Interior Design Tips – Managing Cash Flow and the Business Cycle

Managing the ups and downs of any business can be challenging. For a niche market like interior design, where the business cycle is heavily influenced by home sales, managing cash flow can be the difference between long-term success and short-term failure. Here are a few tips for managing the highs and lows of your design business, from an article at design tipsWarmer weather tends to activate the building trades, leading to increased housing construction. Despite the unpredictability of the weather this year, you can be sure that builders and contractors are ramping up for new projects across the country. This is like manna from heaven for those of you who’ve endured a slow winter. But, this also means you need to have your ducks in a row, and your contractors, subs, and suppliers lined up and ready to get to work on your behalf.Perhaps ironically, however, you also need to make plans for the next downturn in the business cycle, if you hope to be around for the next upswing.Planning for the Slow Times

  • Review your income history – Cash flow is rarely constant. You should anticipate fluctuations in revenue from month to month. A review of the past two or three years should give you a pretty good idea of these fluctuations. Establish a baseline of your expectations and make your plans accordingly.
  • Set a baseline for expenses – While many of your monthly expenses will remain constant, such as office rent and insurance, others will vary. Once you establish a minimum, you can compare these to your income history and determine the months when expenses might exceed revenue. You can now plan for future negative cash flow months and set aside funds to cover them.
  • Trim the fat – Develop a list of expenses that could be eliminated or postponed during slow periods to help reduce monthly outlays. For example, during the summer vacation period when business tends to soften, it probably is not worth it to purchase paid advertising. Instead, use the time to plan your marketing strategy for the fall and get a leg up on your competition.
  • Keeping staff and subs – It is not the case that everyone you work with will be as diligent as you in planning for slow months. If you lay them off when business is soft, you can’t be sure they’ll be available again when you need them. Instead, try to anticipate those slow times and plan for necessary activities, such as annual or quarterly administrative tasks, vacation time or professional development.
  • Make a plan for yourself – Assuming you have worked out your cash-flow forecast and budget for the year, consider how you can best make use of the time during lulls. Investigate new areas of business or new markets for your services, as well as devote time to building relationships with potential clients or persons who could refer clients to you. You may also want to pursue other forms of income, from dealing in real estate to designing and producing products, to offering classes and writing books or articles or pursuing a hobby that will help you to bring additional revenue into your design business.

Every business struggles with cash flow from time to time. By anticipating your needs before they develop, you’ll be able to respond more efficiently and with fewer hiccups. As a last resort, even a short-term loan may be needed yet, if you're ready for it, you’ll also have a plan for that, and will be able to stick to the terms and keep it short term.Looking for more interior design tips, trends, and ideas? Get in touch with TD Fall today.