You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your interior design business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an interior design business?
If you are going to be self-employed, this business can be started in a very modest way for a few thousand dollars by taking online home study courses to get your certification and then working from home until you build up a client base that can support the expenses of an office and additional staff.
If you are considering working for a major design firm before beginning your own business, you will most likely need to pay for a formal education to get a degree. There are two-year and four-year programs at major universities, colleges, trade schools, community colleges, and art/design schools. These programs range from $4,000 to 25,000 per year.
The range in startup costs after you have a degree and are certified is what it takes to pay for an office for the time needed to find your first clients. Allow six months for the initial marketing efforts to attract the first clients and $2,000 to $5,000 per month budget ($12,000 to $30,000 total) to give you enough time to succeed.
What are the ongoing expenses for an interior design business?
This is not a high overhead business. You will need to pay for marketing expenses, the cost of an office, insurance, staff (if you have any), and transportation costs to go to visit clients. A small interior design business, operating from home, might have expenses of around $2,000 to $3,000 per month. The next step up would be having a commercial office space and that runs around $2,000 per month more. As you add staff you will need to allow for $5,000 to $12,000 per month in additional expenses so your total monthly budget could rise to be about $20,000 per month.
Who is the target market?
The best type of client is one that is easy to get along with, has good taste, enjoys the finer things in life, is open to suggestions, and has a project where “money is no object” with an almost unlimited budget. Of course, no one just starting out in this business will find clients like that.
The second best type of client is the “bread and butter” client. These clients have a reasonable budget to spend on the interior design work and ask the interior designer to work on a specific space. When they are pleased with the results, they give the same interior designer another project to work on. They also tell their friends how happy they are with the work and invite them over to see what was done.
Most of the successful interior design firms have plenty of this second type of client. By making these clients happy, the business grows in an almost organic, automatic way. One successful project leads to another and then another.
How does an interior design business make money?
Interior design firms can be paid in a variety of ways. The American Society of Interior Designers notes these are the most common ways to charge for interior design services:
- Charging a flat or fixed fee – After discussing the project with the client and agreeing on the detailed specifics of the project scope, the interior designer proposes a complete fee (expense reimbursement of actual out-of-pocket costs is additional) to take the project through all the stages from concept development, specifications, layout, and installation.
- Time-based fee – The interior designer proposes a compensation rate based on hours, weeks, or months of service.
- Project percentage fee – The interior designer earns a markup percentage of the cost of the total project including any items, artwork, furniture, or services purchased to complete the project for the client.
- Retainer with balance paid upon completion – An initial deposit is paid by the client, which is a portion of the interior designer’s fee that is agreed by signed written contract. The balance of this fee is paid upon successful completion of the project.
- Cost plus – Using this method, the interior designer buys things at wholesale for the project and then charges the client the retail price or a slightly discounted price from regular retail.
- Cost per square foot – The fee for the interior designer is calculated based on the total square footage involved in the project.
How much can you charge customers?
The self-employed interior designer can charge on average $75 per hour for their services. One interior designer on Fresh Home recommends using as a guide the rate that a plumber charges per hour in your local area.
The top interior designer firms in the world, are able to charge clients millions of dollars in fees. Partners in those firms make more than one million a year and regular staff designers make around $80,000 to $144,000 per year.
How much profit can an interior design business make?
The total profit depends on the number of interior designers working for the firm and that there is enough work to keep them all busy. Each designer should generate enough billable hours at $75 per hour to bring in revenues of $80,000 to $144,000 per year. If the firm is a single designer, the expenses would be $24,000 to $60,000 per year, which creates a gross profit before taxes of $56,000 to $84,000 per year.
How can you make your business more profitable?
It is not uncommon for an interior design firm to double as an architectural firm, combining the two through dual expertise or through a partnership between an interior designer and an architect. Several of the world’s best interior design firms have an architectural component, which provides additional revenues.
