Measuring Success: Key Performance Indicators for Interior Designers
Original photography posted at Unsplash by Jason Briscoe.
Original article posted at Design Manager by Margot LaScala.
Running an interior design business is not only an art, but a science. As a business owner, it's essential to know what is going on with the operations of your business, even if your primary role is creative and you have a team member handling the administrative part of the puzzle day to day.
Establishing Key Performance Indicators (KPIs) is the best way to measure the health of your business. Analyzing these metrics will show you where you are excelling and where you are falling behind. This article will outline the KPIs interior design businesses should establish, which should then be reviewed monthly, quarterly, and annually.
Finance and Operations
Cash Flow: Undoubtedly, one of the most important KPIs for any business is cash flow. You should review cash flow by month, quarter, and year – and if you want to be very diligent – by week. You should also regularly reconcile bank and credit card statements to make sure the numbers add up and to spot any suspicious activity. The sooner you catch fraudulent activity, the easier it will be to resolve.
Assets and Liabilities: Always know your debts versus your assets. If your business is in debt, as many new businesses are, make a plan and timeline with your accountant and financial advisor to reach profitability. Design Manager provides a number of reports that help you break these down both for your overall operations and by project. Take advantage of their general ledger, financial statements, sales tax reports, and account reconciliations.
Number of Projects and Payment Schedule: From a financial perspective, it’s important to map out the future timeline of your expected payments by project and your projected expenses per project. This way you can begin planning in advance and making sure you have the proper resources on reserve to meet your upcoming obligations.
Project Management
Meeting Deadlines and Deliverables: Create a master schedule of your deadlines by project (with the understanding that it will be a work in progress as meetings get rescheduled, shipments delayed, etc.) and track how often you miss deadlines as a result of your own mistakes (as opposed to client delays). Meeting deadlines is an important part of building trust with clients and improves your chances of getting future referral business.
Allocation of Personnel: How efficient is your team? Are you allocating too many/not enough employees per project? Can you outsource certain tasks for less cost than producing the work in-house? However, some elements of tracking this KPI will require looking at the profitability of a project and how much you spent on employee time versus income made. If your profits are not where you want them to be, it may not be the fault of an unproductive team. It may require more creative allocation of resources and trying different ways to improve efficiency. Design Manager has tools to help track employee activity and time billing within Design Manager, which helps to quantify productivity.
Timeliness of Payments: As with many things related to running an interior design business, project management and accounting are often tied at the hip. Managing accounts receivables and payables is no exception. Remember, in a typical interior design project management process, the design business takes a deposit (or entire payment) from the client upfront, buys products directly from the vendor, then collects any remaining amount due for the product after installation. This is a rather complicated chain of payments that need to be managed on a tight schedule to ensure a project stays on track.
Billing Simplicity for Clients: How easy is it for your clients to work with you? This can be hard to measure, but keeping a clear, open line of communication with your clients will help you understand this, and don’t be afraid to do an exit interview at the end of a project. Also, think ahead to make things easy for clients from the start. With Design Manager, you can collect payments digitally, via ACH or credit card, in a seamless and secure process. You click a few buttons to generate an email with a link to the payment portal, send it to your customer, and they follow a few easy steps to complete the process on their end. Even better?