Diversify to grow your revenues
Tuesday, October 10, 2017
Interior design business activity has improved in recent months. My wish for you is that you have a prosperous final quarter as we enter the fall design season.
However, many designers are not benefitting from the increase in demand, or they may be getting more business but are not realizing the revenues or profits they had hoped for at the beginning of the year.
If you are one of them, it may be time to think about diversifying your revenue strategy.
Clients are more frequently seeking design consultations and advice, rather than hiring designers to design and manage projects, often resulting in lower fees and fewer billable hours for the designer. This is making it tough for sole practitioners and smaller firms to remain profitable.
In the past, when designers wanted to increase their revenues, they would focus on selling clients more products. Those opportunities are becoming harder to come by now, as more and more clients choose to go online and do their own purchasing.
Designers need to be looking for other sources of revenue to sustain their businesses and maintain their incomes. I am not talking about diversifying your interior design practice or menu of services. I am talking about diversifying your sources of income.
A common diversification strategy for interior designers is to create products. On the face of it, this appears to make sense. Aside from designing interiors and managing projects, what most designers know a lot about is product.
Certainly, many designers have successfully launched their own product lines, some quite famously. In the current market, however, if you are looking to diversify your business, product may not be the right direction in which to go.
With globalization and new production technologies, the amount of product available to designers and their clients has grown exponentially in recent years. Along with it, the number of distribution channels has multiplied, especially on the internet, which is where most clients are searching for product.
It is a challenge for anyone selling products these days to attract a profitable share of those eyeballs. If you think it is difficult marketing interior design services online, try promoting products. It requires substantial effort and resources, and constant vigilance.
On the other hand, if you have a sizeable and active clientele and/or network of designers interested in purchasing your products, or have access to bespoke retail outlets, creating products may work for you.
Preferably, these would be distinctive products that could be provided on-demand or manufactured in small enough quantities to minimize your initial investment and overhead costs. They should also be easily scalable, so if demand increases, you can quickly ramp up to meet it.
In recent conversations with clients struggling with the changes going on in our industry, I have been counseling them to consider pursuing alternative sources of income outside of the interior design industry.
Depending on where you reside, there are, for example, many present real estate investment opportunities right now. Housing prices are at their highest levels since the last recession, and buildable lots are at a premium.
Co-working spaces also are very much in demand right now. Since designers frequently have good contacts with residential and/or commercial real estate developers or sellers, this seems to me to be a fruitful avenue for designers to pursue.
Of course, as with all investments, there is a certain amount of risk. You need to decide how much risk you are able and willing to afford, and do your homework thoroughly before investing.
I understand that what designers want to do is design, and that given the choice you’d rather put your efforts into growing your business than taking on some other business venture. I agree wholeheartedly.
Nonetheless, if you have some cash available to invest in an opportunity outside of interior design that could serve as a hedge against the current volatile conditions in the industry, I advise you to talk with reliable counsel and explore it. It could be just the edge you need to keep your business going and provide you a more secure future.
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