Finance is complicated, especially when you’re running a business. You have multiple projects, various employees, and incoming or outgoing money from a dizzying number of sources. But what if we told you that you can simplify your money woes down to two simple financial levers?
For all the complexity of finance, many of your financial woes can be boiled down to two levers. One of those levers is the gas pedal, and the other is the brake pedal. You can use these two simple levers to modulate your cash flow and keep your business afloat during lean times or accelerate your growth during strong times.
Hitting the Gas
You can accelerate your business by hitting the gas. What this means is investing in ways that will bring in money. You’ll need to invest money, invest time, or accept a certain level of risk to make the most of this. But if you wanted to play it safe, you’d be hitting the brakes instead! You may want to pull this financial lever when your revenue has plateaued, or you’re struggling to take on all of the business that’s landing on your doorstep.
The first way to hit the gas is to increase your marketing efforts. This will usually involve an increase in your marketing budget, but may also require additional marketing materials and campaigns to be created. This may sound like spending money rather than bringing money in, but effective marketing will almost certainly result in more leads. Just make sure you’re ready for the new clients. You’ll only accelerate your business effectively if you can handle the extra work.
If you’re feeling confident about the money in the bank and see room to grow your business, hiring employees can be a great idea. Hiring administrative staff for things like bookkeeping can free up you and your designers to do the work you really want to do. But if you want to tackle more projects or work on projects faster, you can hire more designers as well.
You can also increase your rates. This can be scary, though. You may feel that you’ll alienate some of your loyal clients and lose more business than you’ll gain. This is always a possibility, however, it’s important to not only charge what you’re worth but also to increase your rates with the changing costs of materials from factors such as inflation and tariffs. If your existing clients see the value in your work, they will understand your rate increases and be happy to pay what you deserve. Meanwhile, new clients won’t know the difference and will see the value in your rate if your work reflects it.
Pumping the Brakes
When cash is tight and you can’t afford to invest in a marketing campaign, sometimes you have to take measures to save money and hunker down. This should only be done if absolutely necessary, as it can be detrimental to your business. For everything you take down, it will be that much harder to rebuild and regain the lost momentum. But you may need to pump the brakes during times of economic uncertainty, unexpected slow seasons, or general cash flow stress. Be wary of what you do and where you cut, as you’ll need to keep employee morale in mind. You don’t want to demoralize them into quitting due to new constraints and restrictions.
The first way to pump the brakes is simply by reducing your spending. This is broad and can cover a lot of areas. You may pull back on marketing, especially on campaigns that aren’t performing as well as others. You may put contractors or freelancers on pause. In extreme cases, you may seek out a less expensive office space or go full remote to remove rent from the equation. Audit your software subscriptions and paid memberships to see if anything can be cut.
You can also lay off employees. This will make a massive impact, since salaries are costly. However, this could still cost you more in the long run. This will only be a quick bandage fix. Hiring and onboarding can be an expensive process, even if that expense is in time rather than just money, so rebuilding and retraining employees could be more detrimental than not laying off employees at all. If firing is too extreme for you, see if you can consolidate responsibilities or move some employees to part-time hours.
Identify and put a pause on nonessential projects and hiring. This could include business expansion projects or even costly design gigs.
CEO-Level Decision-Making
Balancing the financial levers of gas and brakes can be a difficult dance. And sometimes, it’s not all gas or all brakes, it’s an intelligent combination of both. You may cut expenses in one area while investing in another. No matter which decisions you make, as the CEO of your design firm, it’s your duty to make data-driven decisions using financial projections. Learn your finances or work closely with a trusted accountant to keep an eye on your cash flow, sales pipeline health, and profit margin. By being in tune with your business and where your money is flowing at all times, you’ll be able to make strategic decisions and be in true command of your interior design business.
Click here to learn how our client, Kim Raymond, came to learn and love her financials.