Running an interior design business is not only an art, but a science. As a business owner, it's essential to know what is going on with the operations of your business, even if your primary role is creative and you have a team member handling the administrative part of the puzzle day to day. 

Establishing Key Performance Indicators (KPIs) is the best way to measure the health of your business. Analyzing these metrics will show you where you are excelling and where you are falling behind. This article will outline the KPIs interior design businesses should establish, which should then be reviewed monthly, quarterly, and annually. 

Finance and Operations

• Cash Flow: Undoubtedly, one of the most important KPIs for any business is cash flow. You should review cash flow by month, quarter, and year – and if you want to be very diligent – by week. Design Manager makes this easy by providing reports that show the flow of client money in and out of your coffers. You should also regularly reconcile bank and credit card statements to make sure the numbers add up and to spot any suspicious activity. The sooner you catch fraudulent activity, the easier it will be to resolve.
• Assets and Liabilities: Always know your debts versus your assets. If your business is in debt, as many new businesses are, make a plan and timeline with your accountant and financial advisor to reach profitability. Design Manager provides a number of reports that help you break these down both for your overall operations and by project. Take advantage of their general ledger, financial statements, sales tax reports, and account reconciliations. 
• Number of Projects and Payment Schedule: From a financial perspective, it’s important to map out the future timeline of your expected payments by project and your projected expenses per project (this is related to the Project Management section of this article). This way you can begin planning in advance and making sure you have the proper resources on reserve to meet your upcoming obligations.

Project Management

• Meeting Deadlines and Deliverables: Create a master schedule of your deadlines by project (with the understanding that it will be a work in progress as meetings get rescheduled, shipments delayed, etc.) and track how often you miss deadlines as a result of your own mistakes (as opposed to client delays). Meeting deadlines is an important part of building trust with clients and improves your chances of getting future referral business. Design Manager offers the Project Order Status Report as a detailed breakdown per project. 
• Allocation of Personnel: How efficient is your team? Are you allocating too many/not enough employees per project? Can you outsource certain tasks for less cost than producing the work in-house? However, some elements of tracking this KPI will require looking at the profitability of a project and how much you spent on employee time versus income made. If your profits are not where you want them to be, it may not be the fault of an unproductive team. It may require more creative allocation of resources and trying different ways to improve efficiency. Design Manager has tools to help track employee activity and time billing within Design Manager, which helps to quantify productivity. 
• Timeliness of Payments: As with many things related to running an interior design business, project management and accounting are often tied at the hip. Managing accounts receivables and payables is no exception. Remember, in a typical interior design project management process, the design business takes a deposit (or entire payment) from the client upfront, buys products directly from the vendor, then collects any remaining amount due for the product after installation. This is a rather complicated chain of payments that need to be managed on a tight schedule to ensure a project stays on track. Design Manager offers many reports to help keep projects and purchasing on track. 
• Billing Simplicity for Clients: How easy is it for your clients to work with you? This can be hard to measure, but keeping a clear, open line of communication with your clients will help you understand this, and don’t be afraid to do an exit interview at the end of a project. Also, think ahead to make things easy for clients from the start. With Design Manager, you can collect payments digitally, via ACH or credit card, in a seamless and secure process. You click a few buttons to generate an email with a link to the payment portal, send it to your customer, and they follow a few easy steps to complete the process on their end. Even better? Design Manager will automatically enter these transitions into your bookkeeping records.

Attracting Clients

• Customer Conversion Rate: This KPI is simple. How many potential clients do you engage with that become paying customers? Keep track of how many email inquiries, phone calls, and referrals are initiated and track how many of those leads progress to paid work. Taking this concept one step further, keep track of how many repeat customers you have, and how many former customers of yours, to your knowledge, have since hired different designers for future projects. 

• Social Media Engagement: Building a loyal following on social media is another significant investment of resources, but it’s important in today’s online-centric world. Make sure you post regularly on each of your platforms, and keep track of your level of engagement with followers and how many serious clients contact you after finding you on social media. Check out our article on how to develop a successful social media strategy. 
• Website Metrics: Your website is arguably your most powerful tool for marketing your business. You have complete control over the aesthetic and the flow of content and information you present to prospective customers. But is it working? To know this, it’s critical to track your pageviews and the amount of time each user spends on each page of your site. Also look at the bounce rate and which avenues are driving traffic to your website. For example, are people finding your site through organic search? Are they coming to it through digital ads (if you are running any)? Emails? Social media? It’s important to understand what is driving people to your website and what is – or isn’t – keeping them there. By paying attention to this, you can constantly improve your site to meet consumer expectations. 

Running an interior design business is not as easy as it looks to the outside person, but you as a professional interior designer already know this. If you are tracking several KPIs like the ones above to ensure your operations are in good standing your artistic work can continue to shine for years to come. While working with a team to help manage operations is never a bad idea, as the business owner, it is ultimately your responsibility to understand everything that makes your business successful. 

Design Manager was created specially to address the complicated interior design business model, and is a powerful tool for managing the myriad details and long list of KPIs to be tracked. If you haven't tried Design Manager, now is the perfect time to see what this industry leading software can do for your interior design business. Sign up for a free trial today!