LECTURE OUTLINE 1: ESTABLISHING AN INTERIOR DESIGN PRACTICE

Transcription

1 Art Institute of Fort Lauderdale Interior Design Department IND 4504 Advanced Business Management Jan Merle, Instructor LECTURE OUTLINE 1: ESTABLISHING AN INTERIOR DESIGN PRACTICE Interior Design as a Profession (Chapter 1 1 & handouts) Definitions of Interior Design and Interior Designer o Professional definitions (see FIDER, ASID, IIDA, etc.) o Legal definitions (see state statutes) Professional Associations of Interior Designers o ASID, IIDA, etc. o History and changing role of associations Demographics and Business Characteristics of the Interior Design Profession o Number of working interior designers in US and size of design firms o Education, gender and age o Geographical location and income o Areas of specialization and varieties of professional opportunities Professional Preparation (Chapter 2 & handouts) Interior Design Licensing o Why are interior designers licensed? o Types of Licensure: Title Act sets minimum professional credentials for using title interior designer Practice Act sets minimum professional credentials for interior designers AND specifies services that only licensed interior designers may perform Interior Design Licensure Requirements (using Florida as an example) o Education 2 year vs. 4 year interior design degree Council for Interior Design Accreditation (CIDA) (formerly Foundation for Interior Design Education Research or FIDER) accredited or equivalent program Architectural degree o Experience 2 to 4 years full-time experience required, depending upon education level Must commence after education completed Must be under supervision of licensed interior designer or architect o Examination: National Council for Interior Design Qualification (NCIDQ) Exam Two day exam, offered throughout US twice per year, in April and October Tests candidates for minimum professional knowledge and competence In states with licensing, you apply to take the exam as part of the licensing process In states without licensing, you may apply directly to NCIDQ if qualified 1 Piotrowski, Christine, Professional Practice for Interior Designers, 4 th Ed. John Wiley & Sons, 2008 Page 1 of 9

2 Creating a New Interior Design Practice (Chapter 7 & handouts ) What is an Entrepreneur? o An entrepreneur is someone who is willing to take a risk by starting and managing his or her own business. Understanding Motivations and Risks o Know and understand what motivates you to be the owner of your own business. o Know and understand the financial risks and expenses of launching a startup business. o Know and understand the legal risks, responsibilities and costs of starting a design firm. Business and professional licenses, fees, and expenses Restrictions on home-based businesses by cities and homeowner associations Legal liability for professional negligence Advantages and Disadvantages of Business Ownership o Advantages: Opportunities to handpick clients and projects More direct contact with clie3nts and vendors Independence decision-making freedom Greater personal satisfaction and opportunities for success Higher income potential Job security o Disadvantages: Financial risk Legal liability Longer hours More responsibility and greater stress Low income during business startup No employment benefits for owner Types of Practice Organizations o Sole practitioner and independent interior design firms o Residential home furnishings retail stores o Office furnishings dealers o Architectural firms Advice and Counsel (Chapter 8) Attorney o Provides legal advice and counsel to business owners and individuals. o Should be experienced in business law and contracts. o Tasks commonly performed by attorney for entrepreneur/business owner: Assist business owner in selecting most appropriate legal formation for the business. Prepare and file the necessary business formation documents. Maintain ongoing required legal procedures (e.g.: corporate minutes) and filings (e.g.: annual report.) Draft or review contracts, leases, purchase terms, loans, etc. Advise on a variety of legal questions concerning client relations, collections, liens, employee issues, professional liability, filing or defending a lawsuit, etc. Page 2 of 9

3 Accountant o Provides financial advice and counsel to business owners and individuals. o Consults with business owner, in cooperation with owner s in-house bookkeeping staff. o Tasks commonly performed by accountant for entrepreneur/business owner: Assist owner by helping to select an appropriate accounting system (cash vs. accrual) Help select appropriate accounting software for the firm, and configuring the system for business startup and ongoing operations (e.g.: setting up chart of accounts, various accounts for sales tax, work-in-progress, employee deductions, organizing Income Statements, Balance Sheets and other periodic financial reports, etc.) Help organize office and project management procedures and forms. Prepare documents needed to apply for a bank loan. Advise on tax liabilities and provide investment counseling. Banker o Provides specific financial services to business owners and individuals. o Services commonly provided by commercial banker to entrepreneur/business owner: Commercial (business) checking and savings accounts Business credit cards for company use Business credit card processing services for customer payments (retailers) Business loans (short-term line of credit or long-term loan) Investment advice and services Sources of Capital o Initial start-up funds from business owner and family o Sources of investment capital and loans: Private lenders: commercial banks and finance companies Equity capital from investors, venture capitalists, and angel investors Small Business Administration (SBA) guaranteed loans Establishing Business Credit o Establishing business credit is critical to the operations and success of any company. o Small business owners must demonstrate good personal credit ratings to establish a trust relationship with lenders; corporations and more established businesses may business credit ratings reports by agencies such as Dun & Bradstreet (D&B) and the Allied Board of Trade (ABT.) o Obtaining business credit cards from commercial bank for use by firm s employees conducting the firm s business. o Obtaining lines of credit to finance merchandise purchases by the firm for resale to clients: Establish a revolving line of credit from a commercial bank (e.g.: for purposes of purchasing inventory) Establish lines of credit (with advantageous purchase and payment terms) from individual furnishings manufacturers, dealers, and suppliers (e.g.: for purchasing specific products for resale to individual clients on an as-needed basis.) Page 3 of 9

