The 5 Financial Metrics That Show If Your Design Firm Is Actually Profitable
Brought to you By: The Dove Agency Financial Services Team
Running a successful interior design firm requires more than just exceptional taste and creative vision. Behind every beautiful space is a business that needs to be financially sound, and understanding your numbers is what separates thriving firms from those barely breaking even.
At The Dove Agency, we work with interior design firms every day to transform their financial operations from overwhelming to empowering. When a new client comes to us, we dig into specific metrics that reveal the true health of their business—metrics that show whether a firm is actually profitable or just keeping busy.
Our Financial Services team has spent years helping designers understand and improve their financial performance. Here are the five critical metrics we look at for every client to assess whether a design firm is truly profitable.
1. Employee Productivity: Are Your Team Members Paying for Themselves?
One of the first things we examine is how productive your employees are from a billable perspective. The question isn't whether your team is working hard—it's whether their time is being billed effectively enough to support your business financially.
What to measure: The percentage of each employee's hours that are billable to clients.
Why it matters: Different roles naturally have different productivity expectations. Junior designers typically spend more of their time on billable project work, while lead designers and principals invest more hours in business development, client relationships, marketing, and problem-solving. Understanding these patterns is crucial, but the right benchmarks vary significantly based on your firm's structure, market, and business model.
It's important to recognize that productivity metrics come with nuance. A junior designer sitting in a meeting where only the senior designer's time is billed shouldn't be penalized for non-billable hours—that's part of their learning and development. Similarly, part-time employees have their own considerations based on their specific responsibilities.
The key insight here is that you should never be losing money on employees. They should be financially contributing to your firm, not just operationally. If a team member's productivity seems consistently off without a clear strategic reason, it's time to evaluate either your billing practices or their role. Determining the specific targets that make sense for your firm is where a detailed financial analysis becomes invaluable.
2. Sales Ratio: Are Your Fees Aligned with Your Product Sales?
Here's a metric that often surprises designers: the ratio of your design fees to your product sales. This simple comparison can reveal whether your pricing structure makes sense for your business model.
What to measure: Design fees compared to product sales revenue.
Why it matters: This ratio serves as a valuable gut check for whether your hourly rates are in alignment with your product markup. Every firm has its own client base with varying tolerances for pricing, and there are general industry patterns that can help guide your strategy.
When these numbers get significantly out of balance, it sends mixed messaging to clients. If you're billing at a premium hourly rate but keeping your markup unusually low, or vice versa, it creates confusion about the value you're delivering. Your pricing should tell a consistent story about your services and expertise.
We often review clients' financials and identify gaps in this ratio that represent real opportunities to recalibrate either hourly rates or markup structures to better reflect the true value of their services. The specific targets that make sense for your firm depend on your market, clientele, and service model—which is why a customized financial assessment is so important.
3. Owner Compensation: Does the Math Actually Work?
This might be the most personal metric on the list, but it's critical. Almost every designer who comes to us has the same fundamental question: "How much should I be paying myself?"
What to measure: Owner compensation relative to overall business revenue and profitability.
What good looks like: This is highly individual, but the math between what you want to take home and what your business generates must make sense.
Here's what we've learned after years of working with design firm owners: very few come to us with a revenue goal. Instead, they start with a personal income number—what they need or want to pay themselves—and we work backward to determine what their business needs to generate to support that.
This process involves looking at your business structure, how you're set up for tax purposes, and whether your current client load and project pipeline can realistically support your income goals. If the numbers don't add up, we help identify what needs to change—whether that's raising rates, increasing project volume, or adjusting expectations.
The bottom line is that your business should support the lifestyle you want, and we help make sure the financial strategy aligns with that vision.
4. Monthly Trends: Are You Ahead of or Behind Industry Patterns?
Your financial performance doesn't happen in a vacuum—it follows seasonal patterns that are fairly predictable in the interior design industry.
What to measure: Month-to-month revenue and project activity trends.
What good looks like: Understanding how your firm performs relative to typical industry cycles.
The interior design industry largely follows the school calendar. Clients want their projects completed when their homes are empty, which creates a predictable flow throughout the year. There's typically a rush at the beginning of December as everyone wants their spaces finished before the holidays, followed by a slowdown through the holiday season. Activity picks back up once people settle into their new year routines, then slows again over the summer.
By tracking your monthly trends, we can help you anticipate when you'll need to hire additional support, when you should be building your pipeline, and whether unusual dips in activity are industry-wide patterns or red flags specific to your business. If you're slow during what should be a busy period, or if you're maxed out heading into a typically quiet season, we can work together to course-correct.
5. Freight and Installation Allowances: Are You Fronting Cash You Shouldn't Be?
This might seem like a detail rather than a key metric, but how you handle freight and installation costs can significantly impact your cash flow and profitability.
What to measure: Whether you're collecting 100% of anticipated freight and installation costs upfront versus reconciling them on the backend.
What good looks like: Collecting estimated allowances upfront based on a fixed percentage of the project value.
Here's the challenge: when you're ordering furniture, freight costs often aren't communicated by vendors until after the order is placed and your card is charged. In normal consumer shopping, shipping feels inconsequential—maybe $20 for a Nordstrom order. But when you're placing a $500,000 furniture order, freight becomes a substantial expense that you shouldn't be floating without having collected funds upfront.
Many of our clients have moved toward building freight allowances into their client invoicing based on geographic factors and project scope. Similarly, we encourage sending final invoices before installation happens, including an installation estimate if there are likely to be day-of charges.
Here's the reality: designers lose all their leverage once the furniture is delivered. We've seen firms try to collect their markup just before installation, or leave outstanding design fees and freight balances until after goods are dropped off. This creates unnecessary risk and collection challenges. The simple rule is this—don't deliver or install until you're paid, and make sure you have the cash on hand to cover these expenses without dipping into your operating funds.
The Bigger Picture
These five metrics—employee productivity, sales ratios, owner compensation, monthly trends, and cash collection practices—form the foundation of a financially healthy design firm. They're the numbers we review with every client because they tell us whether a business is truly profitable or simply treading water.
The good news is that once you understand these metrics, you can start making strategic decisions to improve them. Maybe that means adjusting your billing practices so junior designers' time is properly valued. Perhaps it's realigning your hourly rates with your markup structure. Or it could be implementing better invoicing practices to protect your cash flow.
Whatever the opportunity, the first step is knowing your numbers. At The Dove Agency, we don't just crunch these figures—we help you understand what they mean and how to use them to build a more profitable, sustainable business.
Your time is invaluable. Spend it designing while we help you grow.
Want to dive deeper into your firm's financial health? The Dove Agency's financial services team specializes in helping interior design firms achieve financial clarity and profitability. Contact us to learn how we can support your business.