How to Make More Money in Design
If you're reading this and expecting a magic bullet to bring you tons of cash...you're in the wrong place! BUT, I do have tips that I know work and that I know will help you make more money. Sadly, they aren't going to involve a wand or any kind of good luck charms. HA! This is more about tough love from me, about doing the kind of work you know you SHOULD, but you may be avoiding. So let's take a look!
Adjust Your Fees
It is critical to understand WHAT you're charging and HOW you're charging. Because often that's where you're actually losing money. If you're charging hourly, are you charging enough to cover your overhead/expenses AND make money yourself? If you're charging a flat fee, are you tracking your hours to be sure you aren't losing money by working more hours than you're being paid for? Do you really understand how much you should charge based on your market and competition? Too often we don't ask for enough upfront or we short ourselves on hours because we're worried about turning in a huge hourly bill. If you are disciplined about the fees you charge and billing for every hour you work, I promise you that you'll be more powerful. But it requires sitting down in advance and working out the math. Not fun, but necessary!
Understand Margins vs Markups
I hear too many designers use these terms interchangeably when they're talking about how they charge for product purchases. They are not at all the same thing. To make a profit on those sales, your overall gross margin needs to be around 30% - that usually covers time and costs. That means you need to mark the product up at around 43%! I hear far too many designers say they mark up their product at 30%...it's like it's some sort of industry standard. But they have it the wrong way around. At a 30% mark up, your gross margin is only 23% - you're barely making any money at all and in some cases you could be LOSING money! Examine how you are charging for product and be sure that you're covering your costs and making money on top of it. Otherwise, you might as well charge for your cost + freight/shipping and then a procurement rate. At least then you know you'd be paid for your time.
Cut the Fat
You don't make money cutting expenses in most cases, so I want to be clear that I'm not talking about cutting just to cut. I want you to really look at ALLLL of your overhead costs and examine which things are vanity vs necessity. For example, have you gone to trade shows in the past (like in Paris???) that you really didn't need to attend? Or do you have too many employees because you can't bear to let any go? Or how about a showroom that is really there because you THINK you should have one? It's time to clean up your balance sheet and get rid of things you should have a LONG time ago!
It's time to add a service if your clients are asking for something you don't already provide. For designers I've worked with in the past, this has included things like art curation, revamp consultations, shopping trips, holiday decorating, etc. I'm not saying you HAVE to add those, but if it is something you would like to do and that you know your clients want or need, then go for it! Those can be great fill-in jobs that make money without a lot of overhead. And that is great for the bottom line!
Think Carefully About "Revenue Streams"
There's been a lot of buzz over the last few years about extra revenue streams and how you can "make money while you sleep." But that almost never turns out to be true. (#TRUTH) I'm not saying there aren't some interesting side jobs that might make you money, but remember that all of those extra jobs are extra WORK. And they take your eye off the ball for your core design business. That usually means that you start to lose business or focus in the one area that is your key money maker. That is very rarely a good idea!
Here's the Key
So the key to making more money? It's simple: More money in and less money out. I can hear a lot of you yelling "DUH!" but ask yourself if you have REALLY done the work to be sure that's how your business is operating! If you have a tight handle on your finances and you do a good job marketing your business, you WILL make more money!
To help with that, I am giving you my FREE 3rd Quarter Business Review document to help you put everything down on paper to see where you stand. Good luck!