If you attended our previous 19 Hours, you might have caught the amazing session by Peter Lang & Michele Williams on Benchmarking your Business! (Side-note, if you missed it, you can find the recording here!)
Every business owner at some point wonders how their business stacks up to others in their industry – and Interior Design firms are no different! And in their session, Michele & Peter talked about the pros and cons of benchmarking your business, as well as the top numbers and percentages to consider to measure the health of your business.
So no surprise, with a topic as big as this, there were a lot of great questions coming in during the session. And while we couldn’t get to them all, Peter & Michele graciously came back to clear up some of the ones we didn’t get a chance to get to!
At the 250K amount, and 1/2 is owners pay – what happens at 251K when the owner’s pay drops to 35% per guidelines?
If your business is stable and not growing particularly fast, I would consider using the percentages from the $250k. If you are looking to grow the firm and to start by having higher expenses use the percentages from the 251K in Profit First.
Any tricks for purchasing when you take a full product deposit up front but then cost of an item of cost of freight changes at the time of order placement?
Many designers markup a percentage to cover the freight/shipping etc. and average it without going back for more when the final bill comes in. For example, they might mark up the product 15-20% and cover all shipping in that amount. This is in addition to their normal markup.
Is the book/process Profit First relevant in Canada? I don’t know how much of these financial processes are US-centric.
Absolutely. Profit First is money management regardless of country. There are many in Canada using this system to manage profits.
I’ve started buying some smaller decor items to have on hand to be used in future projects when I see fit during the styling process. Should I track these items as “inventory” even though I am not a true storefront? If these items are purchased tax-exempt, do I wait to pay taxes on them until they are used and sold to a client?
I suggest tracking them as inventory until you sell them. If you purchase tax-exempt, you will pay the taxes on them when you sell them. Let your bookkeeper/accountant know what you are doing so that these show up on your balance sheet as inventory and are available for an audit or noting inventory on hand at the end of the year for tax purposes.
Peter Lang is the founder of The Designer CPA and has been working in public accounting since 2002. Not only has he served the design community with tax and accounting advice, but Peter has also taught financial classes at several different colleges. Peter’s true passion has always been to help business owners feel more confident with their financial decisions. Connect with Peter at http://www.thedesignercpa.com
Michele Williams is the owner of Scarlet Thread Consulting. She is a business strategist and coach serving the interior design industry including stagers and custom workrooms. Michele partners with business owners to align their teams, ignite their processes and manage their money. Her goal is to help each business owner gain clarity, confidence and control so that they can reclaim their time and be passionate about their work. Michele is certified in Profit First and Fix This Next methodologies. She is an author, speaker and the host of the popular podcast, Profit Is A Choice. You can find out more by visiting www.scarletthreadconsulting.com