Updated February 2023

Your client’s budget just changed: now what?

Over the last few years, we’ve seen an enormous increase in what customers are spending on their projects, furnishings, events, design fees, etc. Because of the demand, designers have increased their pricing, hired more staff, and made more money than in previous years on their fees and markup.

But, we all know the impacts of Covid aren’t going to last forever (and not just as it relates to lead times).

This time last year, your clients’ net worth was likely up about 10%. This year, they’ve likely lost between 10-30% of their net worth. Couple that with insane interest rates and the rising cost of everyday goods–something’s got to give.

And it might be their discretionary spending.

Last year if you came in over budget on furnishings you presented or unexpected expenses came up during construction, they probably rolled with it and were more annoyed than anything.

This year, if you come in over budget, there’s likely to be some pushback, and possibly some clients full on stopping their projects.

While your pipeline is likely still jammed full of clients and projects and you aren’t seeing an end in sight, I would strongly encourage you to recession-proof your business so your company is ready when budgets shrink, project sizes reduce, and demand decreases.

Here are seven things you can do TODAY to make sure you are still standing no matter what the market throws your way:

Be mindful of your investments and do your due diligence.
Review your expense base and your fee structure.
Have a real budget conversation with clients and stick to it.
Tighten up your contract.
Review your services; is there an opportunity to serve clients in a different way?
Assess your marketing and double down on what’s working. Check out this blog for more tips on growing your interior design business.
Take advantage of the full pipeline and ask clients for real-time feedback.

Be mindful of your investments and do your due diligence.

My clients invest in their businesses and they are committed to growing their companies in professional and sustainable ways. I can’t tell you how many times I’ve worked with clients who have invested in other things: courses, programs, workshops, etc.

We’ve seen the state of their business even after investing in these other things, and we know that our mix of consulting PLUS hands-on back-end implementation is what takes things to completion.

I encourage you to strongly consider your next investment in professional development or help for your business, not just for the results you will get by investing in the right thing, but also for the money you will save by getting the help that will truly change your business. Things to consider before investing:

What do you actually need? What are your gaps? WHO/WHAT will fill those gaps? Be realistic.
Have you already fully utilized the other things you invested? Or have you not even implemented them?
Can your company afford it?
What do you have time for? If you invest in something (a program, a course, a workshop), do you have time in your schedule to show up wholeheartedly? And most importantly, let me say this again, MOST IMPORTANTLY, DO YOU HAVE TIME TO IMPLEMENT AND APPLY THE INFORMATION YOU ARE USING? IF NOT–then it is not a good time to invest unless it is a done-for-you service.
Ask for references. And not just by looking at their testimonial page on their website. Ask if you can actually speak to those people who left those references. Ask them what else they tried, and what got them the biggest results. Side note: my clients are awesome and often tag me on their social media and mention me in podcasts–seriously, they are the best!!! They also leave amazing feedback and write testimonials that make me so proud. Here are just a few.

So before you invest in your business, take the time to assess what you need, if you have time to take action on anything you invest in, if your company can afford it, and if it will provide the solution you need.

Review your expense base and your fees.

You should be keeping your books up to date–I know adding in product sales and product payments and sales tax is a whole separate beast, but your books have to be accurate and up to date. You should be reviewing your numbers at a minimum every month, not just when a recession is upon us and the market is down. (Tip: add this to your month-end workflow). Financials are essential to being able to make smart and strategic business decisions.

Let’s talk about expenses first.

Review your numbers. Run a P&L. Where can you reduce? What are you not leveraging? Can you cancel subscriptions? Were there any expense categories that were higher than normal? If yes, why? Was it a one-off, or is there an issue?

In my month-end process, I have a subtask that includes all my monthly and annual subscriptions and I add to that anytime I sign up for something new or start a trial. This way I won’t forget what I signed up for and I can easily cancel or switch it to a different card if needed.

You can also use a task like this to see if any of your software programs will offer a better rate if you switch to an annual plan. Most usually offer a 10% or more savings, which, if you have multiple thousands of dollars in software a year, can really add up. And even if it isn’t much, isn’t it always smart to save money when you easily can?