Another source of additional income is designing products to sell (e.g. lamps, furniture, decorative items etc.) and then creating a popular and successful brand name for those products.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your interior design business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Some states require the possession of interior design licenses to act as an interior designer. Other states only require licensing if you wish to formally adopt the title of “interior designer.” To qualify for licensure, you must pass the National Council for Interior Design Certification exam. In order to take this exam, you must have a bachelor’s degree in interior design and two years of work experience. A list of states requiring licensure can be found here.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
It is important to have a contract or purchase agreement which clarifies what is to be expected of both the designer and the client. An example of such a contract can be found here.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your interior design business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market an interior design business
Use the best practices for website search engine optimization (SEO) to get your website listed as high as possible on the search engine results page. Find your focus and market yourself locally. Write high quality content articles (or hire writers to do this) and build an email list by using information given out on your blog, such as e-books. Use free downloadable “how-to” guides to entice the web visitors to join your mailing list. Enter business competitions. Go to tradeshows. Network with architects, real estate brokers, property management companies, new home developers, custom home builders, and all the contacts you can make through the local chamber of commerce and other business organizations.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Things you can do to attract clients are to be gregarious and highly involved in the community because word-of-mouth is the most powerful form of advertising. Another way to attract clients is to do showcases. In many areas, they take a home and allow interior designers to decorate one room each and then let the public pass through the home to see the quality of the work. These are great promotional events. Even though this is hard work and requires an investment of time and money, it usually leads to an expanded client base.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start An Interior Design Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
The people who work as interior designers have an in-depth understanding of color usage, textures, furniture styles, artwork, lighting, fashion trends, eco-materials, indoor plants, and a whole range of other things that can be used as design elements for interior spaces. They need to be very good at dealing with people, including clients that can be quite difficult and workers that make mistakes on occasion. Their main talent is aligning their own view of what the interior space will be made to look like with the client’s preferences and needs, so that both are very satisfied with the results.
What happens during a typical day at an interior design business?
There are three main activities of an interior design firm owner. They are: 1) constantly learning about new elements of design and current trends, 2) seeking new clients to work for, and: 3) managing the ongoing projects and staff.
What are some skills and experiences that will help you build a successful interior design business?
Having a flair for creative efforts, the ability to work hard, and an eye for aesthetics are the critical elements needed to succeed in this work. Most interior designers have a degree in interior design, but some are architects, and some have a degree in fine arts and supplement their knowledge by taking interior design classes for the necessary certification requirements.
If people walk into your home and are amazed by how it looks and ask how they can get similar results created for them, you are on the right track and may have found your first client.
The American Society of Interior Designers has a website with information for students and information for those who want to become interior designers. They also have a job bank and recommend taking an internship with a design firm to learn more about this career path.
What is the growth potential for an interior design business?
Interior Design publishes an annual list of the 100 top designs firms in the world.
The list for 2016 shows these firms are the top ten with these earnings:
- Gensler from San Francisco earned $527 million in design fees.
- HOK from St. Louis earned $151 million in design fees.
- Perkins + Will from Chicago earned $149 million in design fees.
- Jacobs from Pasadena earned $145 million in design fees.
- HBA/Hirsch Bedner Associates from Los Angeles earned $132 million in design fees.
- IA Interior Architects from San Francisco earned $95 million in design fees.
- Stantec from Edmonton earned $92 million in design fees.
- CallisonRTKL from Dallas earned $83 million in design fees.
- Nelson from Philadelphia earned $79 million in design fees.
- HKS from Dallas earned $77 million in design fees.
TRUiC's YouTube Channel
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One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting an interior design business?
It is best to have some experience by either interning at or working with a design firm. Alternatively, you can offer to help a successful interior designer that works on their own. While learning, build up a portfolio of your work. Take high-quality digital photographs of the work, make big glossy prints for your physical portfolio (11” x 17” size), and put them in a very attractive leather portfolio binder. Carry this physical portfolio with you everywhere you go and as often as possible show your work to other people.
Use a “soft” sell approach, by not trying to sell anything at all. Just ask everyone, even someone you just met in a casual setting, to give you their opinion of your work. You will be surprised how this can lead to jobs. Also, put the photos on a website that shows the best of your work as well.
How and when to build a team
When there is so much design work that you have a client waiting list, it is time to consider adding staff to help you. However, it is imperative that you supervise your staff and exercise caution when hiring a new team members, as your business' reputation will rely on the quality of your staff and quality of the work that they do.