By Drue Lawlor, FASID
Director of Coaching at Gail Doby Coaching & Consulting
“Beware of little expenses. A small leak will sink a great ship.”
Talk about these topics at GE: Even if you’re creative, you need to understand them, negotiating pricing with manufacturers at market, expand or stay lean.
Are you overwhelmed by the financial (numbers) side of your business? Like many designers you probably had very little if any exposure to lessons in accounting in design school. Yet understanding your financials is a major key to building a successful interior design business, so it’s important to make friends with your financials. It’s truly not as scary as many may think. The most successful designers I know are not the most creative or the ones with outstanding design sense – they are the ones who combine these abilities with a clear understanding of the numbers in their businesses.
You don’t need to become a bookkeeper or accountant, but you need to be able to understand the flow of money in your business. To quote Robert Kiyosaki, “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” Your accounts may show that your firm takes in a great deal of money, but it’s what is left over after all the costs have been covered – in other words, the bottom line/net profit – that will indicate if your firm is truly “making” money.
Understanding your balance sheet will also tell you about what you own and what you owe – what are your current assets and what are your current liabilities.
Making friends with your numbers will also help you to identify those little expenses that can become a drain on your profits. It will also help you see if your projects are truly profitable. Again, just because your clients may be writing you large checks, that doesn’t indicate a profitable business. If all that revenue is coming in just to go out to meet your cost of goods and overhead, then you do not have a profitable business and you may be operating a “hobby” rather than a business. If you want to maintain or grow a profitable business then it’s important that you make a profit – both for you and your entire team.
Having a better understanding of your numbers can also help you evaluate processes of your business – How efficient is your collection process? Is your gross margin high enough? Are all your projects profitable – or do you need to re-evaluate some of the projects you are accepting?
When you create a budget, and then a Business Dashboard/Business Progress Tracker which is the high-level view of where you are at the point in time that you review the dashboard, you can manage and monitor your “metrics” which is a fancy word for measures of your success.
If you would like to learn how to overcome your struggle with the financial end of your business, then you need to be at The Genius Exchange this summer, where extraordinary interior designers and their teams gather to advance their businesses with proven principles for rapid growth.