How to Read a Profit and Loss Statement for an Interior Design Business
Profit and Loss for Interior Design Business
As your interior design firm grows, the financial reports become more important, not less. Many business owners assume that once revenue crosses the million-dollar mark, the primary focus should remain on sales. In reality, once demand is steady, the greater opportunity lies in understanding how that revenue is structured and whether it is supporting the company you are trying to build.
A Profit and Loss statement is one of the most important tools available to you as a design business owner. It shows the income and expenses of your company over a period of time, and more importantly, it reveals the financial impact of your decisions. When you know how to interpret it properly, you can identify where profit is being created, where it is being eroded, and what needs to shift.
Let’s walk through a sample Profit and Loss statement together and evaluate what it is telling us.
Sample Profit and Loss Statement for an Interior Design Firm
Assume we are reviewing a year-end Profit and Loss statement for a $1,200,000 interior design firm.
Revenue
Design Fees: $450,000
Product Sales: $750,000
Total Revenue: $1,200,000
Cost of Goods Sold (COGS)
Furniture & Materials: $420,000
Freight & Storage: $60,000
Installation: $45,000
Total COGS: $525,000
Gross Profit: $675,000
Operating Expenses
Payroll (team only): $210,000
Rent: $60,000
Marketing: $40,000
Software & Admin: $55,000
Professional Fees: $25,000
Miscellaneous Operating: $35,000
Total Operating Expenses: $425,000
Net Profit: $250,000
Now let’s evaluate what this report is actually telling us.
Revenue Breakdown: Design vs. Product
The first question I would ask is: how is this firm making its money?
Design revenue is $450,000.
Product revenue is $750,000.
That means:
37.5% of revenue comes from design services.
62.5% comes from product sales.
This firm is product-heavy in revenue generation.
That is not a problem. It simply means the health of the business depends heavily on product margin discipline. If product pricing weakens, profitability will shift quickly.
When reviewing your own interior design profit and loss statement, always start with revenue mix. It shapes everything downstream.
Gross Profit Margin for an Interior Design Business
Gross profit is $675,000 on $1,200,000 in revenue.
$675,000 ÷ $1,200,000 = 56.25%
That falls within a healthy range. Many established design firms operate between 40% and 60% gross profit.
On the surface, this looks strong. But because this firm is product-heavy, we should look deeper.
Product revenue is $750,000.
COGS tied to product-related activity totals $525,000.
$525,000 ÷ $750,000 = 70%
This means the average product cost is 70% of revenue, leaving roughly a 30% gross margin on product. That is tight.
If this firm believes it is marking up 50% or 60%, the Profit and Loss statement is telling a different story. Something is compressing margin. It could be inconsistent markup, unbilled freight, installation leakage, or retail purchasing without sufficient discount.
Remember, the numbers are not accusing, they are informing you to make important decisions.
Operating Expenses as a Percentage of Gross Profit
Gross profit is the money available to run the company. So operating expenses should be evaluated against that number.
Payroll: $210,000
$210,000 ÷ $675,000 = 31%
That is right at the threshold. Generally, payroll for team members should remain around or under 30% of gross profit. This firm is slightly payroll heavy, which may not be a crisis, but it deserves attention. Is utilization strong? Are billable hours meeting projections?
Rent: $60,000
$60,000 ÷ $675,000 = 8.9%
That is within a healthy range. This firm is not rent-heavy.
Total Operating Expenses: $425,000
$425,000 ÷ $675,000 = 63%
This means 63% of gross profit is consumed by operating costs, leaving 37% flowing to net profit.
Net Profit Margin: Is It Supporting the Strategic Plan?
Let’s continue evaluating performance against gross profit to stay consistent with how we assessed operating expenses.
Gross Profit: $720,000
Net Profit: $250,000
$250,000 ÷ $720,000 = 34.7% net profit as a percentage of gross profit
This tells us that after covering operating expenses, 34.7% of gross profit remains.
Now, we can also look at net profit as a percentage of total revenue for broader benchmarking:
$250,000 ÷ $1,200,000 = 20.8% net profit margin
That is strong for an interior design firm.
But leadership is where the numbers become a strategy.
What is that $250,000 designed to accomplish?
Fund owner distributions?
Cover tax obligations?
Build retained earnings?
Support expansion?
Pay down debt?
Invest in team development?
If this firm plans to hire two additional designers next year, that net profit may not be excessive at all. If the owner plans to reduce workload while maintaining revenue, the strategic interpretation changes again.
The same numbers can tell very different stories depending on the firm’s three-to-five-year vision.
What Your Profit and Loss Statement Is Really Telling You
A Profit and Loss statement for an interior design business is not simply reporting profit. It is a revealing structure.
It tells you:
Whether your pricing supports your overhead.
Whether product margin is aligned with expectation.
Whether payroll is sustainable.
Whether your business model can support growth.
If you look only at the bottom line, you will miss the story. When you begin to compare percentages and evaluate revenue mix, you move from reading numbers to leading with numbers.
That is the shift from creative operator to CEO.
If you would like structured support walking through your own financial reports and aligning them with your strategic goals, our Financial Bootcamp starting March 12th 2026 guides you through this process step by step. You can also schedule a Discovery Call to evaluate what the next level of financial leadership looks like inside your firm.
Your Profit and Loss statement is not just an accounting report, it is a decision-making framework that supports your dream interior design business.