does not necessarily equate to higher profit margins, especially if your offerings are not designed to be profitable.

Price wisely: Price your services and products based on their value, your time, and market demand while still ensuring healthy profit margins.
Streamline: Streamline your services by developing efficient systems, production processes, and operational processes to reduce costs and time.
Refine: Continuously evaluate and refine your offerings.

A special note about pricing: Tracking the time you spend on projects is crucial for determining the appropriate fees for your services. By accurately monitoring your time, you can price your services based on the value you deliver, ensuring profitability and client satisfaction. Take the cost of what you’re currently charging, multiply your hours by your rate, and add your expenses (with markup) to find the value of the service. If the calculated value is higher than your current cost, you should consider adjusting your pricing.

Track Key Performance Indicators: How to Keep a Scorecard

Keeping track of key performance indicators (KPIs) is vital for assessing your business’s performance and identifying areas that need improvement. To track this information, create a scorecard that includes the areas of leading and lagging indicators for your business. Some essential KPIs for interior designers include:

● Marketing activity
● Appointments booked
● Proposals sent
● Sales conversions

By consistently monitoring these metrics, you can make informed decisions on adjusting your strategies and allocating resources more efficiently to drive growth.

Tracking Leading Indicators

To measure the effectiveness of your marketing efforts, you need to track leading indicators. Leading indicators are real-time numbers that measure your current efforts and can predict future outcomes.

Keeping track of these numbers helps you determine what’s working and where to allocate more resources. Here are some examples of leading indicators to track:

Email marketing: Track the number of emails sent out, opened, and responses/clicks.
Social media: Track the number of posts you make, followers you have, and engagements.
SEO: Keep track of how much content you publish, keywords you’re ranking for, and keywords on the first page of search results.
Events: Monitor the number of events you attend, how many appointments you book as a result of those events, and how many of those appointments convert into sales.
Website traffic: Track your total traffic and the number of new visitors to your site.
Website forms: Keep track of the number of people who fill out your “contact us” form and the number of downloads you receive.
Appointments: Monitor the number of appointments you book.

Here’s an example of how you can create a simple report to track this information weekly:

boosting profits chart

Tracking Lagging Indicators

In addition to leading indicators, you should also track lagging indicators to monitor your sales activity. Here are some examples of lagging indicators to track:

● Website forms
● Appointments booked
● Proposals given
● Sales won
● Revenue

Here’s an example of how you can create a simple report to track this information weekly:

sales boosting profits

Stay on Track to Maximize Growth & Profitability

To see the benefits of the steps outlined above, it’s crucial to stay on top of your finances and keep track of your progress. Here are four key tips for staying on track:

#1 Update and Review Weekly. Update your scorecard regularly and review your progress to see where you’re excelling and where you need to make adjustments.

#2 Track Hours and Expenses. It’s important to track the time and money you’re spending on each project or service. This will help you identify areas where you may be able to streamline your processes or cut costs.

#3 Make Offerings Sustainable and Profitable. When creating new services or products, make sure to consider the cost of materials, labor, marketing, and overhead, and price accordingly to be profitable.

#4 Adjust Pricing Based on Calculations. If you find that your services or products are not turning a profit, it may be time to re-evaluate your pricing strategy. Use the data you’ve collected to make informed decisions about adjusting your pricing to achieve your financial goals.

Build a Better System for Boosting Profits Today

By incorporating these tips, you will set your business on the path to success. These strategies will make sure you:
● Have money set aside to pay yourself and run your business.
● Have the funds to consistently invest in attracting new clients.
● Are able to grow your business, boost revenue and profitability.

—By Debra Scarpa, founder of Home Designer Marketing, a firm dedicated to guiding designers to success with strategy, branding, websites, SEO, social media and more.



Tagged with: Business, Financials

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