115. A Profitable Design Business Is Not the Same as a Scalable Design Firm

Speaker A: A profitable design business and a scalable design firm are not the same thing. See, a profitable business can look good on paper and a scalable firm can carry weight. That is the distinction most designers miss. You can have strong revenue and beautiful projects, great clients, and still be landing inside a business that was never built to hold the next level of what you want. And it's like designing a gorgeous lobby with no thought for traffic flow or durability, maybe maintenance, acoustics, all of these other variables that the people in the space actually are going to be relying on. It may photograph well and impress everyone. And don't get me wrong, those are great things. But under daily use, it starts to fail. And your business works the exact same way. See, profit tells you the business performed. Scalability tells you the business was designed well. And if you're trying to move from six figures to seven, that key distinction matters greatly. Because six seven figures is not just more money. It's going to be more weight, decisions, clients, communication, payroll, complexity, leadership, visibility, responsibility. Let me tell you, I can tell you because I have a multimillion dollar firm. And if your business is not load bearing, more growth will not feel like success. In fact, it's going to feel straight up like stress. So today we're talking about the difference between a profitable design business and a skill scalable one. Not from that overused, just systemized everything angle. But we're going deeper. We're asking the important question, can the business you have built actually carry the business that you say you want? Welcome to Success by Design where I give you the real talk and a big reality check about you needing to stop treating your business like a hobby. Let's turn it into a profit generating machine. All while doing it in a way that works for your life. I'm Katie Decker Erickson and I am taking what I learned by building a multi, multimillion dollar coast to coast design business and sharing it with you right here. If you are wanting to generate more profit and not be burnout and possibly even have a dream design business, you are in the right place. Welcome back to Success by Design. I'm Katie Decker Erickson, interior designer, business coach to interior designers and the founder of a multimillion dollar design firm. Today I want to talk to the designer. I see you. You're making money, but you know something is off. It's not that you're failing. You're not new anymore and you're not just sitting around wondering if everyone's going to hire you. No, no. Instead you have proof and clients and Projects and invoices and results. But there's this tension that's going on inside you because while the business is working, the business isn't built. And those two ideas are very different. See, a, uh, business can work because you're talented and because you're persistent and responsive. It may even work because you care deeply and will just not let things fall apart. But that doesn't mean that you're actually scalable. That just means you're really strong. And I've seen a few of you and I've been there myself. It usually means you're pretty tired to go with it. Here's the straight talk. Your strength may be hiding weakness in your structure. I remember the first time I encountered this in my business and I was so exasperated and I thought I needed to make another hire when uh, all reality, I just needed to go in and spend time reorganizing our processes, updating our templates, and making sure that the not sexy 2x4 structural components of our business were standing strong so that everything that looked beautiful from the outside was actually authentic. This is what we're going to unpack today. Because if you want to grow into a seven figure design business, you have to stop measuring success only by how much money came in. This is why I will roll my eyes, put my hands on my hips and get frustrated when other coaches are focused strictly on profit building. The profit takes care of itself, folks. When you have a well designed business and you have to start asking whether the business you have can bear more weight, if the answer is no, you've come to the right place. Let's get real for a minute. You have a project that looks amazing and the client is happy. The photos are beautiful, the invoice was strong and you made money. This is the classic project I'd love to talk about because it does look like a win. But I want to get really real for a minute. Maybe you had to over function to get it across the line, or you were the one who remembered the detail. Everyone else was missed. Maybe you jumped in when the vendor dropped the wall, or you were the one who smoothed over that client anxiety. You may have been the only one who got the pricing issue and you pushed hard to make sure that timeline still worked. When others dropped the ball, you may have been the only one who stayed late to make that presentation better. Or you know, the invisible weight on every single job. Maybe you carried the entire load. So yeah, when we look at it, great news, the project's profitable. But here's today's Distinction. I want you sit with this question for a moment and ask yourself, was it scalable? Could you do it 10 times over? Would you want to do it 10 times over? Is that the type of business you're trying to build? See that right there, that is the real question. Because if the profit only happened because you personally were the shock absorber to every impact in the project, I don't know about you, but that's not a project I want to do 10 times. Because it's dependent. It's dependent on you. Okay, let's throw out another scenario here. You finished the year. Your top line revenue looks great. Maybe it was even your best year yet and you should feel super proud. But when