1) Don't be a Bank for Your Clients
Too many interior designers are financing their clients' merchandise purchases. Here's how to stop — and get paid your profit upfront.
Here's a scenario I see constantly in interior design firms: the client approves a proposal, the designer gets a deposit from the client and orders the merchandise, paying in full.
The designer has, in effect, financed their client (often wealthy) while waiting for the merchandise to arrive so that they can get the final deposit from the client.
It doesn't have to work this way. The fix is a written deposit policy that requires the client to pay the full client price before you place the order. Here's why that's even better than it sounds:
- You've already marked up the product before quoting the client price
- Client pays you 100% of the client price at approval
- You pay the vendor cost — which is less than what you collected
- The difference — your gross profit — is in your account before the product ships
This isn't just a cash flow strategy. It's a profit timing strategy. You're not waiting until delivery to realize your margin. You have it in hand from the moment the order is placed.
Flip the scenario — 50% or less upfront collection, vendor payment required immediately — and you're personally financing the gap out of your own cash or credit. That's a loan you never agreed to make, to clients who could almost certainly write the check without blinking.
Put this concept to work: Pull out your current Letter of Agreement and find your deposit policy. If a client approved a purchase today and you placed the order tomorrow, would your gross profit on that transaction already be sitting in your bank account? If not, a single policy change — requiring full client payment before orders are placed — fixes it immediately. Quality clients rarely push back when it's presented as simply how you work.
David
CEO, Interior Design MBA
As of this writing, I'm continuing to offer my entire video program on "Getting Pricing Right" at 80% off! You can learn more HERE.
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