About Catching a Whale

There is no path to financial success for interior designers without occasionally landing large, marquee projects that are many times larger than their average.

The problem is that this is exactly the kind of project that can not only make a firm. but can break it as well.

Every designer I have worked with has a version of the whale story. It goes something like this: the call comes in, the project is enormous by any standard you have ever applied, and for a few days the possibility of it sits in the back of everything you do. You run the numbers in your head. You think about what that project would mean — the portfolio piece, the cash, the credibility. You want it badly.

I am not here to tell you that instinct is wrong. Catching a whale is, in fact, one of the only reliable paths to building real wealth through interior design. Most design firms operate on a roller coaster of sales — strong years, quiet years, and occasionally a year that is neither. It is the occasional whale that turns an otherwise decent year into a great one, and a great year into the kind of excess cash that eventually makes work optional. In twenty-five years of working with design firm principals, the firms that built lasting financial security almost always had a whale or two in the story somewhere.

So yes, hunt the whale because landing one every now and then is essential to your long term financial security.

But understand what you are fundamentally changing the nature of your business when you do — because the part of the whale story that rarely gets told is what happens to the firm in the aftermath.

Breakeven Math is Not Accounting; It’s Survival!

To understand the risk of landing a whale, you need to understand how a design firm’s economics actually work — which is different from how most business textbooks describe them, and different from how your accountant and accounting software portray them.

A standard breakeven chart shows revenue climbing at a smooth 45-degree angle until it crosses the total cost line. That picture is accurate for a donut shop because every day looks pretty much like the last, and word of mouth and advertising can help that firm grow in a steady “up and to the right” fashion.

It is not accurate for an interior design firm. Your revenue does not climb smoothly. It spikes, drops, recovers, and spikes again. The roller coaster is not a failure of planning. It is the structural reality of a project-based business serving a client base with discretionary budgets.

Let’s go back to the donut shop. First client in line spends $12.50. Next spends $4.75. Third spends $22.40. But trust me, no one in that line is getting ready to spend $102,000!

But for you, it’s entirely possible that Client #1 will spend $7,500, Client #2 will spend $35,000, and Client #3 will spend (or want to spend if you can handle it) $275,000! Or maybe $735,000!

No other business I’m aware of has such a great variance between their smallest client and their largest. That creates serious management problems.

Unlike Other Industries, Your Breakeven Point MOVES!

What this means in practice is that your firm’s breakeven point is not a static finish line you cross once and stay above, as is the goal with most businesses. It is a moving target — one that shifts every time you make a structural decision about your business. When you’re dreaming about how much a big project would be “worth,” you should spend an equal amount of time worrying about how much it will cost. Here are some common costs that scale up to support the outsized job:

* Hiring additional designers, project managers, procurement staff, and administrative support

* Leasing larger office or studio space to accommodate expanded staff and client expectations

* Increasing payroll burden beyond salaries alone (benefits, payroll taxes, insurance, bonuses)

* Investing in upgraded software systems such as CAD/BIM, rendering, PM, accounting, and collaboration tools

* Purchasing additional hardware and equipment (high-end workstations, printers, sample storage, phones, servers, vehicles)

* Expanding marketing and business development spending to attract or sustain similarly sized projects

* Raising operational overhead through more complex project delivery requirements: travel, consultants, legal review, bookkeeping, procurement coordination, warehousing, white-glove logistics, and client service expectations

The whale doesn’t wreck firms by failing to materialize. It wrecks them by arriving — and as a result, prompting decisions that outlast the project by years.

They’re Called “Fixed Costs” for a Reason

When you land a project that is many times larger than your average, one of the first inclinations is to hire. Perhaps a junior designer or dedicated project coordinator. Maybe a procurement person to manage the volume of product flowing through. These are reasonable hires. Each one is easy to justify against the revenue the whale is generating.

For example, you might think: This project could easily grow to $450,000; a $60,000/yr junior designer or project manager would be well worth it. In fact, it’s the smart thing to do!

I’ll save the challenges of making a good hire for a future newsletter and focus on the $60,000 salary for this one. This number is not simply a variable, or direct cost associated with the project. Rather, it raises your breakeven point permanently — or at least until you make the difficult decision to reverse course.

The math is not complicated, but it is sobering. A full-time employee with a fully burdened salary of $60,000 — wages, payroll taxes, benefits — needs to be covered by gross profit before it contributes a dollar to the bottom line. If your firm’s contribution margin is 32%, your firm must generate an additional $187,500 in revenue just to break even on the hire.

That includes after the whale is gone! That includes forever!

The designers who use whales correctly — who staff them without permanently raising their breakeven, extract the excess cash before their overhead absorbs it, and exit the project with their firm stronger than when they entered — are the ones who eventually build sustainable financial security. The ones who get it wrong will spend the next several years working at the same intensity for a fraction of the financial gain.

The difference between those two outcomes is not talent or luck. It is six specific decisions that must be made before the project starts. Let’s look at them now…

Last week we looked at how pricing is the single most sensitive variable in your business, and how every penny of a price increase flows straight to the bottom line.

We also looked at “anchor pricing,” the psychology of perceived value, and why the “right” price has almost nothing to do with your costs and everything to do with what your client believes you’re worth. (Perceived value.)

This week, we’ll go deeper. I’ll put you in the front row of an MBA class that could be held today at Harvard or Stanford. We’ll discuss “Strategy 101,” but you must not let the business terms scare you away. You must not think that because your firm is small, that these high-sounding business tools won’t work for you.

These stories are all illustrating the same principle, one that behavioral economists call anchor pricing: when a higher reference point exists, the next lower price looks dramatically more attractive than it would standing alone. The jewelry was not underpriced at $20; it was unanchored. Without a higher number nearby to signal value, it read as cheap.…

Today, I want to introduce you to a different and far more sane model. As a case study, I’ll use one of my ActionMap clients who markets just one week a year. Not one week per quarter. One week per year. The rest of the time, she is designing. (Or snow skiing; more on that in a minute.) Her calendar fills itself.

This is not luck, and it is not a niche s…

Every designer has sat through the form-follows-function lectures. It’s one of the foundational principles of the profession — the idea, traced back to the architect Louis Sullivan, that the shape of a thing should be determined by what it needs to do.

In practice, most designers apply this rigorously to client projects yet then completely ignore it when…

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I would say that 90% of my interior design consulting clients receive financial statements (at least a P&L) from their bookkeepers once a month.

And, I would say that 90% of those welcomed the experience about as much as a trip to the dentist. One client of mine simply tossed them into her bottom drawer, right next to the bottle of vodka she kept in case her CPA or bookkeeper wanted to “go over” the statements with her!