Last week Gail Doby revealed her 2011 Interior Design Business Predictions. Now she is providing us with insight on what your competitors are earning! Design Success University just published the NEW 2010-2011 Interior Design Fee and Salary eBook, and you can download your complimentary copy today ($79 Value – Complimentary!).

Clients and consumers in general are more demanding and less patient than ever
about fees. They want value, and they want to know what to expect.

After you download the complimentary eBook, you’ll get access to a prerecorded
webinar, How to Avoid Fee Fiascos…And Attract Your Ideal Client by Gail Doby,
ASID. It’s full of strategies and solutions to help you make more money and keep your
competitive edge in today’s market.

Click below to download your eBook now!

The end of the year is fast approaching (we probably didn’t have to remind you!).  A few things to keep in mind so that you can turn over an organized file to your accountant in January:

1.      Make all of your charitable contributions before the end of the year in order to get the benefit of a tax deduction for 2009.  Itemize gifts of goods, while the information is still fresh in your mind.  Remember to also account for the professional time that you donated to that auction.

2.      Make the most of your retirement contributions.  Some contributions can be made until April 14 of 2010 for 2009.  So, now is the perfect time to plan that contribution and make the contributions over the next four months.

3.      Most of us like to defer our income, and increase our expenses in order to decrease our current year tax liability; however, you may need to rethink this strategy as tax rates are on the rise.  Tax cuts created during the Bush administration are set to expire in 2011, which may make it advantageous for you to recognize income now rather than later.  Ask your tax professional.

4.  Ensure that you are up to date on your bank reconciliations so that you have a true balance sheet and income statement on December 31st.

5.  If you do your own payroll, check with your accountant and/or the IRS to ensure that you are aware of the proper year-end forms to file.

6.  In many financial accounting software programs you can only have two fiscal years open at any one time.  That means that in 2010, you must have 2008 closed.  This is especially true if you use Studio Designer.  If 2008 is not closed, be sure to do this before December 31st or you will run into a big mess.

If you are feeling any pinch and worry about what to gather for the end-of-the-year financials, be sure to use your bookkeeper or accountant as a resource.  Feel free to contact our Accounting Services group and we will make sure to either help you or steer you in the right direction.

I can’t begin to explain how ecstatic I was to see this article posted yesterday on Fast Company’s website.  It’s about time that 1. the extremely complex nature of the interior design industry was brought to the forefront and 2. the industry, in and of itself, garnered respect as an industry of professionals and not just of weekend or afternoon hobbyists.  Way to go Fast Company and even more kudos to Design Investors.

Bringing Dollars and Know-How to Design Studios

With all the hoo-ha over laser-cut patterning and mid-century styling, it’s easy to forget that design is a business. But is it a profitable business? The folks at Design Investors think it is–or can be with smart management.

Design Investors may be the first attempt to bring the tricky magic of venture capital and private equity to design. Will it bring the breath of life to design seedlings?

Started two years ago by Peter Sallick (left), the former CEO of Waterworks, the firm has so far invested in just three outfits: Rose Tarlow Melrose House, Twill Textiles and Waterworks, Sallick’s former employer. Design Investors, which is based in Wilton, Connecticut, used its own funds and pooled with a dozen investors. (Sallick declines to say how much capital they have invested.)

Click here to see the full article on Fast Company’s site…

This is the first part of a multi-part series of lessons learned from Inc. Magazine’s GrowCo conference. These lessons have been translated and applied to the interior design industry for relevance.

Ram Charan

Dr. Ram Charan, author of Execution and Leadership in the Era of Economic Uncertainty and former Harvard Business School faculty member, gave a thorough and complete explanation of the current economic climate to kick off this year’s Inc. Magazine GrowCo conference. While one hour may not have been much time to explain a labyrinth-like fiasco, there were several important takeaways. To build a good foundation, we must answer the question “What got us here?”

Charan argues that several missteps resulted in the concoction of this downturn soup:

- The Banking Act of 1933 (also referred to as the Glass-Steagall Act), amongst other things, separated commercial and investment banks as a public interest measure. This provision in the act was repealed in November 1999. While the repeal of the Act was well-received at the time, many economists argue that the repeal contributed to the global financial crisis of 2008-2009.

- As an economy, we became overleveraged. For many years, interest rates were close to zero and there was too much liquidity.

- A major risk shift occurred when mortgage companies began bundling loans and selling them instead of keeping the loans in-house. This shifted risk from lenders to investors.