you think about repeating that, all of a sudden your stomach drops. Not because you're ungrateful or not because you're afraid of success, but because you know what it took. You know how many exceptions you made, you know how many times you worked out side of your standard operating procedure. You know how much you carried in your head and you know how much your team relied on you to make the final call. Well, you know how many problems were solved by your own urgency instead of the business structure. And here's the part that nobody really wants to talk about out loud. Sometimes a profitable year is not evidence that your business is ready to grow. Yeah, you heard me right. Just because you're profitable doesn't mean your business is ready to grow. Even if it was your best year yet. Sometimes it could just be evidence that you survived a business model that is already at capacity. And that is a very different conclusion. It is the difference between thinking like a designer and thinking like a CEO. So what's actually going on here? See, most designers think this pressure means they need more. Uh, so we start to have anxiety. We want more leads and revenue and help. We all of a sudden start reevaluating all of our marketing, our exposure, our uh, luxury clients hours, motivation. But often that more. See, that right there is not the fix. That more right there, that is the test. Because more reveals what the business is actually made of. A heavier client load reveals whether your process is clear. And that bigger project reveals whether your pricing model is actually strong. A, uh, larger team is going to reveal that you know how to lead or whether you do. See more inquiries reveal whether your sales process is disciplined. And more money, which is what we often focus on artificially, reveals whether your expenses, payroll and cash flow are actually being managed properly. That's the deeper dive I want you to look at. More visibility reveals Whether your brand can attract the right clients instead of just more clients. And so when designers come to me and say, I think I need to grow, I often ask, grow, what do you want? More revenue, capacity, profit, leadership, repeatability, margin, freedom. All of those are valuable. They're also not the same goal. And this is where I see this misdiagnosis happening in our industry, where over and over again you say, I need to get to seven figures. But maybe you haven't asked yourself what kind of seven figure business you're actually building. Is it one that owns you with no margin and constant emergencies and a team that's super busy? But boy, are they confused. And every client gets a different experience. And maybe you're thinking, yeah, a successful business that feels suffocating. Yeah, that's not the goal. See, the goal is not just seven figures. So don't get me wrong, it's sexy, it's fun, and it's really fun to say, but the goal is a business that can actually carry seven figures. And that is really different. So here's the real issue. Most designers build a business around talent first, then they try to add scale later. But see, scale is not something you sprinkle on top like glitter of a talented business. Scale has to be designed into the business. It's way further back than that pretty piece of artwork or that smell good candle. It's clear back on the two by fours behind the walls of your business. And that function has to be designed in early. It has to be structural like those two by fours. You can't ignore circulation, lighting, durability, use case, budget, and then expect the space to magically perform because oh my gosh, the artwork and the candle are beautiful. Your business is absolutely no different. You cannot ignore decision, flow, capacity, ownership, offer structure, pricing, profitability, delivery standards, leadership, and then all of a sudden go, well, why isn't the business scaling? I mean, the work is beautiful. See, that is why. The first question is not, are you profitable? That's the one that drives me absolutely nuts and uh, makes me want rip out my hair. The fresh question is, is your business structurally sound? A structurally sound business has four load bearing elements. And I want to dive into those is the heart of our conversation today because they are so important. First of all, the offer has to be load bearing. Your offer is not just what you sell. That's right, you heard me right. It's not just what you sell. So your offer determines what the business can deliver. So a vague offer doesn't account for an encouraged scope creep. A vague Scope can create extra labor that you should be profiting on and encouraging. If every project is custom, from the first phone call to the final invoice, you probably have a profitability problem hiding inside of an offer problem. See, a scalable offer has edges. It says, this is who we serve. This is the problem we solve. This is how we actually work and what is included, and most importantly, what is not included. And see, this is how we make decisions and how the client moves through the process. And that does not make design generic. I think a lot of times as interior designers, we feel like we're giving up creative freedom or license when we do that. Not at all. In fact, it actually makes your business stronger. And the creative outcome of that is still extremely custom and gratifying. See, the container that you're operating in should not be the chaos. It should be the foundation of control so you can create. I, uh, want you to ask yourself, is my offer clear enough that the right client can say yes and the wrong client can self select out? Oh, doesn't that feel good to say? What if they never even called you right? Is my scope clear enough that my team knows where we're delivering? Ask yourself, is my pricing tied to the actual labor and leadership required to bring this to maturation? Is this offer something we can sell and deliver again