The 7 Reasons Interior Design Firms Fail

How Many Of These Are You Guilty Of?

  1. They don’t define “success” clearly enough, which means they don’t have a target that drives and inspires them. Just living month-to-month for year after year is not success. Set a specific income and savings goal for the next five years and create the detailed plan necessary to achieve that.
  2. They don’t project cash flow on a weekly basis. This information does not come from your financial statements or from your bookkeeper, though accurate reports of receivables and payables can play a role. This projection comes from your head and your gut feel. Your head will simply log into any bank accounts and find out how much cash is on hand. Your gut feel will tell you how much you’ll collect within the next week or month, and how much you’ll have to pay out. That’s not very hard, is it? Yet doing so will enable you to go through that entire period with either confidence, or a healthy bit of anxiety.
  3. They hire too soon, and poorly. Google has almost 100,000 employees, so each new hire can have only a tiny impact on the company. Yet it’s not unheard of for the interview process to last 6-12 months and include a dozen or more interviews. Yet I’ve seen interior designers with 1-2 employees hire someone after a single interview. They are hiring someone who will represent 1/2 to 1/3 of their entire company…and often hire this person without a detailed job description. The time it takes to train and manage them is always more than expected, and you can expect a big dip in productivity before any gains are realized…if they are realized at all.
  4. They ignore the roller coaster of sales. One of the factors that makes interior design such a challenging business is that it is subject to the roller coaster of sales. While the top line of many companies, large and small, goes up at least a little bit every year, that’s almost never the case for interior designers who, subject to the occasional whale client, can see enormous swings in revenue—up and down—from year to year. You must understand the basics of breakeven analysis so that you can establish fixed costs that will enable you to survive in the lean times, and make hay in the good times. 
  5. They abandon the very business development discipline that made them successful in the first place. This is not a slam at social media (though I do enjoy doing that!) but I’ve heard from countless designers that after years of networking, going to events, joining associations, and building a word-of-mouth brand, they abandoned all of that in hopes that social media would serve the same purpose. Of course it didn’t, and now they worry that they don’t have the energy to start all over to rebuild what they once had.
  6. Back to cash flow…but this time over a longer period of time, and tied to pricing strategies. Because most designers don’t see reports that truly reveal where they’re making money and where they’re not, they just pull pricing out of the air. But being able to develop some scenarios with variable pricing (time and product) and the timing (deposits, retainers, etc.) can make the difference in just getting by, and truly breaking through.
  7. They’re too squeamish. Interior design is not the only “professional” people on the planet. There are others like attorneys and accountants and wealth managers. But many of those are much less squeamish than designers when it comes to the unavoidable act of selling! Many designers don’t send out enough emails, don’t make enough phone calls, don’t network enough, don’t ask for higher prices, don’t ask for referrals and on and on.

Yes, I could easily come up with seven more, but these are the ones that came to mind first when someone asked me this very question. And I invite you to leave your thoughts and comments below.

NEW - IDMBA Program

Learn about the new Interior Design MBA - one academic program to deliver the complete business education interior designers need.