- Rating agencies did not do due diligence to uphold a high level of rating integrity.

Charan however argued that we will not see a depression. He theorized that government agencies are putting appropriate circuit breakers in place to prevent a massive plummet.

As small companies, Charan promoted the following importances:

1. CASH IS KING. Cash is the lifeblood of any business. You must have cash on hand to weather the storm. If you do not have enough cash now, seriously consider opening a line of credit or decreasing costs to increase cash.
2. Grow in the areas that you can generate cash. While long-term goals are important, think about the areas of your business that are actually currently generating revenue. Concentrate on growing these areas.
3. Focus. Don’t try to do too many things. You remember what they say about “Jack of all Trades, Master of None”. Don’t be Jack, be the Master. Focus on the core competencies of your business and grow those areas. Don’t try to do it all yourself.

After the economic refresher course, Charan turned his presentation to our psychology. He encouraged the attendees to keep the dominant psychology and to keep a positive attitude. “Inspire people”, he said.

One of the greatest takeaways from Charan’s presentation will be of utmost importance moving forward.

Don’t succumb to dropping pricing. ADD VALUE.

Think of areas that you can, for little cost, add a great amount of value for your clients. Remember that times will be better. If you have lowered your prices, it is much harder to raise them again.

The final important takeaway from Charan’s presentation was to not be myopic. Pay attention to what your clients want. Are you listening to them? Do they want more dedicated communication and a higher level of service? If so, how can you provide that for them? In your next team meeting, I encourage you to dedicate ten minutes to ask your team, “Did anybody see any change on the outside in the last week?” Look for the game changers.

Let Gibson Design Management Accounting Services help you keep your business healthy during these tough financial times. 

Included in the Financial Health Assessment:

• Analyze Client Deposits
• Review Accounts Receivable
• Review Accounts Payable  
• Assess Work In Progress
• Review current and historical Income Statements
• Compare billing rates with Industry Standards
• Provide you with a full-page analysis and recommendations

 Contact us today to get started!  Email Margie Strickland

1. Spend wisely. In our current economy we all need to be careful about where we spend our money. That is certainly not to say we should stop spending altogether, but it is important to give a little more thought to expenditures. As a business owner, it is important to ask yourself whether big purchases will generate future cash and pay for themselves in a reasonable amount of time. If the item will generate cash for your business, then it might be a very wise decision to make the investment. Perhaps the item in question doesn’t generate cash, but is a need; Again, it is probably wise to make the investment now in order to keep your business running smoothly. But if the item in question is a fabulous new filing cabinet to replace the perfectly good one you already have – it might not be the best time to make that purchase.
2. Make sure your Client Deposits are sufficient. In tough economic times it is more important than ever to get an appropriate deposit from your client. We feel that 75% is sufficient to cover the actual cost of any product ordered and keep your protected. Not only does this help you maintain a good cash flow, but should your client experience a change in their financial situation you are not left holding the bag (or the custom sofa that is on order.)
3. Handle financial concerns immediately. The best way to avoid financial problems is to keep yourself up to date on exactly where you stand. When a problem does arise, don’t bury your head in the sand, deal with it immediately. Not everyone has the discipline or accounting knowledge necessary to monitor their finances objectively on their own. If that is the case (and for most of us, it is) then you need someone managing your finances for you. Someone who will bring issues to your attention and make sound recommendations to solve problems and ensure that new ones don’t arise.
4. Don’t fear the “B” word – Budgets. I have come to realize that a budget is a great tool for keeping our finances on track. Our budget serves as a guide to assist us in making good decisions each month about our spending; enabling us to achieve our financial goals. A budget will help you maintain the direction of your business and remain in control. The important thing with a budget is to make sure you have a good system in place to track spending. If it takes too much time and effort, you are less likely to stick with it.
5. Don’t obsess over your finances. Whether you have someone managing your business finances or not, it is important that fretting over your financial situation doesn’t become a daily staple in your life. Focus your energy on the aspects of your business you enjoy and are good at. Focus on what you can control and impact. You can be smart about your spending, you can make wise investments, you can handle problems in a timely fashion. You can also choose to make sure that you have qualified people helping you manage your finances in an effective manner; allowing you time to network and forge new relationships with clients, time to create and manage stunning design projects, and time to provide excellent customer service to your clients.