As you assess your expenses, especially software and team, are there steps you can automate? Are you using your software to the fullest (I’m guessing NO!)? Can you digitize contract signing? Can you set up some zaps with Zapier so when something happens in software A, it sets up something in software B, thus eliminating the need for you to do it or for you to pay someone on your team to manually do it?

Now, moving into your fees and your rate.

I am a firm believer in tracking your time, regardless of your pricing structure (hourly, flat fee, price per square foot, percentage of total cost, etc.). Knowing how long things take is essential to ensure you’re working efficiently and charging accurately for your services.

What you can charge is dependent on a lot of factors like your experience, your talent, your market, your marketing, and your overhead. Are you considering all of those as you set your fee? Have you raised your rates recently? Are you closing every discovery call and consultation call you take? If you struggle with pricing and preparing scopes of work, be sure to check out my Pricing & Proposals Workshop for Interior Designers.

With client budgets going down, it’s smart to be sure you are leveraging your fee structure in the event product sales go down OR you need to reduce your markup to win client confidence during an unsettling time.

Once you are firm in your fee structure, be sure your marketing backs it up. Consistent marketing, high-quality information and images, and speaking to your ideal client are the name of the game.

And you know this goes without saying, build out that paid waitlist. More on starting a waitlist here.

Have a real budget conversation with clients and stick to it.

Ahhh, budget. The topic designers are nervous to talk about, the topic clients have no idea about, and the thing that can bring down an entire project.

You need to have a budget conversation in the beginning. Multiple times.

In your investment guide and on your website. What is a recommended budget for working together? SHARE THAT PLEASE. Don’t waste anyone’s time or make them feel uncomfortable if they can’t afford to work with you. There are a million designers out there and they will find someone who is a good fit. Free them up as quickly as possible to find that person if it’s not you.
On the discovery call. Talk to them about the budget they shared in your contact form. Is it realistic? What can they expect based on their project?
In the proposal/contract. You can share an investment amount you expect the project to come in around OR you can have a term that states the minimum spend. Or, you can collect a furniture retainer.
In your onboarding. Yup, here we go again. Ask them for their budget in the design questionnaire. Talk to them about the budget at their kickoff meeting. Let them know what expenses are coming. Be transparent.
At presentation. What, again? YUP. Honor their budget. As you’re sourcing, be sure you are checking their room total against the original estimated budget. Are you coming in over? You owe it to your clients to stick to their budget–in fact, you signed a contract with them. Reselect and find a lower priced option.
When they move outside of scope. You guys, this is a great time to remind them of “This isn’t included in the original scope, and if you want to add this space on, I estimate that will be another $X,000. Are you wanting to include this in the project, or would you prefer we wait until we finish this first phase?”. Your client shouldn’t be surprised when they get a bill from you. They should know it’s coming and that is part of what you should be providing to them by way of your client experience process.

Back in the old days, (okay, fine, last year) you could come in over budget at presentation by like 10-20%, and clients would shrug and say, “Okay, that’s fine. Not ideal, but we love it so let's move forward.” Now, they’re looking at that like “Wait, what?! You knew our budget. We talked about it 10 times. And you can’t honor that?!”.

Nothing will make your clients lose trust faster than when you a) can’t honor a commitment and b) come in over budget and make it seem like a bait and switch.

The budget conversation is critical to your client experience and your clients are trusting you to create a design they can move forward with 100%. By designing a space that is outside of their budget, you risk losing their trust, you risk spending additional time reselecting and requoting, and you risk the whole project just completely stopping.

Not worth it.

PS: I have one designer (P-you know who you are!) who provides a budget to her clients upfront before they sign on, and even when there is major construction involved, she comes in within 1% of the originally presented budget every time. Amazing.

Tighten up your contract.

Call your attorney today and have them review your contract. Tell them what challenges you’re facing throughout the design process and make sure your contract protects you from those challenges in the future and sets realistic expectations and options for you and your clients.

→ Should you include a term in your contract, and what language to use?

→ Should you collect a furniture retainer, and what language to use?