4 Insurance Advisers o Business owners require the services of numerous insurance providers, who are often highly specialized. o Types of insurance policies that may be appropriate or required for a design firm: General property damage, liability, and personal injury insurance Professional liability insurance/errors and omissions (E&O) insurance Product liability insurance Automobile insurance on business vehicles Life insurance (reciprocal key man policies for multiple owners) Insurances related to employee benefits: Workers compensation insurance (required for all employees) Unemployment compensation insurance (required for employees; paid by the owner in the form of mandatory contribution to a state tax) Health insurance (optional for owners and employees) Long-term disability insurance (optional for owners and employees) Other specialized insurances Technical Consultants o Interior designers often need access to specialized consultants to provide advice, services, and products on a project-by-project basis. o Consultants may be hired by the interior designer, or may need to be hired directly by the client or owner, depending upon state law. (e.g.: interior designers are not typically permitted to hire state licensed contractors.) o Consultants provide advice and expertise to designers and owners, prepared specialized plans and drawings, supervise on-site work o Examples of such specialized consultants include: Architect Engineers (structural, mechanical, HVACR, electrical, plumbing, etc.) Contractors and subcontractors Code specialist Specifications writer Accessibility specialist Mold and mildew specialist Acoustical specialist Home theater designer Kitchen and bath designer (including renovations) Lighting designer Landscape designer Green building design specialist (LEED Accredited Professional) Business Formations (Chapter 9 & handouts) Criteria for Determining the Appropriate Business Formation for Your Needs o Number of owners o Ease and costs of initial startup and ongoing operations o Protection from personal liability o Tax treatment of business profits o Access to financing Obtaining investor and bank loans Establishing business credit with vendors Page 4 of 9

5 Types of Business Formations o Sole Proprietorship o Partnership o Limited Liability Company (LLC) o Corporation (Inc.) C Corporation S Corporation Professional Corporations o Joint Venture o Other forms of business organization used by interior designers Franchise Design-Build Preparing the Business Plan (Chapter 11 & handouts) What s Your Mission? o A business s mission is its purpose and direction. o Clarifying your mission helps you to understand how your firm is different from all other firms, and will make it easier to guide your firm toward fulfillment of that mission. o The Mission Statement is a philosophical statement that provides a concise explanation of a firm s direction and purposes and why it exists. The Business Plan o Purposes o Researching & Writing the Business Plan Business Summary Market Research (potential clients & competitors) Marketing Plan Operational Plan Financials Start-up Costs o One-time expenses o Ongoing operational expenses Business Location o Home-based business o Business office in a commercial space Equipping the Office/Studio o Office furniture o Storage units o Electronic equipment o Software o Library Page 5 of 9

6 Design Library o Internet-based catalogs and research sources & tools o Physical materials stored in a library: Furniture catalogs Product literature, tear sheets, brochures, etc. Price lists Materials samples Finish samples Textile samples (memos and cuttings) o Work table and storage for display board materials Inventory Issues o Inventory are items typically products purchased for stock by the design firm and held for future resale to clients o Inventory can also be: Furnishings purchased for use by the design firm (office furniture) Items returned by clients for various reasons, and held by design firm o Inventory typically does not include furnishings ordered and held specifically for resale to a particular client (this is considered work in progress. ) o Advantages of purchasing for inventory: Allows designers to take advantage of special purchases to increase margins Allows designers to establish and maintain open accounts with manufacturers by meeting minimum opening orders and annual minimums o Disadvantages of purchasing for inventory: Ties up available cash Additional costs of receiving and storage o Design firms must decide if inventory will be received and stored onsite (at the design studio or retail store) or handled by a subcontracted receiving and storage service/facility o Design firms holding inventory must report it for tax purposes using accrual accounting method Marketing Interior Design Services (Chapter 18) Definition: Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. The Four P s of Marketing o Product o Place o Promotion o Price Branding: Branding is the promotion of a particular product or company by means of advertising and distinctive design. o Branding is the combination of images and encounters that the customer perceives, accepts, and experiences with a product. o Services, even a person, may be branded, in addition to a product. Page 6 of 9

