It often takes a talented eye to bring out the very best in a building. Whether it’s a new building or a renovation, an interior designer can help transform a space to be functional, beautiful, and just what the owner is looking for.
If you are passionate about creating beautiful spaces, you may want to consider starting your own interior design business. To succeed, it takes more than just a love for décor. You need to understand the industry, be up-to-date on the latest trends, and know how to market your business. This guide is here to take you through the steps you need to take to start your own interior design company..
Interior designers work with clients to improve both the aesthetics and the functionality of a space, whether that’s a single room or the entire interior of a new business. Designers follow a complex process that starts with analyzing a space and performing research. Good designers need to combine both attention to detail and creativity in their work, planning, revising, and then executing designs to meet their clients’ desires.
Because of the intricate knowledge required in this field, designers tend to specialize in a particular niche, like residential or commercial design. They often work closely with architects and general contractors and will focus on everything from the overall layout of a room to the color palette, the fabrics, and the placement of furnishings.
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The interior design services industry generates over $25.5 billion in the US annually. It is comprised of about 148,000 specialized design services firms employing around 182,0001. This industry is characterized by its low barriers to entry, allowing new designers to set up shop with relative ease. The downside to this ease of entry leads to a fragmented market with many small, independent operations vying for a piece of the pie. Larger firms offer interior design as part of integrated architecture and engineering services. Growth drivers for the industry include construction activity and consumer confidence and spending.
To stay competitive in the interior design industry, staying updated with the latest trends is a must. Here are a few key trends shaping the interior design industry:
- Organic shapes and soft lines: There is a shift from angular shapes and strict straight lines towards furniture and home elements that embrace soft lines and organic shapes, bringing a sense of serenity and fluidity to interiors.2
- Sustainability: There is a growing emphasis on sustainability, with a focus on enduring materials and design pieces with permanence. This includes embracing second-hand shopping and using recyclable and renewable materials.3
- Technology integration: The latest in smart home technology is being integrated into interior design to make homes more comfortable and efficient.4
Steps To Start An Interior Design Business
Step 1: Market Research
When someone wants to start an interior design business, the first step is to understand if there is a market for another business in their area. Conducting market research helps in identifying the demand for interior design services and allows new businesses to better understand customer needs. Here are a few steps to undertake this research:
Research state licensing requirements: Begin by exploring the professional licensing requirements for interior designers in your state. Each state may have different regulations and criteria for practicing this profession. If they are missing, look into any educational qualifications, exams, or certifications that may be necessary to offer your services legally.
Gauge local competition: Assess the existing interior design businesses in your area to determine how saturated or underserved the market might be. Understand their specializations, clientele, and areas of focus to get insights into the level of competition.
Identify customer demand: To assess the market potential, consider factors such as population growth, disposable income levels, construction rates, and real estate trends in your area. Determine if there is a demand for interior design services based on these indicators. Look for any signs of increased residential or commercial construction projects, as they can indicate a need for interior design expertise. The Census Bureau and your local economic development office will be helpful with getting this information.
Network and connect: Reach out to professionals within the design industry, such as architects, contractors, builders, and home goods retailers. These individuals can provide valuable insights into market demand and potential opportunities. Ask if they frequently partner with interior designers and whether there’s unmet demand for such services.
Step 2: Write a Business Plan
So, you’ve done your homework. You’ve looked into the market, and you’re feeling good about the potential for your interior design business. What’s next? It’s time to put pen to paper and write a business plan.
There are several reasons to create a business plan, and one of them is that it helps to put your ideas into words and create a clear direction for your business. It enables you to outline and summarize your business idea, including the services you plan to offer and how you will operate. By doing this, you can define your mission, vision, and goals to provide a roadmap for your business’s direction and growth.
In addition, the business plan takes a close look at the financials. Here, you estimate how much money you will need to start and operate your business, as well as how much revenue you can expect to earn over time. By doing this, you can determine if your business is financially feasible and identify any areas that may need improvement or adjustments.
Last, if funding will be needed from a bank, the business plan provides lenders with the necessary information to assess the viability of your business.
Related: How to write a business plan
Step 3: Secure Funding
Once you have verified the market for your interior design business and completed your business plan, the next step is ensuring you have access to the necessary funds to start your business.
The first funding source to consider is your personal investment. Many interior design businesses are funded with the owner’s money, so look back at the business plan to see how much it will cost to get started and assess the amount of personal savings available to finance your business. This could mean tapping into savings accounts, selling assets, or using other personal resources. If you find that your personal savings won’t fully cover the startup costs, you’ll need to look at additional funding sources to bridge the gap.
