How to Start a Home Decor Business
Do you have an eye for coordinating items into a cohesive ensemble for living spaces? Being able to style and display items that appeal to your customers’ tastes boosts sales and earns your store valuable revenue.
Home décor businesses often have a high-profit margin and make excellent business endeavors for those with a knack for sales and an eye for staging and styling furniture. Let’s discuss how to start a home décor business.
A home décor business displays and sells furniture and home decor items (i.e., wall hangings, lamps, rugs, fabrics, wall art, and other accessories). Home décor small businesses are often individually owned or a part of a franchise. A franchise gives your store instant brand reputation but comes at a price since you must buy into the franchise to sell its inventory.
Individually owned stores acquire furniture and home décor items from various sources and display the items for sale in a showroom or on a website. These home décor stores sell brand-new items, name-brand items, or discounted furniture from off-brand wholesalers, discontinued lines, or refurbished inventory.
Home décor businesses profit by selling their items at a higher cost than they purchased them for. And often, home décor businesses have a high-profit margin of around 20 – 45%.
As of 2022, the U.S. had over 27,000 home-furnishing businesses that generated upwards of $29 billion. Unfortunately, home furnishing stores have seen revenue declines of 2.5% in 2022. This downward revenue trend began in 2020, and the industry has not quite recovered from the initial sharp dip.
Coinciding with a decline in revenue, the number of home furnishing businesses has also declined over the past few years. In fact, the number of stores has reduced by 2% in 2022 alone.
A key reason that home furnishing businesses started on a downward trend in 2020 is the worldwide pandemic that shut down and stalled many retailers. Home furnishing stores declined as people stopped shopping in-store and opted for online shopping.
Further, discount furniture stores and e-commerce became strong competitors, taking a large part of the furniture-shopping consumers. In fact, during the pandemic, many people began working from home. This trend increased the demand for home office furniture, which many purchased online.
However, this decline for home furnishing stores is not necessarily an ongoing negative trend for home décor businesses. Many people are returning to in-store purchasing, and businesses have adapted to online shopping.
So, although home furnishing stores have declined, there is hope that in-store shopping will return to close to what it was. Further, home décor businesses can mitigate losses and compete with e-commerce trends by having a solid online presence.
Individuals and businesses are the two main markets for home décor businesses. Individuals shop at home décor retailers to furnish, decorate, and organize their homes. Similarly, businesses, such as offices, restaurants, and studios, need home décor stores to furnish their businesses.
Arguably, a large market for home décor businesses is new home buyers. These buyers have a new space that needs to be styled and decorated. In addition to new home buyers, other groups who need a home décor business include those who
- are redecoration or remodeling
- are downsizing or upgrading their space
- have added family members or housemates
Checklist for Starting a Home Decor Business
Starting your own home decor business can be a great way to turn your passion for interior design into a career. But like any other business, there are a few key steps you need to take before you can get started. Here is a checklist of the essentials you’ll need to get your business off the ground.
Step 1: Write a Business Plan
Starting a home decor business can be an exciting endeavor, but it is important to remember that it is also a major financial investment. Developing a business plan helps you to clearly define your goals and objectives, as well as outline the tactics you will use to achieve them. It also allows you to consider potential challenges and devise strategies for addressing them.
Additionally, a well-developed business plan can be crucial in obtaining funding from investors or banks.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
A helpful starting point is to consider the overall theme or aesthetic of your business. Do you specialize in coastal-inspired decor? Industrial-chic furnishings? Scandinavian minimalism? Incorporating this into your business name can give potential customers an immediate sense of what they can expect from your products and services.
It’s also important to consider the names of other businesses in your industry, as well as any relevant terms or phrases that might attract attention.
Related: Tips on naming a business
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a home decor business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select Your Location
When it comes to starting any retail business, especially a new home decor business, location is crucial.
One way to help narrow down your spots is to take a look at what other successful businesses in your niche are doing. Are they located in trendy downtown areas or in more suburban neighborhoods?
Also, look at nearby businesses and see if there are complementary stores nearby to help attract customers. Additionally, consider whether the area has high foot traffic, is easily accessible for clients, and has enough parking options. Don’t forget about the need for storage space for inventory as well.
