219: Benchmarks for the Interior Design Industry
219: Benchmarks for the Interior Design Industry
with Michele Williams
Here is a question I get repeatedly when someone shows me their financials, “Is this good?” While many may be good judges of great design – being a judge of great financials can be a bit more difficult if you don’t know what you are looking at or how to compare the numbers you are seeing. In this podcast I will share some benchmarks for financials in the Interior Design industry – and in healthy businesses in general.
Topics Mentioned:
Benchmarks
Financial markers
Trends
Listen to the Episode
Ok, we are going to geek out just a bit and talk about some of the numbers, metrics, statistics or benchmarks in our industry and in business in general. This may be a shorter episode – but it is filled with data. Check out the show notes on my website where this is all written out for you.
There are so many of these benchmarks we could look at– so we are going to only hit the highlights. If you want to go deeper, go ahead and go to my website and sign up to have a Discovery Call to check into coaching with me. We can look at ALL the numbers when you work with my team.
Remember that the numbers are just that – indicators. If we don’t like them – then we need to change the decisions that created them.
First, let’s look at the industry of Interior Design.
According to a 2022 market research report – here are some statistics.
In 2021 revenue for the Interior Design industry was $14.5 billion.
Over the last 3 years, revenue has been growing at an annual rate of 12.2% per year.
64.9% of companies in the Interior Design industry are profitable. Approximately 35% are not.
These profitable companies have an average net income of 12.8% of revenue.
Payroll per employee averages $54,209 for the industry.
The job of “designer” pays a mean of $31.59 an hour with the bottom 10% making $15.66 an hour and the top 90% pay band paying $51.24 an hour.
Operationally, employee expenses make up 56.7% of operating expenses.
Property such as rent or lease is about 5.7% of operating expenses.
In addition, here is what I am also seeing:
Cost of Goods is running between 40-60% of Total Revenue for most firms.
Gross Profit is also 40-60% of Total Revenue.
Most designers are able to bill approximately half of their working hours if they have assistance. So for a designer working 40 hours, 20 hours can be billable.
For teams where designers have a lot of support with the smaller and administrative tasks, I am seeing 25-30 hours of billable opportunity.
Revenue split between billable design time and product sales varies by business model.
I am seeing product markups anywhere from 35% to more than 100%. This varies on model and location.
Many companies are learning to make sure that they can cover their monthly expenses on billable time due to the delay in product delivery and capture of profits.
Principal designers who also “run the company” are billing 10-15 hours a week.
Rent is safest when it is within 6-8% of Gross Profit. Using Gross Profit as a measurement is best because it captures profit after product costs.
Cash flow is hitting a hiccup due to delays and problems in the installations. Learning to manage the flow of cash in and out of the company will be most important for this upcoming year. Knowing your monthly “nut” and preparing the work to cover that financial nut is imperative.
Many companies are now adding in benefits like 401k match, health insurance or stipends, cell phone reimbursement and profit shares as revenues are rising.
As a Profit First certified coach, I do use the Profit First numbers as a great place to start to look at the health of a company.
We always begin with 15% of Gross Profit allocated for taxes. This can go up or down as your individual tax situation is assessed, but it is a good starting point. 15% of gross profit is equivalent to about 28% of net profit if your business is working in the Profit First percentages.
Profit in the company – separate from owner’s pay or draw – but company profit is between 5-15% of gross profit for most of the companies I work with.
Owner’s compensation (this includes salary and any draws or benefits) is anywhere from 10-50% of gross profit.
Operating expenses are 30-65% of gross profit.
It is important to recognize that these are healthy percentages for companies and to be used as a starting point for comparing your company. Perhaps you have made other decisions to move your money in another direction. At a minimum, know what your tradeoff is.
You may be thinking – dang! This is a lot. Yes, it is. Running a company is a lot.
Here are some ways to move forward.
Continue to check out the podcast, Profit is A Choice®. We talk about profitability in hundreds of ways.
Complete the Financial Health Check Up on the Scarlet Thread Consulting website.
Load your data into Metrique Solutions™ so it can visually interpret your results.
Take a course – like Understanding Your Financials®.
Join one of my coaching programs by taking the first step in a Discovery Call.
If there was ever a year to know your numbers and to protect them – this is it. Don’t lose the profits of the last two years because you are not aware of the changes happening in your cash flow today.
Check out one of the 5 steps above and do something now to make your year less stressful. Choose to be profitable. Because we all know, profit doesn’t happen by accident.
Key Thoughts:
Remember that the numbers are just that – indicators. If we don’t like them – then we need to change the decisions that created them. Michele (2:15)
Cash flow is hitting a hiccup due to delays and problems in the installations. Learning to manage the flow of cash in and out of the company will be most important for this upcoming year. Knowing your monthly “nut” and preparing the work to cover that financial nut is imperative. Michele (8:37)
It is important to recognize that these are healthy percentages for companies and to be used as a starting point for comparing your company. Perhaps you have made other decisions to move your money in another direction. At a minimum, know what your tradeoff is. Michele (11:46)
Contact Michele:
Facebook: Scarlet Thread Consulting
Instagram: @ScarletThreadATL
References and Resources:
Profit First by Mike Michalowicz
Profit is A Choice® podcast with Michele Williams
Sign up for a Discovery Call