Day Ten of our 12 Day Countdown – Suggestions for things you can do this month to prepare for a fabulous 2009!  It seems like we’ve officially hit the holiday season with the start of this week.  Most designers I know are taking this week and next off to enjoy the holidays with their family and friends.  Today, I’d like to suggest that you take some time this month to get your financial documents, paperwork and computer files organized.

I am one of those people who literally starts to feel uncomfortable when I’m not organized.  When life gets busy and crazy (which seems to be most of the time) I generally will take some time on the weekend to “tidy” everything up so that Monday morning I can start my week with everything in order.  When tax time comes around and I have everything in order and neatly filed it sure makes life a little easier!  Maybe you haven’t kept things in the best order this year – but have no fear, if you have some time on your hands this month you can spend an afternoon and get it under control.

A few suggestions to make life easier in the future:

Purchase a Document Scanner – no longer is it necessary to keep paper copies of important documents on file – simply scan them into your handy dandy scanner and keep paperwork neatly organized on your computer.  (just make sure you have a system in place for backing up documents – see previous post)  Visit Amazon to check out all your options and learn about document scanners.

Use accounting software specifically designed for interior designers – Studio Designer 8.0 – “From Proposal to Invoice, Studio Designer manages the daily activities of interior design firms.”

Let Gibson Design Management take care of the details: Contact Kay to learn more about our newest membership, Accounting Services.  With Accounting Services, our members have the benefit of a full-service accounting team to complete all financially related tasks within their design firms. 

These will include:

• Creating invoices for time and goods
• Disbursing checks to vendors
• Operating payroll, as needed
• Calculating and paying sales tax
• Running reports to show you the financial health of your business and where you need to improve

Our Accounting Services membership is led by a CPA with experience in both small business and the larger corporate world.  She runs a team of financial professionals to help our members get back to the real reason they became designers.

Designing Profits, Inc. performed a major national survey of interior designers this year.  These survey results are now available for purchase on their website ($89).  From the DPI site: “This package contains both the actual results of the 2008 “What Designers Earn” survey, and David Shepherd’s 38 minute PowerPoint presentation with audio voice over. More than just an analysis of the survey, Shepherd provides a mini-MBA in strategies interior designers must adopt in order to create sustainable profits in the future.”  I saw David present some of this information at the 5th annual Business of Design Conference last month and was very impressed with both the findings and with his presentation technique.

Visit the Designing Profits site to purchase this informative and eye-opening package.

With the fall of Lehman, the Merrill Lynch acquisition, and the AIG fiasco, many of us could be left scratching our heads and wondering, “What could possibly protect my business if these giants can’t even hold it together?”

I watch CNBC every morning. In the last few weeks, there has been a recurring theme that these giants toppled because of their lack of risk management strategies. Maybe it was greed, maybe it was lack of foresight, but these companies did not manage their risks and now their employees and their shareholders are feeling the brunt. Mr. Lehman, who built the company 158 years ago, is also rolling over in his grave. The question is, “How can we, as interior design firms, manage our risks in a time when the state of the economy is a day to day prognosis?”

Client deposits. I have spoken with far too many designers that only request a 50% deposit to place an order for goods. Let’s take the following example:

ABC Design Firm orders $100,000 worth of goods for Mr. and Mrs. Smith

ABC Design Firm marks up goods 30%

Total sales = $130,000

However, ABC Design also only requests a 50% deposit to place the order, even though many of ABC’s vendors require 100% up front.

Deposit that ABC receives = $65,000

That means that ABC is $35,000 in the hole on these orders. $35,000!?!? Not only is this bad for cash flow, it could potentially ruin ABC’s business in one fell swoop.

What if something happened to Mr. or Mrs. Smith? What if one of them lost his or her job and there was no longer money to pay for these orders? Mr. and Mrs. Smith may be very nice and honest people, but if the money is not there, the interior designer is going to be one of the last in line.  If Mr. and Mrs. Smith fail to pay ABC the other 50%, ABC will be forced to cover $35,000 of the manufacturers’ bills, not to mention freight charges, and will have lost $30,000 in gross profit.

COVER YOUR COSTS IN YOUR DEPOSIT. Better yet, request 100% deposit to order. At least if ABC Design Firm charged a 75% deposit ($101,250) on this order, their $100,000 cost of goods sold would be completely covered. If something happens, they will only be out their profit and some freight. (I say “only” but I know that hurts too).

Risk management is not just an important business practice for the giants. It is crucial to small businesses and especially to interior design firms.