Once you have narrowed down some potential areas, do some research on rental rates and development plans for the future to make sure it’s a financially sound decision. Ultimately, finding the perfect location takes time and careful consideration, but it can make all the difference for your business’s success.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
As with any new business, it’s important to make sure all of the necessary licenses and permits are secured before opening your doors.
The specific licenses required for a home decor business will vary depending on your location and the services you offer, but some common ones include a business license, a sales tax permit, and an Employer Identification Number. It’s also important to consider whether or not you need zoning permits for your physical storefront
Step 6: Begin Working with Manufacturers
In order to launch a home decor business, the selection of manufacturers can make or break your success. It’s important to do ample research and choose manufacturers who have the merchandise your customers will want to buy.
Start by determining what type of products you want to sell. This will help narrow down potential manufacturers in your industry. Next, gather information on their practices and ethics, as well as their track record in terms of quality and timeliness. Consider visiting the manufacturing facility in person to see their processes firsthand and ask questions about their production methods. Finally, take the time to negotiate terms and fees before making any commitments.
Most manufacturers and suppliers will require a new business to have their licensing in place before talking in depth.
Step 7: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a home decor business is another. Fortunately, the cost to start a new home decor business is relatively low; however, funding to start a business can be difficult. Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 8: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 9: Get your Marketing Plan in Place
There are a variety of ways to spread the word about your products and services, but planning before opening your store is critical.
One option is to connect with local interior designers, architects, real estate agents, and home builders to let them know about your store opening, so they can refer clients to you. Since you are in the business of selling good design, be sure all of your marketing materials, from business cards, brochures, website, and store signage are professional.
Additionally, don’t underestimate the power of social media! Set up profiles on social media platforms like Instagram and Facebook and showcase your products, special offers, and client projects. You can also consider hosting events or workshops at your store as well, where potential customers can interact with your products in person.
In addition to having a storefront, some home decor businesses have found a lot of success selling their inventory on their e-commerce site (or only operating online).
With a little creative thinking and effort, you’ll have no problem getting the word out about your new home decor business.
Step 10: Get Business Insurance
When starting a home decor business, it’s important to protect yourself with the right insurance coverage.
Commercial property insurance can cover the cost of damage to your workspace, equipment, and inventory. General liability insurance can protect you from legal liabilities, such as if a customer slips and falls in your store or if you accidentally damage someone’s property while installing decor. Additionally, it’s a good idea to look into product liability insurance, which can cover any potential claims related to products you sell or use in your services.
Of course, every business has unique needs, so consulting with an insurance professional can help ensure that all of your bases are covered. Protecting your business from potential risks is an important part of running a successful operation.
Step 11: Hire Employees
While starting out, you may provide many, if not all, of the roles in your operation, it’s important to work towards building a diverse team with a range of skills and expertise, so your business can grow.
An interior decorator or designer can help create beautiful spaces for clients, while a salesperson can assist with finding the right products and closing deals. It’s also essential to have staff members who excel in customer service, ensuring that customers keep coming back. And let’s not forget about administrative tasks – having someone who excels at organization and paperwork can take a huge weight off the shoulders of the rest of the team. Ultimately, building a strong and well-rounded team is key to success in the home decor industry.
Related: Hiring your first employee
Step 12: Set up an Accounting System
When starting a home decor business, it’s important to have an effective accounting system in place.
One option is to use manual methods, such as physical ledgers and spreadsheets, but this can be time-consuming and prone to errors. Alternatively, many small businesses find success with online accounting software like Quickbooks or Xero. These programs offer features like invoice generation, expense tracking, and financial reporting functionality.
It’s also helpful to have a separate business credit card for expenses related to the decor business, which can easily be tracked and reconciled using the software.
Ultimately, the specific accounting system you choose will depend on your personal preferences and the needs of your business – but investing in a reliable system will save time and help keep your finances organized.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a home decor business?
Starting a home décor business can feel like a choose-your-own-adventure story. Your store could operate entirely online, keeping costs low, or you may choose to open a franchise or a showroom to display inventory. Whatever adventure you choose can be profitable, but the costs will vary.