7 Page 7 of 9 o Usually part of a larger corporate branding or identity program, involving company name, logo, tag line or slogan, and business color scheme applied to all graphic materials Target Marketing o Target Market: Target marketing is a marketing method that helps a firm identify one or more groups of potential customers who are most likely to utilize the services of the firm. o Market Segment: A market segment is an identifiable group within the firm s total market a group of customers that has some common characteristic. o Begins with a thorough understanding of what services the design firm is capable of offering. o Involves an analysis of target characteristics to define market segments and overall target market: Demographics Psychographics Geographic Industry type Benefits Product usage Establishing a Niche o Market Segmentation, Differentiation, or Niche Marketing: Choose a specific segment or part of the total market in which the designer has an interest or expertise and to work only with clients in that segment. o Both commercial and residential interior designer may specialize in this way. o Designers can specialize in one or two related market segments, to avoid being overspecialized and outgrowing the available clientele in a specific market area. o Allows designers to develop deep expertise and to become highly experienced in a specific area or areas of design, providing extra value to clients. Marketing Analysis o Marketing Analysis: Marketing analysis involves gathering and analyzing data about such things as the abilities and interests of the staff, potential clients, the economy, and the competition. o Enables the firm to make better plans and decisions about the direction of the firm s business efforts. o The goal of marketing analysis is to find out, through market research, what the client wants and then to determine if and how the firm can provide it. o Marketing analysis forms the basis for the Marketing Plan, and must become an ongoing part of the business s strategic planning and budgeting process to be effective. The Marketing Plan o Developed in connection with a firm s Strategic or Annual Plan, and Budget o May be a formal or informal process. o May be accomplished in-house or by hiring a marketing consultant. o Must be based on objective, documented marketing research and analysis. o Identifies a firm s marketing goals and the means to be used to accomplish those goals o Elements of the formal Marketing Plan: 1. Introduction 2. Goal Statement(s)

8 3. Capabilities 4. Services 5. Clientele 6. Policy Decisions 7. Marketing Organization (Staff) 8. Marketing Effort (Strategies) 9. Evaluation 10. Forecasts Promoting the Interior Design Practice (Chapter 19) Public Relations o Public Relations (or PR) is a term that refers to all the efforts of the firm to create an image in order to affect the public s opinion of the firm it is an umbrella for all the activities, tools, and efforts used to communicate information about an interior design firm to the public and especially to potential clients. o Can be handled in-house or through a paid consultant. o Common elements of a public relations program: Design of company logo and stationery Company web site Collateral materials and brochures Portfolio photography Newsletters News releases Published articles in newspapers and trade magazines Publicity o Promotional exposure to the public (attracting their attention to your firm) without having to pay media charges, such as advertising. o Unplanned publicity can sometimes be bad publicity, such as being named publicly as the subject of a professional negligence lawsuit. o Common publicity generating activities: Editorial coverage in a newspaper or trade/lifestyle magazine Publication of a press release Public speaking Participation in a design show-house Entering design competitions Pro-bono design work contributing your time & services to a charitable cause or non-profit organization within the community Essential Promotional Tools o Consistent graphic designs including company logo, business cards, stationery, business forms and literature o Professional photography of completed projects for portfolio and publicity purposes o Press releases o Web site o Brochures & collateral materials o Advertising Page 8 of 9

9 Press Releases o Free publication in newspaper or trade magazine of a newsworthy event about the firm drafted and distributed by the design firm or its public relations consultant. o Typically very brief and concise, but may include accompanying photos or other images. o Common reasons to issue a press release: Recent commissions for a major project Design award received Hiring of significant employee Company moves to new quarters Firm-sponsored workshop, seminar or public speech Brochures o May be prepared in-house or by a professional publisher. o Typically directed toward potential clients who are not familiar with the design firm. o Describes the firm and its services in a clear concise way. o Often features key projects and clients, with photos. Referrals o A referral is a recommendation from an existing client to a potential client. o Part of Word of Mouth or referral marketing. o Often the primary means that design firms get new work, especially residential designers. o Related concepts: client testimonials and letter of reference Networking o Networking is the cultivating of mutually beneficial relationships... with an extended group of people with similar interests or concerns. o Another Word of Mouth marketing technique. o Gaining exposure to people both within and outside the design industry who may be able to refer clients to you, and to whom you can refer business. o Can be an informal process, such as offering a business card in an appropriate forum, or a formal process involving regularly attended networking meetings. Internet Marketing o Developing and maintaining a web site for marketing purposes. o Using (individual and broadcast ) to communicate with existing and potential clients, as well as vendors and peers. Develop and distribute a seasonal Newsletter to maintain contact with existing client base. Develop and distribute an Brochure to potential clients. Advertising o Advertising is defined as any kind of paid communication in media, such as newspapers, magazines, television or radio. o Advertising strategy may differ significantly for firms selling products, as opposed to service-oriented design firms. o Advertising is expensive, and relies on repeated exposures for success. o Print ads may be national, regional or strictly local. o Yellow Page ads are a common and inexpensive form of advertising. Page 9 of 9