What should I check before buying an interior design business?

Design studios look simple from the outside: a team, a portfolio and a steady flow of projects. Underneath, much of the business may rest on one person’s reputation and a handful of relationships. Your diligence should test what stays when the owner leaves. Ask for records, not summaries, and expect to speak with key staff and some suppliers before you commit to anything.

Where the work comes from

Ask for a list of clients over recent years and how each one found the studio. Referrals from builders, realtors and past clients behave differently from walk-in or online inquiries. If a few referral partners supply most of the work, find out whether they would keep sending it to a new owner. A conversation with one or two of them can tell you a great deal.

Open projects and money held

Request a schedule of every project in progress, with contract terms, deposits received, purchases already placed and work remaining. Ask your lawyer and accountant how deposits for unfinished work are treated in the deal. Check that orders placed for clients are tracked properly, and ask how disputes or delayed deliveries have been handled. Your accountant can help you read how this appears in the financial statements, much as in this look at another service business.

Accounts, samples and premises

Trade accounts and vendor discounts are sometimes tied to the owner or to past volumes, and may not transfer automatically. Ask each main supplier directly. Look at the samples library and what it costs to keep current. If there is a showroom or studio lease, read its term and its assignment rules with your lawyer.

The people clients know

Identify which employees and contractors have real client relationships. If the owner does the design work and the clients rely on that taste, plan how you would replace it. Ask whether key staff would stay, and whether any agreements are in place to keep them.