Our work is reader-supported, meaning that we may earn a commission from the products and services mentioned.

How to Start an Interior Design Business

Overview

How to Start an Interior Design Business

It often takes a talented eye to bring out the very best in a building. Whether it’s a new building or a renovation, an interior designer can help to transform a space to be functional, beautiful, and just what the building’s owner is looking for. Becoming an interior designer and starting an interior design business requires lots of work, including formal education, but it can also bring the opportunity to transform and improve countless spaces and countless lives at the same time.

Business Overview

Interior designers work with clients to improve both the aesthetics and the functionality of a space, whether that’s a single room or the entire interior of a new business. Designers follow a complex process that starts with analyzing a space and performing research. Good designers need to combine both attention to detail and creativity in their work, planning, revising, and then executing designs to meet their clients’ desires.

Because of the intricate knowledge required in this field, designers tend to specialize in a particular niche, like residential interior design or commercial healthcare facility design. They often work closely with architects and general contractors and will focus on everything from the overall layout of a room, to the color palette, to the fabrics, to the placement of furnishings.

Related Industries

Event planning
Home staging

 

Industry Summary

According to IBIS World, the interior design industry underwent steady growth from 2015 to 2019. During that time, the industry experienced 1.6 percent annual growth, and the number of businesses increased to 110,280. Correspondingly, industry employment also grew to 140,828. In 2019 alone, the industry brought in $16 billion in revenue.

This steady growth was largely driven by an increase in residential and commercial construction projects driven by the improved economy. The per-capita disposable income also increased during that time, meaning people were more likely to spend money on luxuries like interior design.

Industry Trends

Many trends are currently affecting the interior design industry and shaping what that industry may look like in the coming years. According to Interiors+Sources, one of the largest trends currently shaping the industry is an increased focus on the environmental and social aspects of design projects. Consumers are considering the sustainability not only of their design projects but also of the design company that they decide to hire. Design businesses that can demonstrate their sustainable designs may win jobs over other businesses lacking that sustainability experience.

With loneliness being a major issue in society today, interior designers have the opportunity to use design to combat that issue. This is particularly true in commercial interior design, where designers can create inviting spaces that allow for maximum social interaction.

Architectural Digest predicts that interior design will become increasingly digital, with designers relying on visualization apps, online purchasing tools, and online communication tools. Increasingly, designers will be able to facilitate virtual designs, which means they could potentially have clients anywhere. Social media has already become a powerful marketing tool for interior designers. The trend will likely continue, serving as a major platform that becomes more refined and business-focused for designers.

Target Market

The ideal clients for an interior design business are generally real estate owners, though that target audience will become more refined based on a business’s specialty. Some businesses focus on high-end design for affluent homeowners, while others may offer commercial interior design services for larger businesses like hotels, senior living facilities, and restaurants.

 

Checklist for Starting an Interior Design Business

Starting an interior design business can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off on the right foot.

Step 1: Write the Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related: How to write a business plan

Step 2: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities 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 an interior design 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 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 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: 3 steps 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 3: Select your Location

A smaller interior design business doesn’t necessarily need an office that’s open to the public and can be operated out of a spare room or office in the owner’s home. As a business grows, renting office space may help, especially if the business hires staff.

Related: Choosing a business location

Step 4: Register for Business Licenses and Permits

Many states require interior designers to obtain licensing. In states that make licensing or registration optional, an interior designer may want to become certified with accredited programs such as the National Council for Interior Design Qualification. Rather than send designs to licensed architects to finalize work, some states allow designers to sign off and submit drawings, which provides additional value to their services. Even in states where licensing isn’t necessary, certification can increase billable rates by 34%.

In addition, there are some general licensing and registrations that will vary depending on where the business is located, such as a sales tax permit or Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 5: 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 an interior design business is another.

Even though the cost to start an interior design business is relatively small, getting funding can be difficult. In order to get a loan, the borrower(s) will need to have good credit, have personal collateral to secure the loan, and personally invest 15-25% towards the total start-up costs.

Related: Finding the money to start a business

Step 6: Open a Business Bank Account

Keeping your 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 7: Get your Marketing Plan in Place

Marketing is essential in both establishing and running an interior design business. Business owners often use social media such as Facebook, Instagram, and Linkedin as well as paid online marketing on Google, but there’s also potential for print advertising and direct mail marketing opportunities. Some designers also establish referral rewards programs, encouraging current and past clients to recommend the business to prospective clients.