→ Should you have a reinstatement fee?

→ Should you incorporate a two-part billing method? One fee for design, and one fee for project management.

Make sure you understand these terms so you can review them with clients at their initial onboarding meeting. Use your existing terms to shut things down if a client has gone rogue or is MIA.

You are only as strong as your contract so if you have a contract and don’t enforce it, or don’t have a contract and anything goes, I highly suggest using a contract and sticking to it. It is up to you to remind clients of what they signed off on in advance of them being in breach.

Payments due immediately? Late fees assessed after X days? Revisions due within X days?

Reminding them of timelines and what’s coming next is basic customer support. You’re not the bad guy. You are providing information to them to ensure they have a good experience with your company. And if they don’t have a good experience, even with all your clear communication, then you can feel confident knowing it had nothing to do with you, and everything to do with them.

Looking for a contract? Check out my interior design residential contract template here.

Review your services. Is there an opportunity to serve clients in a different way or to serve a new client base?

If Covid did one thing for the industry, it was to bring virtual design to a lot of location-based businesses. This means designers and planners found a way to offer “design only” services, without the ongoing management and the day of all-hands-on-deck install/event day.

If product sales go down because people are spending less, can you create a service that isn’t tied to product sales? Can you create a service that might allow you to tap into a new client base? (I love this service for that–and you could add in product sales if you want!).

Are there other revenue streams you can explore? Working with builders? Partnering with agents? Becoming an affiliate? Collaborating with brands? Digital products? Bringing on a project manager so you can take on more renovation projects? Buying new is just insane with rates—and we’re seeing lots of renovation projects coming through our clients’ pipelines.

Or maybe, it would benefit you to sign up for direct trade accounts, so you aren’t sourcing just retail or sourcing from buying houses that take more of the commission. It often makes sense to have a few key accounts where you can put a lot of your volume so you can take advantage of better pricing and have more control over the design.

If something in your marketing isn’t working (and you’ve given it an honest chance–like three months or more), it might be time to pause that effort or switch platforms and put that money toward what IS working.

So first, determine what your end goal is for your marketing (not everyone wants more clients, some want more collaborations, or more publicity, or more product sales, etc). Then, look at what platform is bringing you those results.

And if something isn’t working: pause it for now. Then use that time, energy, and money on the platform that is working.

DON’T stop marketing when the market turns. Keep marketing. Stay front of mind. Email past clients and ask for referrals. Let previous clients know if you’re rolling out a new service. Double down on the marketing efforts that are working.

Take advantage of your full pipeline and ask clients for real-time feedback.

What’s so great about all the demand right now is that you are finding out what’s working and what’s not working and you can adjust in real-time so it’s better for the next client and so you can make it right for existing clients.

Bonus: because you are working with a lot of clients, you can ask them and get immediate feedback. “How could I have made this better?” “What could I have done differently?”

When we are busiest and at capacity, weaknesses and inefficiencies in the business are exposed, and it highlights where small changes might make the biggest impact.

If you are sensing a “change in the mood” so to speak, now is the time to check in with your clients before you spend 30 hours designing or before you turn away projects you didn’t think you’d have time for, before you.

Being open and transparent with your clients, and knowing you might have to be flexible (yes, I know this is the opposite of what I said in the contract section) will be key right now. If a client’s budget has drastically changed, don’t you want to know that before you put all your resources into designing a space they won’t move forward with? Staying in front of it, having a conversation with them, and moving forward with confidence will keep your projects and your finances on track.

If you are already feeling the effects of the market, I encourage you to buckle down and work through the list above. Then, focus on refining your processes, learning your software, and training your team so that when the market turns, you are ready and stronger than ever. Find resources for designing a streamlined and sustainable business here.

While no one can fully recession-proof their business, especially when it’s a luxury service, you can ALWAYS provide your customers with an excellent client experience and transparent communication. If you’re like most of my clients, you’re in this for the long haul so even in downtime, focusing on designing a recession-proof business will serve you, your customers, and your company for years to come.

Listen to my episode on Design Biz Survival Guide about recession strategies here.

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