Today in The Lounge, Nick is joined by interior designer Julia Molloy for a conversation on today’s interior design business models and the ways that designers are generating revenue. Plus, she details strategies to bring your business to the optimal industry-wide gross profit margin.

In addition to having ten years of professional experience, Julia is the founder of BOLD-Business of Luxury design summit and is considered an expert on the business of interior design. Her events are organized at various times throughout the year, all over the country. She recently wrapped up events in Dallas and Costa Mesa, and her upcoming event is in Portland, Oregon on September 17th and 18th. Check back on her website soon to see the dates for the 2019 summits, which will be hosted in either early spring or fall.  

Business Logistics Today

Julia knows that business models differ from region to region and type of design firm. Most of the clients she works with are boutique model firms with about 2-7 staffers. Regardless of the size, Julia says that designers generally struggle with two challenges. The first: keeping an organized workflow, info structures and systems in place — and the second: optimal billing and a high profit margin. And on top of this, new technology and product competition is decreasing product revenue. Hence, a majority of her work focuses on re-framing the billing structure of an interior design business, which we describe in more detail below.

Methods of Generating Revenue

Julia says that there has been a huge shift from past to present billing models and, as a result, the industry standard has shifted. Generally there are three methods to generate revenue: the margin on the product, time billing and service profitability, and fee billing. She calculates overall revenue for a project by what the client has spent on the project divided by the cost.

The optimal gross profit margin per project should be at a target of 40%. This percentage comes directly from Mark Collins, the managing partner of Designer Advantage.

Generating Optimal Gross Profit Margin

No matter which firm you’re at, there are various systems to generate the optimal gross project margin. One is markup on product: try to purchase products with a discount 40-50% off retail. With this method, you can markup 35% with the low- to mid-level clients, while being competitive. In the contract, offer a 10-20% discount off retail — that way, you are not obligated to pass the extra discount to your client.

Another method is focusing on time efficiency. She says that, if you are doing all the work, you should be charging the company no less than $50/hour. She recommends charging $125-300/hour as a principal designer, even if you are starting out. Hiring a junior or assistant designer is a money machine, especially is they are attached to the project. For example, if you hire a junior or assistant designer, plug in $50 an hour, paying a junior/assistant $30/hr, with days off and compensation etc., and markup 30% buffer for payroll, insurance, and so on. If you are doing most of the work on the project versus a junior or assistant, you are costing the company $20 more per hour for the company. This method frees up 10% of your time by hiring a junior/assistant for $400-600/week, with a net profit of $3,000/month for the company. “When you get the efficiency and structure in place,” she says, “there is more creativity and you are serving your clients faster and better.”

To learn more about Julia, attend a Bold Logistics summit, and buy her profit calculator, visit her at www.juliamolloy.com.