When personal funds aren’t enough, a traditional bank loan is a popular source. When approaching lenders, they typically expect borrowers to invest at least 15% of their personal funds towards the total project cost. Additionally, having a good credit score and sufficient collateral are generally required. If the bank considers the loan too risky, they may consider using an SBA (Small Business Administration) loan guarantee to reduce risk.
Another potential funding source is friends and family, but these funds should be treated with the same formality as a bank loan, and any agreements should be put in writing. This helps prevent misunderstandings and protects personal relationships.
If your funding needs are low or you are unable to secure credit from a traditional lender, you can explore microloans. These loans are available for smaller amounts and may even provide business training along with funding.
Step 4: Register the Business
Starting an interior design business involves several legal and administrative steps to ensure it’s properly registered. Each state has different requirements, but here’s an overview of what a new interior design business owner needs to do:
Business structure: The first step is to decide on a business structure. The structure you choose will determine how your business is taxed and the level of personal liability you assume. The four main types of business structures are:
- Sole proprietorship: This is the simplest structure, with easy startup and the lowest cost. It’s a good choice if you’re running the business alone and are aware that you’ll be personally responsible for business liabilities.
- General partnership: If you’re starting with one or more partners, this structure allows you to share responsibility and decision-making. Like a sole proprietor, partners are jointly liable for the business.
- Corporation: A corporation offers liability protection, separating personal assets from business debts. However, it’s more complex and has stricter administrative requirements.
- Limited Liability Company (LLC): Combining the ease of a sole proprietorship with the liability protection of a corporation, an LLC is a popular choice for many businesses.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Professional licensing: Many states require interior designers to obtain licensing. Check with your state’s regulatory board to understand the specific requirements. Even in states where it isn’t necessary, obtaining professional accreditation, such as certification with the National Council for Interior Design Qualification (NCIDQ), can increase your billable rates and lend credibility to your business5.
If you plan to conduct any physical alterations in the spaces you design, you may also need to register as a contractor in your state or the town where the work is being done. This usually involves passing an exam and paying a registration fee.
Business licenses and permits: Depending on your location, there will likely be a variety of general registrations that are needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).
Step 5: Set Up Operations
As you transition from the blueprint of your business plan to laying the foundation for your interior design business, setting up your operations becomes the next step.
First things first, if you haven’t already, pinpoint the services you’ll offer. Will you be the go-to expert for sleek, modern office spaces, or will you bring a breath of fresh air to residential living rooms with your eco-friendly designs? Perhaps you’re thinking bigger, aiming to revitalize entire hotels or healthcare facilities. The scope of your services, whether comprehensive design packages, a la carte decorating advice, or merchandise resale, will dictate much of your operational needs.
The next decision is whether you need a physical office space or can operate from a home office. This largely depends on your business model and the kind of clients you’re targeting. If frequent client meetings are part of your operation, ensure you have a professional setting available. This could be a home office, a rented workspace, or even a local coffee shop or co-working space for initial consultations.
With the office space figured out, the next task in setting up operations is investing in necessary equipment and software. Depending on your needs and budget, this might include CAD programs for drafting plans or 3D rendering software for creating visual mockups. Administrative programs for managing tasks, schedules, and client communication are also essential. Customer Relationship Management (CRM) software can help you keep track of client details, project statuses, and follow-ups.
Finally, start building relationships with suppliers. These could include furniture retailers/distributors, painting retailers and distributors, home furnishings stores, painting contractors, and other contractors. Strong relationships with suppliers not only ensure you have access to the products and services you need but can also lead to discounts and referrals.
Step 6: Create a Marketing Strategy
Starting an interior design business is an exciting journey, but just like every other business, it also requires a solid marketing strategy to thrive and succeed. While you may be the most talented designer out there, without effective marketing, customers may never know you exist.
First off, creating a unique brand identity that reflects your personality, values, and vision is an excellent way to differentiate your interior design business from your competitors. Your brand identity should include elements such as your logo, color palette, font, and tone of voice. Be consistent in how you present your brand across all your marketing materials to make it recognizable and memorable.
Next, having an online presence, including a professional website and active social media accounts, is essential. Use social media platforms, such as Facebook, Instagram, and Linkedin, to share your portfolio, client testimonials, and engage with your audience.
When starting your own interior design business, displaying your interior design projects through high-quality photographs or videos is a powerful way to attract clients. Invest in professional-quality visuals that showcase the beauty and functionality of your designs. Don’t underestimate the importance of quality photographs of the spaces. If you or a friend aren’t talented with a camera, it’s worth hiring a professional photographer who can take quality photos that display your work in its best light.
If you have limited or no samples, you may want to volunteer your services, or some interior design in your own home can help create these samples quickly.
Step 7: Prepare to Launch!
As we near the completion of our guide for launching an interior design service, there are some crucial final steps to ensure a smooth takeoff. While individual needs may vary, here are a few common items that may still be needed before launching.
