Staying profitable is rarely a simple task, regardless of a business’ size. But the pressure gets personal when you’re writing your own paychecks, as many interior designers do.
That’s why it’s so important for designers to step into the CEO role and get serious about their business finances.
Lots of factors influence profitability. We’ve gone over why you shouldn’t bill hourly and how to price your services based on profit margin. We’ve also talked about why it’s important to establish multiple revenue streams to keep cash flow steady.
But one of the biggest obstacles to interior designers’ staying profitable is their ability to gauge how long their projects will take.
You can have a great plan for how your month is going to go, with all your jobs plotted out on your calendar (as I recommend). But if even one of those projects starts to require a lot more energy than you expected, it can wreak havoc on your schedule. Odds are it will also affect both your personal life and your other projects as you scramble to make up the time.
If you want to avoid this very common scenario, it’s time to get proactive about spotting potential problems and minimizing their potential to hurt your business.
Introducing “Scope Creep”
“Scope creep” is the general term for unplanned project changes that make a project more complicated without changing its price. It’s called a “creep” because these changes often start small but can go on to do major damage to your profit margin.
Scope creep is super common. It tends to be particularly problematic in fields with more subjective deliverables, such as design and consulting. In interior design, common causes include indecisive or demanding clients, and complications with inventory or sourcing. However, I’d say that most often, the culprit is simply poor communication and the misunderstandings that follow.
Before you start any project, both you and the client should agree on the project’s style, budget, and deliverables — and get as much of it in writing as possible. Here’s what you need to know.
Define The Scope of Work
The first major invitation for scope creep happens when designers don’t define the scope of work and their delivery of tangibles against that scope of work.
You may have heard the phrase “measure twice and cut once,” and that definitely rings true here. Each minute you spend upfront gathering intimate knowledge of the client and the space will pay off exponentially later in the form of fewer changes and a higher client satisfaction rate.
In my post on appealing to clients’ emotions, I included a list of questions you can use to get to the bottom of what your client really wants from the investment. Build those questions into each initial consultation so you can be confident about what that they’re looking for. Although you don’t want to put them through the ringer, you should err on the side of being too thorough. Ask them anything from general questions about style to specific preferences on how they move about in their space, how they live and how they entertain.
If you get the sense that a potential client doesn’t really know what they want, I suggest not starting the project until they can define about what they’re looking for more clearly. Of course, you can try to help them through that process. You may even point them in the direction of your Pinterest board or other evaluation tools you’ve developed.
But don’t ever start on a project you feel unsure about. Listen to your intuition. You’ll end up losing money in the long run if the project runs away with you, or if the client ends up unhappy (even if it’s a result of their own lack of clarity).
Establish the Budget
It’s one thing to get a clear understanding of what the client wants style-wise – and if you’ve done your marketing well, they’ve come to you because they like your style. But what they want and what they can afford may be very different things.
Potential clients may be in love with your portfolio and want the same look for their home, for example, but expect to get it at a very different price. This is where it’s especially important to level with clients about what kind of design they can get at each price point and more importantly, remind what you deliver as part of your design aesthetic. To get clear about this, it could help to establish minimum budgets for each room type or size, or at least show potential clients examples of work you’ve done for on similar budgets.
We all want to accommodate our clients, and we all understand that most people don’t have unlimited budgets. But it often takes a lot of extra work to make a beautiful design fit a bare bones budget. You’ll often have to look twice as hard to find pieces that don’t compromise quality.
Set Clear Deliverables
Your initial proposal is probably the most important tool you have in combatting scope creep. Each proposal should include a a preliminary budget and a payment schedule that addresses the following three elements.
I suggest breaking the total cost into three payments, with 40 percent due upfront, 30 percent due halfway through, and rest due as you begin the final stretch of the project. (If you want more details on this process, I break it down step by step as part of my post on the pitfalls hourly billing.)
Be as specific as possible about what you expect to get accomplished with each payment milestone. Spelling it all out in writing will make it much easier to stay on the same page with your client.
When you send the invoices for the halfway point and at the 75 percent point, include updates summarizing what has been done, explaining any changes to the original budget, and noting what will happen next. You should get a written record of the fact that your client has read and approved each of these invoices. Don’t move forward with the project until you get it.
As you add tentative dates to your proposal, build in extra time to account for unexpected delays and mistakes. Use your experience to factor in the amount of buffer time that works for you, but I’d suggest at least 30 percent. For example, if you think it will realistically take about 20 days to get to the halfway point in the project, play it safe and put 26 days on the proposal.
Always underestimate your speed. We business owners tend to be driven optimists, which can sometimes cause us to list the date we’re hoping to hit instead of the safety date. Keep in mind that if you happen to deliver early, they’ll be delighted. But if you’re late, it will reflect really badly on your company.
In the proposal, you can also note how many revisions or follow up meetings will be included in the scope of the project. Spell out what will happen if the client wants additional meetings or revisions. Then you can refer back to the proposal as necessary.
Remember Your Brand
In the end, all projects require some flexibility on your part. Ideas and logistics always change throughout the course of a project. There will be times when it will be a no-brainer to eat the cost of these unexpected changes to preserve a client relationship.
But remember that your interior design business is providing a luxury service. There are plenty of alternatives out there for bargain shoppers who don’t want as much personalized attention. (We go over some of these alternatives in this post on taking on your competition.)If you’re having problems with scope creep, the real issue may be that you’re not attracting the right clients. Click To Tweet
If you’re having problems with scope creep, the real issue may be that you’re not attracting the right clients. You want to be working with people who are willing to pay for the best and aren’t intent on squeezing you for everything they can possibly get. For more on how to attract the right clients, read our guide: How to Find the Best Interior Design Clients.
I’d love to hear what you think. Tweet me at @idmasterclass and let me know how you keep your projects on schedule and on budget.
Interior Design by Alyssa Colagiacomo Interiors #IDMCMastermind #IDMCDesigners