and again without reinventing that business every single time? If you're answering no to any of these, the offer is not load bearing yet. You have the opportunity to stick with me here, but it's not there yet. Okay, the second thing I want to talk about is the owner's role. It also has to be load bearing. This is the difference between being a business owner and being a CEO. And in many design businesses, the owner is not just the CEO. You turn into that operator. She ends up becoming the lead designer, the salesperson, quality control, client therapist. I can't tell you how many times I was a client therapist, project rescuer, vendor wrangler, final approver, team trainer, bookkeeper, reviewer, brand strategist, and emergency response system. And because she's capable, she makes it work. But I want to tell you, capability is not the same as scalability. If your role as the owner is undefined, you're going to become the gap filler for the entire company. And I cannot stress enough how really dangerous this is for your corporation. Not because you're not good at it. In fact, just the opposite. You're too good at it. You can cover gaps for a really long time and make broken things look functional. You may even Be able to create profit with personal effort. But that does not mean your business is healthy. It means you are compensating for what the structure has not yet solved. Because a scalable owner role is clear. And if you're saying, well, what should I be knowing? Yeah, good question. Let's ask. You should know what decisions only you can make, what standards you own, the relationships that require your direct involvement, and what work needs to be released. You should also be thinking about what information your team needs so they're not sitting there waiting for you. Think about what meetings protect the business and what numbers you need to review each week. And also what you are just no longer available for. And that last one, oh, is that hard. But boy, is that necessary. Because if you're available for everything, guess what? Your business is going to use you for everything. All right, Number three, your team has to be load bearing. They have got to buttress this beside you. And a team does not automatically create scale. A team without ownership creates meetings and questions and management. And a team with ownership creates capacity. That's what we're going here, folks. Capacity. A lot of designers hire help and they feel disappointed because they are still on the overwhelm. And I see you and I feel you, and that is the worst place to be. One of my favorite things in coaching is when we look closer. The team was often never given true ownership. They were given tasks. So don't get me wrong, they were given pieces and they were given support work, but they were not given clear outcomes. And if no one owns the outcome, guess who does? You. That is why a scalable team is not built around helping me or supporting the designer. It is built around business functionality like design, development, procurement, project management, client communication, install coordination, operations, marketing, finance. Yeah, every function. Function does not need a full time person right away. But every function needs an owner. Even if one person owns multiple functions at first, that's totally normal in a firm that's getting ready to grow. Just make sure that ownership is abundantly clear. Otherwise your business is going to grow and everyone gets busier. But nothing gets lighter for you as the CEO. So I want you to ask yourself, who owns this outcome? Who makes the first decision? Who catches the issue before it gets to me? Who's actually communicating with the client? Who updates that system and who knows when something is off? This is my personal favorite. Who has authority? Not just responsibility, because responsibility without authority is not actually ownership. That right there, that's called frustration. All right, Your numbers have to be load bearing. And a lot of designers look at revenue like it is a scoreboard. Let me tell you right now, folks, it's not. Revenue is the headline. Profit is your truth. Because cash flow is the oxygen, capacity is the warming light, and you need all four. A profitable business asks, did we make money? And a scalable business asks, did we make the right money in the right way? And that means you need to know more than your top line revenue. Instead, you need to know what project types have the best margins, which clients consume the most unpaid time, which services are easiest to sell, but gosh darn it, they're hardest to deliver, which offers are creating clean delivery and which projects create cash flow strain. Think about which team roles are underpriced into the model and where Are you personally subsidizing the business with unpaid leadership labor? And that is so incredibly important because many designs, line forms look profitable because the owner is not fully accounting for her time. If your profit depends on you donating nights, weekends, emotional labor, unpaid project management, let me tell you right now, that is not called profit. It is called owner subsidized profit. And owner subsidized profit. Wait for it. Yeah, it doesn't scale. So the fix is not just charge, more like you hear so many other coaches saying, the fix is to understand, understand what the business actually costs to deliver. Out of that, we begin to scaffold the price, the scope, the staff, and then you can sell accordingly. Okay, I've thrown a lot at you. It's another week of me doing so. I want to talk about the practical moves though that you can make this week. And I want you to run a test called a load test on your business and do not make it complicated. I just want you to pick one recent project and look at it honestly. You're going to ask yourself five questions. All right? What made the project profitable? Was it priced correctly or did