Your Results Are In!
Alright, I am impressed! You clearly know the importance of understanding your financials. Having this information has most likely helped you make more strategic decisions like launching new service offerings that increase profitability, hiring your dream assistant, or even working a little less than you used to! Now that you have a grasp on the reality of your finances, let talk about how to create and maintain financial hygiene.
Now it’s time to start thinking “when was the last time I did a cost analysis?” or “when did I last update my financial plan?” Below you will find 3 actions to take that will help you set up a consistent financial analysis program.
Step 1
Audit Your Financial Plan
Running a successful interior design business requires more than just creativity and vision—it also demands careful financial management. Auditing your financial plan is crucial for ensuring the health and sustainability of your business. Auditing your financial plan is a proactive measure that can help you identify opportunities for improvement, ensure compliance, and prepare your business for future growth. It's an essential part of running a successful interior design business.
Don’t have a good Financial Plan? Download our free template.
Step 2
Perform a Cost Analysis on Your Last Two Design Projects
Performing a cost analysis on your last two design projects can provide valuable insights into your financial performance and help you make informed decisions for future projects and most importantly, make sure you are pricing your services in a way that reflects the value you bring! Here are 9 steps to run through as you perform your Cost Analysis.
Collect all relevant financial data related to your last two design projects. This includes invoices, receipts, and any other documentation of expenses incurred during the projects.
Identify Direct Costs: Direct costs are expenses that can be directly attributed to a specific project. Examples include materials, labor, and subcontractor costs.
Calculate Indirect Costs: Indirect costs are expenses that are not directly tied to a specific project but are necessary for running your business. Examples include rent, utilities, and administrative expenses.
Determine Total Project Costs: Add together the direct and indirect costs for each project to determine the total project costs.
Calculate Revenue: Determine the total revenue generated by each project.
Analyze Profitability: Calculate the profit margin for each project by subtracting the total project costs from the total revenue and dividing by the total revenue.
Identify Cost Drivers: Analyze the cost breakdown of each project to identify the main cost drivers.
Make Recommendations: Based on your analysis, make recommendations for improving cost efficiency and profitability in future projects. This could include negotiating better pricing with suppliers, optimizing resource allocation, or revising your pricing strategy.
Implement Changes: Implement the recommendations from your analysis in future projects to improve your financial performance and overall business success.
Listen now to the Profit is a Choice Episode, How to Determine When to Raise Rates and When to Absorb Costs
Step 3
Cost Modeling for Your Future Goals and Vision
By cost modeling your finances, you can create accurate budgets and allocate resources efficiently. This ensures that you have the necessary funds and resources for each project or business initiative. From analyzing the future impact of different pricing strategies, to playing out different future scenarios, cost modeling helps you assess and mitigate financial risks as you look to scale your design company. An easy way to perform cost modeling, is to leverage an in-house financial software that eliminates the manual steps.
Metrique Solutions is a financial software designed by and for designers. It was created to empower designers with varying financial backgrounds to effortlessly gain profound insights into their finances and make well-informed decisions.
Use this promo code for FREE access for 1 month!
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Listen now to the Profit is a Choice Episode, How to Easily Set Reachable Money Goals in Your Design Firm
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THE BLOG
Hi There!
I'm Michele, the Owner and Founder of Scarlet Thread Consulting. Before diving into business coaching, I spent over a decade running my own design business. I know firsthand the stomach-churning feeling of not having enough money to pay taxes or even yourself.
That experience was a wake-up call. I realized that simply trying to "make more money" and "sign more clients" wasn't the path to profitability. Instead, I focused on restructuring my pricing, improving time management, and creating a solid financial plan.
For the past ten years, I've been helping interior designers understand, manage, and optimize their finances. My goal is to make their businesses work for them, not the other way around.
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