Business insurance: Obtaining the right business insurance protects yourself and your business. This can include general liability insurance, professional liability insurance, and property insurance.
Setting up bookkeeping: Accounting software helps keep track of your income and expenses, prepare for tax time, and make informed business decisions based on your financial data.
Determine pricing structure and payment policies: How much will you charge for your services, and how will you structure your fees? Will you require a deposit upfront? These are important decisions that can impact your cash flow and profitability.
Create contracts and terms of service: Protect your business and outline the expectations of your client relationships by creating contracts and terms of service. These documents should include details about the project scope, timeline, payment terms, and any other relevant terms to ensure a clear understanding between you and your clients.
Opening a business bank account: Separate your personal and business finances by opening a dedicated business bank account. This will make bookkeeping and financial management more efficient and help you track income and expenses related to your interior design business.
Joining industry associations: Consider joining industry associations such as the American Society of Interior Designers (ASID) and the International Interior Design Association (IIDA). These organizations offer valuable networking opportunities, professional development resources, and access to a community of like-minded professionals in the industry.
Preparing for the grand opening: Finally, plan for your grand opening. This might involve organizing a launch event, sending out a press release, or running a special promotion. The goal is to generate buzz and attract your first clients.
Common Questions When Starting An Interior Design Business
How much does it cost to start an interior design business?
Starting an interior design business can often cost between $10,000 to $30,000, including initial expenses like registration, equipment, deposits, and marketing materials.
Equipment: The largest upfront costs for new interior designers are computers, software, printers, furniture, and sample materials, which can total $5,000 to $10,000.
Office deposits: Depending on the size and location, this could range from $1,000 to $3,000 or more. Many designers start from home to minimize costs.
Business registration: Registering your interior design business, including professional and business licensing and business formation, will likely cost $1,000 to $3,000, depending on your state and locality.
Insurance: Costs for initial business insurance premiums can range from $500 to $2,000, depending on the coverage options and the size of your business.
Marketing: Initial costs for marketing activities such as creating a professional website, designing a logo and business cards, and implementing marketing campaigns can range from $1,000 to $5,000 or more.
While these figures provide a general idea of the costs involved, it is essential to assess your own unique situation.
Additionally, it is recommended to have three to six months’ worth of operating expenses on hand as a buffer to cover unforeseen circumstances and ensure a smoother start for your interior design business.
How profitable is an interior design business?
The profitability of an interior design business can vary based on factors like location, clientele, and specialization. However, let’s break down a hypothetical scenario to estimate potential earnings.
An interior designer working full-time on both residential and commercial projects could reasonably expect to earn $150,000 to $250,000 in annual gross revenue. This assumes securing 8-10 average-sized projects each year with design fees averaging $15,000 per residential project and $25,000 per commercial project. It also includes merchandise markups with an average 30% margin on furnishings purchased for installations.
With 8 residential and 2 commercial projects budgeted per year, that translates into $120,000 from residential design fees (8 x $15,000) plus $50,000 from commercial fees (2 x $25,000) plus estimated product sales markups around $50,000 at a 30% margin on $166,667 in merchandise purchases. That totals $220,000 in gross annual billings.
Most interior decorators and their firms have a gross profit margin of 35-40%.6 This suggests that after deducting the cost of goods sold (such as furniture and decor items that you purchase for clients), in addition to rent, salaries, insurance, etc., about 35-40% of your revenue will be left as gross profit.
That results in $132,000 to $143,000 in total annual operating expenses. By subtracting expenses from gross billings, this leaves $77,000 to $88,000 in pre-tax net profit annually for the owner to take as earnings.
Interior design firms face challenges with cash flow management as some clients may be slow to pay after the job is done. Be sure to keep on top of finished jobs to ensure timely payment, as this can cause difficulties in getting the cash to start the next job.
What skills are needed to run an interior design business?
Starting an interior design business doesn’t require a business degree, but certain skills and experiences can make the process of starting this business smoother and potentially more successful.
Attention to detail: Attention to detail is a paramount skill for interior designers. A good designer will focus not only on the big picture but also on how all of the little detail elements contribute to a room’s overall aesthetic and functionality.
Knowledge of building codes: Knowledge of local building codes is a must, especially when a designer is involved in making alterations to a room’s physical layout. Designers need to have a working knowledge of plumbing codes, electricity, and architecture basics, like how load-bearing walls work.
Problem-solving skills: Problems are sure to arise in any design job, so designers need to be creative and come up with solutions to any problems they may encounter. Some of these problems may occur with pressing deadlines, so the ability to think creatively, even when under pressure, is also important.
Customer-service skills: Interior designers work closely with their clients, and listening to and addressing customer concerns is important.
What is the NAICS code for an interior design business?
The NAICS code for an interior design business is 541410.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.