Planning for Profitability in 2021
Does your bottom line show that your business is profitable? Not the gross revenue but your net profit – what you take home after all your costs have been covered. If your answer was “no” – then you are not alone. Amex stats show that only 40% of businesses are considered profitable – and even more importantly that 60% of ALL businesses are UNprofitable!! If you are part of that 60%, don’t you feel it’s time for a change?
First, overcome the mindset that often plagues creative entrepreneurs – you may not see yourself as a business person. So as you begin to plan for 2021 ask yourself if you are an interior designer who happens to have a business or a business person who happens to be an interior designer. Many of you may rebel against the business side of interior design, and want to concentrate on what you love – designing. Well it’s time to work a bit on your mindset and visualize how much more you would enjoy being an interior designer if you were doing what you love AND were able to show a substantial profit.
Next, do you have an effective business plan? Research shows that 78% of small businesses lack well-developed business plans, including insufficient research on the business before starting it! Once you overcome your mindset and actually get excited about making money while doing what you love – then turn your focus toward your business plan. Profitable businesses are identified by business practices that are organized, efficient and thorough, so one easy first step to developing an effective business plan is to evaluate your current business processes and procedures. What are they and what do they involve? How could they be streamlined to make your business more efficient?
Often designers feel they need to add clients/design jobs to increase profits. What if, instead, you were able to decrease the number of jobs while increasing the size of those jobs? Every time you start a new job, there is a “relation-building” phase which is important but is time consuming. Small jobs can involve more of your time than they are worth as you still need to invest the same amount of time finding those clients but your return on investment (ROI) is less as the job is smaller. Doesn’t it make sense to focus that investment of time on finding larger jobs? So consider focusing on fewer but larger design jobs. Firms that are more profitable are, among other things, more efficient – this is just one example of a more efficient use of your time and more billable time – more billable time means more profit.
These are 3 areas to help you get started as you plan for more profitability in 2021, but for the long term success of your business, be prepared to be a lifelong learner – investing the time and effort to continually increase your knowledge and skillset — and don’t forget to include your team in that personal and business development.
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