Business formation costs. Both online home décor businesses and in-person showroom décor businesses have initial startup costs:
– Licenses are required by each state to conduct business. Each state has individual pricing structures, so locate your state’s website to find out what a business license costs.
– Permits may also be required depending on your state or local county’s requirements. Again, the best source for permit costs is the state’s website.
– Insurance protects your business from financial hardships following a loss or liability. Comparing quotes from various companies often allows you to pick a policy with the best coverage for the best price.
– Franchise costs apply if you purchase a franchise and sell its inventory. The initial franchise costs are different for each. But for example, a Sears Hometown store requires new owners to have $20,000 in cash and a positive net worth of $100,000.
Your space. Location costs can consume a sizable portion of your initial budget. Retail space is usually priced by square foot per year, and many retail spaces fall between $10 – $40 per square foot per year. Keep in mind that the cost per square foot could be higher for more popular metropolitan areas.
At first, you may think that a completely online store will have no location costs, which is valid to an extent. You won’t pay rent on a physical location but will pay for your website, including development, hosting, and maintenance costs. A high-traffic website can cost several thousand dollars a month to maintain and secure.
Inventory. Inventory, like furniture and décor, must be purchased to display on a website or showroom. According to the Sears franchise, initial inventory purchases can cost between $60,000 – $80,000.
Marketing. Marketing is a great way to invest in your business. Good marketing plans draw interest and build brand reputation and, in turn, revenue. Often, franchisee owners have a leg up in this department as the franchise gives the store brand recognition. Many franchises also help with marketing.
However, marketing on your own can cost very little—such as building up your website’s search engine optimization (SEO) or social media platforms—or it can cost several hundred dollars a month. Purchased ads on social media platforms can cost less than $1 per click up to over $5 per click.
How profitable is a home decor business?
Many home décor businesses have experienced revenue challenges over the last few years. However, money can still be made in this industry.
Home décor stores should aim for a 20 – 45% profit margin. For example, At Home, a popular home décor retailer, had a gross profit margin of 34% in 2021 and is a strong competitor among home décor businesses.
So, for example, with a profit margin like At Home’s, assuming $50,000 per month in sales, you would earn between $10,000 and $22,500. Note, that gross profit is sales minus the cost of inventory and doesn’t include the cost of employees, marketing, rent, and other overhead expenses.
Are there grants to start a home decor business?
It’s extremely rare to find a grant to start a home decor business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a home decor business?
From accounting to purchasing, styling a showroom, and delivering items, having a base set of skills will help your business be successful. The skills listed below will help operations run smoothly if you operate online or face-to-face with customers.
An eye for design. Customers rely on the expertise of home décor businesses to help them find the perfect piece to match the style and needs of their home. Understanding design elements and what works versus what clashes are essential skills for staging your showroom. An eye for design also helps to sell items and counsel customers through purchases.
In addition, being able to style and place items pleasingly and functionally looks great and helps your marketing efforts. Professional-looking pictures for your website or social media accounts enable you to market your products and draw intrigue.
So although you don’t need a degree in interior design to start this business, it doesn’t hurt to have a keen sense of style, taste, and design terminology to help your clients get the look they’re after.
Management. A home décor business requires organization and management. For instance, some areas needing management include appointment scheduling, deliveries, inventory purchases, employees, and item staging.
So, being able to organize the business’s countless tasks makes the difference between chaos and calm. Fortunately, organization is a skill that can be learned, and planners, apps, and calendars are helpful tools that keep your business on track.
Negotiation and Sales. A major part of home décor businesses is negotiating for items from sellers and reselling the inventory at a higher price. Therefore, negotiating and selling are valuable skills to help you acquire the perfect items and sell them for a profit.
Marketing. A well-rounded marketing plan contributes to your business’s success. To make sales, you need customers, and marketing gets those customers. If marketing is not one of your strengths, then hiring a marketing expert is an excellent way to get help with planning your advertising and marketing strategy.
What is the NAICS code for a home decor business?
The NAICS code for a home decor business is 442299, which is classified under All Other Home Furnishings Stores.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
Although home décor businesses have had their challenges the last few years, there is money to be made yet. Many people are returning to in-store shopping, and businesses are increasingly providing an online shopping experience. So as both consumers and businesses meet partway, there is still an opportunity to make money.