How do I tell what an interior design business owner actually takes home?

A design studio’s statements can look strong or weak for reasons that have little to do with the owner’s real earnings. Product purchases for clients may inflate revenue, deposits may arrive well before the work, and the owner’s own design time may never appear as a cost. Reading the numbers properly means asking your accountant to review how the statements record the owner’s pay and personal costs.

Separate products from design fees

Ask how the studio bills. Some firms resell furniture and materials to clients, and those purchases pass through the books with little margin. Others charge fees for design time. Ask for revenue split between the two, along with the cost of what was bought. Ask an accountant which figures separate the studio’s own design work from pass-through purchases.

Replace the owner’s design hours

If the owner does most of the design work and takes it as profit rather than wages, the statements may not show the cost of the owner’s time. Ask how many hours the owner works on client projects, then consider what it would cost to hire a designer to do that work. Ask your accountant how that cost would show in the statements.

Watch deposits and timing

Deposits received for projects not yet finished can make a quarter look better than it is, and the obligation to deliver stays with the business. Ask your accountant how the studio records them, and compare what has been collected with what has been completed. A schedule of open projects helps you see the gap.

Personal expenses and one-time items

Look for vehicle costs, travel, family payroll or personal purchases run through the studio. Ask for the support behind each adjustment the seller proposes, and check that any claimed add-back is documented. BDC’s financial statements primer explains the basics if you are new to reading them.