Do You Know Your Number?

January 28, 2022

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Do you know your number? When was the last time you looked at your profit margins? As an interior designer, understanding how much money each project generates is the secret to improving your profitability.  

Although you feel a sense of accomplishment after completing each project, if your profit margins are low, your earnings are not equal to the value of the work you provide. By reviewing your profit margins regularly, you can find opportunities to improve profitability. If you want to feel empowered and start charging prices that reflect your true value, it all begins with knowing your numbers. 

Recognizing Your Value 

As an interior designer, you offer a very valuable service. Your ideas and project management skills provide ideal living and working spaces to your clients. You know how much effort it takes to see a project through from the initial consultation to hanging that final art piece.  

But do you really understand how much of the money you charge ends up in your bank account? It is often difficult to fathom how your fees reflect the scope of work you provide. This is why analyzing your profitability is so important.   

Increasing Your Profitability 

Being paid at the end of a project is not the final step. Instead, reviewing your numbers once all is said and done helps determine if you are charging enough for the work provided. Although this sounds like a job for an accountant, looking at some basic numbers provides valuable insights into your profitability including: 

  • The final amount your clients paid (less sales tax)
  • Referral fees you received 
  • Cost of the goods provided 
  • Vendor costs 
  • Total hours you and your team worked 

Reviewing these figures (so you know your number) helps you embrace the value of the work you do, giving you the confidence to charge what you are truly worth. 

Evaluating Project by Project 

Project-by-project evaluation helps you understand your bottom line. Here are a few questions to consider: 

  • What is your fee? 
  • How much are you earning per hour for the work you and your team provide? 
  • Are you carefully tracking your hours? 

Ideally, you should be earning a profit margin between 40% to 60% on the entire job. If you are not, then you at risk of not being able to afford to run your business efficiently AND take a salary. As you look at your numbers, you might be surprised to find you are not actually making what you think you are hourly!    

When you evaluate past projects, it encourages you to evaluate projects before accepting them. By taking a closer look at past projects and adjusting how you work, and what you charge, you will realize a higher profit margin and greater overall profitability in your business. 

When you evaluate past projects, it encourages you to evaluate projects before accepting them. By taking a closer look at past projects and adjusting how you work, and what you charge, you will realize a higher profit margin and greater overall profitability in your business. 

Summary 

So, what does it all boil down to? You need to know your number so you can increase your profitability. I often tell my clients that when the money generated from their work isn’t enough to sustain themselves and the needs of their business, then the business is actually a side gig. 

Your goal is to increase profitability so you can cover the costs of running your business, live a comfortable life, and still have enough to reinvest in growth and professional development. Evaluating each and every project provides the insights you need to improve your profitability. 

If you do not know where to start to figure out those past profit margins, I have the perfect FREE tool – my Job Profitability Analyzer – that you can download and start using immediately.  

Have more questions? Set up a strategy call and we can discuss how to help you make strides in your business.  

And for more industry learning, daily inspirations, lessons, and thoughts, hop into one of my private FB groups, the Interior Design Business Forum (Interior Designers) or The Coaching Hot Spot (Online Coaches and Consultants). Let these communities help you become an actionable entrepreneur. 


Tags

business strategy, business success, profitability, profitability analyzer


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