How do I review an interior design studio’s trade-discount supplier relationships?

Begin with the list. Ask for every supplier the studio buys from, how much it buys from each, what discount or credit terms apply and how long the account has been open. Look for concentration: a studio that depends on a few suppliers is more exposed than one that spreads its orders.

Then find out whose name is on each account. Trade pricing is often given to a designer personally or to a registered business that may change in a sale. Ask whether any written agreement exists, whether it can be assigned and what each supplier requires from a new owner. Ask the seller to introduce you to the main reps, once the deal is far enough along.

Finally, check how the studio uses those discounts. Some studios pass them on to clients, others keep the margin and some do both. Compare invoices to client billings on a few projects. Your accountant can help you read the margin, and your lawyer can review any supplier contract. Ask each main supplier, once the seller agrees, whether any minimum order or annual target keeps the terms in place, and what happens if the studio misses it.

Key takeaways

• Get a supplier list with terms, volumes and the name on each account.
• Confirm directly with key suppliers whether terms continue after a change of owner.
• Compare supplier invoices with client billings to see how discounts are really used.
• Ask whether minimum orders or targets keep the terms in place.