The ups and downs of the design industry mirror economic fluctuations, leading most design firm owners to question if or when they should hire. Many are reluctant to take the plunge because they’re not sure how to predict the flow of future projects.

If you’re not tracking your expected revenue from your current clients, now is the time to start. A simple project tracker spreadsheet, with the next 12 months as column headers, will help you to predict your firm’s future revenue. Estimate future fees by project, by month. Then estimate income from projected future projects (those that you hope to sell) by month and by project. This spreadsheet is a precursor to a full cash-flow model (which you should also have as a savvy business owner).

You want to use future data to predict when you need to hire. If your future projects are predicted to decline in a few months, then you may not want to hire yet unless you are waiting for large projects to sign with you.

How do you know if you’re currently understaffed? A simple measure is to look at your profit-and-loss statement to see how much time-billing revenue you have had for the last 12 months, and subtract your total staffing costs from that number. Total staffing costs include payroll, insurance, taxes, perks and payroll processing.

If the result is negative, you’re overstaffed. For example, if your time-billing revenue is $200,000, and the cost of maintaining your staff (including your paycheck) is more than that, then you are overstaffed for the revenue you’re generating.

When your revenue is twice your staffing costs, that’s another story: If your time-billing revenue is, say, $400,000 and your total staffing costs are $200,000, then you’re probably close to needing to hire.

Another measurement, depending on where you’re located, is your revenue per full-time employee. Most firms typically generate $250,000 of revenue per full-time staffer. If you’re in a resort area with high property values and you specialize in luxury projects, your average revenue per full-time employee could be as much as $1 million.

Your staffing levels aren’t a set-it-and-forget-it thing—it’s something you should be adjusting as business conditions change. When times are uncertain, as they have been since Covid, make sure you’re occasionally checking your revenue per full-time employee and continuously predicting future revenue so that you can adjust operating costs accordingly.

For insights and analysis on how designers across the country run their firms, download the 2023 Interior Design Business Survey report, presented by Pearl Collective, Interior Talent and Business of Home.

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Gail Doby is co-founder of Pearl Collective (formerly Gail Doby Coaching & Consulting), an interior design business consultancy that helps designers, architects and other creatives increase their profitability. Doby ran her own design firm in Denver for nearly 20 years and has a degree in finance and banking. Since 2008, she has been helping designers scale their businesses profitably and reach financial freedom. As a coach, mentor and business transformation specialist, she shares innovative ways to overcome the roadblocks, challenges and detours creative entrepreneurs face. She is also the bestselling author of Business Breakthrough: Your Creative Value Blueprint to Get Paid What You’re Worth. Her goal is to empower design industry clients to differentiate themselves, drive measurable results, achieve business projections, and create personal satisfaction through game-changing strategies and business practices.