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Understanding the Cycles of Business in Interior Design: How to Be Prepared for Change

Updated: Jan 24

By: Doris Hager, Principal of Hager Design International Inc.


Interior design is a field that is constantly changing, not just with trends and styles but also in business. The business of interior design is cyclical in nature. There are times when business is booming and there are times when it slows down. We call that Feast or Famine! It’s best to be prepared for both the good times and the bad times.


As a business owner, it's important to be aware of the cycles that businesses go through in order to be prepared for change. The business cycle is the natural rise and fall of business activity that occurs over time. It is characterized by four phases: expansion, peak, contraction, and trough. Also know as expansion, growth, contraction and recovery.



Identifying the Different Phases of the Cycle


During the expansion phase, businesses are growing and expanding. This is typically a time of prosperity and optimism. Business is good, clients are calling, you are in demand! You’re also hiring to keep up with the extra business and to meet your commitments to clients. Finally, there is profit. You can pay yourself and there’s extra finances for the office needs.


As businesses and the global economy reach their peak, they become more vulnerable to changes in the market. Be wary of this peak, spending will eventually always end. The phone is not ringing as often anymore, now you must forge new relationships and dust off your marketing materials.


The contraction phase is when businesses start to slow down and experience a decline in sales. You are looking at your team and starting to make cuts in employees and spending. This is a great time to implement a budget or look at your expenses and create a do-not-exceed monthly threshold amount to make sure you can weather the storm.


Finally, the trough is the low point of the cycle, when businesses are struggling the most. This is the time of keeping your staff at bare bone minimums. Keep the seniors that are working on projects and understand your business. Everyone is obligated to do everything at this stage. Avoid going into debt and dive into your saving only if absolutely necessary.



It is important to be aware of these different phases of the business cycle so that you can plan your business strategy accordingly. For example, during periods of contraction, you may need to focus on marketing your services more actively or offering discounts to attract clients. Be aware, discounts today cause loss of profits later. Don’t offer them too liberally just to get the work. During periods of expansion, you may be able to charge higher rates or take on more luxurious projects.


Over the past 30 years of running Hager Design International Inc. (HDI) I’ve weathered about 3 to 4 recessions, and most recently the effects of COVID, so there is always a way out. We’ve avoided debt at all costs through every downturn and were able to come out on the other side ready for growth. A positive attitude and strong core team will always get you through. It's never easy, but it's worth it on the other side.


Managing Finances During a Time of Transition


There are a few key things to keep in mind when it comes to managing your finances during a time of transition in your business.


First, maintain a sense of normalcy and stability in your spending. This can be difficult if your income fluctuates, but it's important to stick to a budget. Prioritize what's most important and make changes slowly and deliberately. For example, eliminate unnecessary spending like free coffee days for staff, team building events or dinners, and renovating your office. With careful planning, you can weather any storm.


Second, be prepared for unexpected expenses and have a contingency fund set aside to cover them. Save money during the expansion phase. Look at diversifying your income sources. Maybe branch out into other areas of design. We purposely have a hotel division and a restaurant division as their down- turn cycles are different.


Finally, don't be afraid to ask for help from a financial advisor or accountant if you're feeling overwhelmed. This is also the time to expand your marketing strategies and let the world know of your talent. Perhaps it’s time for Company Executives to hit the road and attend networking events that could potentially land more contracts and get Company exposure.



When COVID hit we looked at all our costs and made a conscious decision to keep all core senior staff. We knew when the time came that we’d be able to find juniors again more readily than our trained seniors. Our seniors helped us get through the pandemic by keeping current projects on track and keeping clients happy. Happy clients mean repeat work and a strong reputation.


By understanding the cycles of business and developing a long-term strategy, you can be prepared for whatever comes your way. With careful planning, you can ensure that your interior design business thrives no matter what the economy throws at it.


Conclusion


You can confidently navigate through any economic cycle by following Warren Buffet’s advice – avoid Debt, and never loose money. A positive attitude mixed with a healthy fear of failure will make you stronger and successful no matter what the economy is doing.



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Doris Hager is the founder of Hager Design International Inc., an international interior design firm with hospitality projects throughout North America. Doris can be reached at info@hagerinc.com


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