we save it with unpaid effort? Number two, what made the project frickin hard? Was it the client, the scope, the process, the timeline, the team structure, or honestly, our own lack of clarity? All right, question number three. What had to run through you? Not what did run through you because you prefer control, which I totally understand, but what actually had to run through you because the business had no other way to handle it? Number four, could you take on five more projects just like this one? Not emotionally, structurally, could the business carry five more like what we just explained, experienced? And finally, what would break first if, uh, the answer to that question is you, we have a much larger issue. See, whatever you answer that question with, that right There is the next problem you're gonna solve. So maybe your pricing would break, or your procurement, or your team communication, or client onboarding, or your calendar. And like I said, maybe it's. You see, the answer is not failure in any of that. It's just giving you a blueprint. And it tells you what needs to be strengthened before you start adding more weight in the form of more projects. So I want to have a mindset shift with you. So your old belief is, if the business is profitable, by gosh, it's healthy. Hopefully, after listening to this episode, your new belief is profit is not the only sign of health. A healthy business can carry growth. See that right there? That is the shift. Because, yes, profit matters. Of course it matters. But profit alone does not tell you whether the business is, uh, well designed. See, a project can be profitable and still reveal a very broken process. Your year can be profitable, but, oh, my gosh, you can be utterly exhausted and depleted. A client can pay well and still be a terrible fit. And your team may be busier than ever, but they're not creating capacity. A business can look wildly successful and still be a structural house of cards. See, your new belief is, I am not just here to make money. I'm here to build a company that can hold the level of success I want. That right there, folks, that CEO thinking, maybe your old belief is my value is that I can make anything work. I hope that after listening to this, your new belief is, my value is not in rescuing the business. My value is in designing a business that does not constantly need me rescuing it. That one matters because designers are excellent rescuers. I see you. You're creative and resourceful, and you can pivot and problem solve, and you do make the impossible possible. But if your business depends on that level of rescue every week, that is not scalable. And you shouldn't have to prove or feel like you have to prove your value by being the person who saves everything. Instead, I want you to prove your leadership by building something that does not constantly require you to save it. So here's the bottom line, folks. A profitable design business and a scalable design firm are, uh, not the same thing. Profit proves your business can perform, while scalability proves your business can carry weight. And if you want to move from six figures to seven, you have to stop asking only, how do we make more money? I hate that question in so many ways, because what you should be asking is, can the offer carry more and the team carry more and the numbers carry more and the client experience carry more? And can the business carry more without requiring me to personally absorb every ounce of the pressure? See that right there? That is the work of the CEO and that is the work I do with designers inside of Success by Design. We're not out here just chasing growth for the sake of growth. We're looking at the structure underneath the business. We are looking at what is profitable, what is draining, what is unclear, what is owner dependent, what is underpriced, what is over customized, and what needs to be redesigned structurally so the business can grow without consuming the very designer that built it. Because I'm going out on a limb here. After working with hundreds of designers, you did not build this business just to create beautiful work and then drown behind the scenes. I see you. You built it for freedom and impact, income, legacy, all of it. But legacy needs structure and growth, needs capacity. And seven figures needs a business that is actually designed to hold seven figures. So here's your next step. I want you to run the load test. Pick one recent project and ask what made it profitable? What made it hard? What had to run through me? Could we take five more like it? And what would break first? The final answer to what would break first is where your next level begins. And if you're ready to stop building a business that only works because you keep showing up and rescuing it and you want to start building one that is actually structurally sound and scalable and CEO led, that is the work I would love to do with you. Because the goal is not just a profitable design business. The goal is a business that could carry the success of what you are working so hard to create. If this resonates with you, head over to FixMyDesign Biz with a Z.com again, fix my Design Biz with a zoom and snag a free 15 minute problem solving call with me. I want to hear from you. I see you. I know you're working hard. Let's work smart. Because after all, your business should be working for you, not you working for it. Until next time, take care. That's your real talk for today. If you found this helpful and you are ready to truly move the needle in your design business, head over to Fix My Design Biz and let's get started. That's Fix My design biz with, uh, a z.com and if you want to stay connected, head over to my Instagram @SuccessByDesign. Underscore CoachPodcast and give me a follow. Don't forget to mention you came from the podcast because I would love to meet you and I personally respond to every dm. Until next time. Take care.