When starting your own interior design business, a portfolio is often going to be the difference between getting clients and losing out on jobs. If you’ve previously completed interior design projects for other agencies, you may already have design samples that you can use, but make sure that you have permission to use the samples of the work you did under that agency.

If you have limited or no samples, you’ll need to create them before striking out on your own. Volunteering your services or doing interior design in your own home can help create these samples quickly. Don’t underestimate the importance of quality photographs of the spaces. If you or a friend aren’t talented with a camera, it’s worth hiring a professional photographer who can take quality photos that display your work in its best light.

Related: Low-cost ideas to market a new business

Every business is going to need a logo. Make a professional logo in no time with the free Canvaa logo maker!

Step 8: Get Business Insurance

An interior design business will need several different types to fully protect the business. The most common types of insurance include:

General liability insurance protects the business if customers are ever injured, like tripping over equipment on a job site. This insurance can cover costs like legal fees and other expenses.
Commercial property insurance protects the business against the financial loss of inventory and property after an event, like a fire.
Commercial auto insurance protects the business in case a business vehicle is ever involved in a car accident.
Workman’s comp insurance helps to cover expenses like medical bills or lost wages if an employee is ever hurt while on the job.

To get an accurate idea of what insurance will cost, request quotes from multiple providers. Compare the quotes, and be sure to pay attention to variables like coverage limits and exclusions, premiums, and deductibles.
Related: Types of insurance your business may need

Step 9: Hire Employees

Newer interior design businesses won’t require employees. As a business grows, it may be useful to bring on a personal assistant or assistant designer. Salary.com reports that interior design assistants earn an average salary of $40,613. According to PayScale, personal assistants earn an average of $43,239 per year.

In addition to budgeting for salary expenses, the payroll budget also needs to include workers comp insurance, paid time off, and health insurance contributions for employees.

Related: Hiring your first employee

Step 10: Set up an Accounting System

Setting up an accounting system is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

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 an interior design business?

Starting an interior design industry carries relatively minimal startup costs if operating from a home office.

Assuming the training for licensing or certification is taken care of, plan to spend at least $5,000 on some of the essentials, like a professionally designed website, a comprehensive portfolio section to display your work, in addition to a good computer and interior design program software.

How profitable is an interior design business?

Salary.com reports that, as of December 2019, interior designers earned an average of $46,385 per year. Designer salaries typically ranged between $36,784 and $50,870.Many factors will affect a designer’s earning potential, including the certifications they hold, their specific skills, how many years they’ve worked in the industry, the type of clients they market to, and even their location.

In addition to selling interior design services, many interior designers form relationships with local furniture stores companies to include pieces in the design. The furniture stores then pay the designer a percentage of the merchandise sale.

Interior design firms face challenges with cash flow management as some clients may be slow to pay after the job is done. Be sure to keep on top of finished jobs to ensure timely payment as this can cause difficulties in getting the cash to start the next job.

Are there grants to start an interior design business?

It’s extremely rare to find a grant to start an interior design 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 an interior design business?

Starting an interior design business doesn’t require a business degree, but certain skills and experiences can make the process of starting this business smoother and potentially more successful.

Design experience and education. According to Career Explorer, a bachelor’s degree is required to become an interior designer. Interior designers’ education usually includes courses in topics like project management, drafting, design, space planning, and 3-D imaging. Several states require interior designers to earn an interior design license, and this formal training and work experience may be a requirement, depending on the state’s laws. In contrast, there is no formal education required to become an interior decorator.

Attention to detail. Attention to detail is a paramount skill for interior designers. A good designer will focus not only on the big picture but also on how all of the little detail elements contribute to a room’s overall aesthetic and functionality.

Knowledge of building codes. A knowledge of local building codes is a must, especially when a designer is involved in making alterations to a room’s physical layout. Designers need to have a working knowledge of plumbing codes, electricity, and architecture basics like how load-bearing walls work.

Problem solving skills. Problems are sure to arise in any design job, so designers need to be creative and come up with solutions to any problems they may encounter. Some of these problems may occur with pressing deadlines, so the ability to think creatively even when under pressure is also important.

Customer-service skills. Interior designers work closely with their clients, and listening to and addressing customer concerns is important.

What is the NAICS code for an interior design business?

The NAICS code for an interior design business is 541410.

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 and how to find yours

Resources:

American Society of Interior Designers
Commercial Interior Design Association
Designer Society of America
Interior Design Society
International Interior Design Association

Subscribe Now to the 60-day Startup Challenge!

Subscribe Now to the 60-day Startup Challenge!