ICON - The magazine of the American Society of Interior Designers - (Page 51) of Your Design Business “It’s a 98 percent certainty that if you don’t know if your firm is profitable, you’re not.” – David Shepherd, MBA their businesses that are providing the lion’s share of their firms’ income, they abandon—or at least severely curtail— other types of projects. Customer service, an essential aspect of any interior design business, is especially difficult to quantify and monitor. Mary Knackstedt, FASID, who has helped hundreds of interior design companies succeed in her 20plus years as a business consultant, cautions that the customer service aspect of design can be “more costly than doing the initial work.” Clients expect customer service, Knackstedt says, so she advises designers to “include an allowance and mark up for service” when preparing contracts for projects. She also encourages designers to offer their clients service contracts for the duration of an installation, which could be as long as 10 to 20 years. “After all,” Knackstedt says, “that interior must stay in perfect condition until it’s time to change it.” Do It Yourself or Hire Someone? “It is extremely difficult for a sole practitioner to make a great living,” Shepherd declares. In addition to designing and project management, he points out that “You still have to do everything [the big firms] do: accounting, public relations and marketing, procurement and bookkeeping.” Designers should frequently ask themselves whether to do something on their own—a question of ability as well as time available—or should they outsource or delegate, which begs the question, “Can I afford this?” Knackstedt responds to these questions by advising designers to know what they themselves do best and to partner frequently with designers expert in other aspects of design as well as professionals in supporting occupations. Rick Gilman, CPA, CITP who has , been consulting with designers for more than 30 years, asserts that, “The more staff you have the more profitable your business,” and provides his clients with a formula for determining when it is time to hire an associate. Of the maximum hours available in a 2,000-hour work year (40 hours per week x 52 weeks per year = 2,080 hours less 80 hours vacation = 2,000 hours), Gilman says only two thirds of that time (1,320 hours) can be productive and billable. Shepherd believes that figure, in reality, to be much lower and says it “would be a miracle” for a designer to bill for more than 50 percent of his or her time. But assuming the higher number is possible, a sole design practitioner who charges $150 per hour for his or her time could expect an annual gross income of $198,000. Of course, they must also subtract at least 35 percent for taxes and other mandated deductible costs, about $10,000 for insurance, and another $10,000 or so for undetermined exASID ICON | SEP/OCT 2007 51
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