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Business of Home Podcast
Keith Granet on what the design business will look like in 2035
00:58:40
The veteran consultant and design industry insider discusses the state of the industry
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- [00:04]
A
This is Business of Home. I'm your host, Dennis Scully. Every week I'll be speaking to leaders and innovators from all corners of the home industry. My guest this week is Keith Granite. It's difficult to quickly sum up Keith's career. He's been a business consultant to high end interior designers for over three decades. But he's also the founder of the Leaders of Design, the chairman of the board at Software Platform Studio Designer, and the author of several books on the design business. More recently, Keith took over the Decorative Furnishings association and is in the process of launching an AI symposium. I spoke with Keith about the six qualities successful designers share, why professional education needs to change, and what the design business will look like in 2035. This podcast is sponsored by Ernesta. Custom sized and delivered in as little as two weeks, Ernesta offers design Forward rugs where function truly meets beauty. From their sun dried Persian collection to the 100% premium wool styles, their expert craftsmanship is unmatched. And when you join Ernesta's exclusive trade program, their team of dedicated consultants will manage everything from ordering samples to generating quotes, connecting all of the dots to support and streamline your business. Apply for membership today@ernesta.com BOH this podcast is sponsored by Resource Furniture, the leader in multifunctional solutions for the trade. Their transforming furniture from wall beds to expandable tables is designed and made in Italy to maximize every square foot without compromising style. Whether you're designing a home office that doubles as a guest room or occasionally need to accommodate large gatherings, Resource Furniture delivers flexibility with style. Visit their showrooms in New York, Los Angeles, San Francisco and seattle. Or visit resourcefurniture.com to join their trade program and unlock exclusive pricing and Support. That's Resource Furniture.com and now on with the show.
- [02:32]
B
Before we jump into an AI conference and what's happening in the software world and the many things that you have your hands in, let's give listeners a little bit of a history lesson in your career and how you got into this industry. Originally. I remember way back when you were
- [02:53]
A
working for Gensler was the original. Yes.
- [02:56]
C
Well, you wanted me to go back that far.
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B
Well, I mean, you know, this is going to be the reader's digest version of this, Keith, because you've been in the industry a long time, you've done a lot of things and so I want to make people aware.
- [03:07]
C
Well, so it started out and it's actually kind of a funny story right out of college. So I went to a small college in upstate New York where I went to a small high school that said I thought I always wanted to be an architect. I worked for in high school a architect as an intern who was a protege of Frank Lloyd Wright's, and she actually had designed Richard Nixon's house in Upper Saddle River, New Jersey.
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B
Right.
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C
And so I went to this school that had an independent study in architecture, and it allowed me to do an internship and that my brother had just gotten married and moved to San Francisco. And literally, and half your readers won't even know this, but he sent me the Yellow Pages, and he ripped out the pages and sent them to me and said, find a firm. Come here and do an internship in California. And the largest ad happened to be Gensler. And I remember talking to the office manager and we had a nice conversation. She goes, this sounds great. I don't have to pay you, so why don't you come and do an internship? And so I went, did the internship, and I came sort of screaming out of there going, oh, my God, they don't make any money and I'm not that talented. What am I going to do? At that point, I was in my junior year, and so I took a bunch of accounting classes and was like, oh, I have an aptitude for this. I did really well. And then I graduated with a BA in art because of all of these courses around architecture. And. And I called up Gensler and said, look, I'm not going to be an architect, but can I have a job? I was 22 years old. And they're like, yeah, we loved you. Come on, we'll find a job for you. So my first job was to run the mailroom, which seems apropos now in Los Angeles because everybody starts in the mail room.
- [04:57]
A
Exactly.
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C
I don't even know if there's a mail room anymore, actually. But so I started in 1979 after I graduated high school or college. Sorry. And stayed there for eight years. It was my 90 day review, and I walked into the office manager's office and she said, you know, I'm sorry it's not working out. I was devastated. I love the firm, I love my job. And I go, why? What's going on? And she said, you talk too much. And I was like. I was like, well, you know, my job is to deliver the mail, right? And she said, well, yeah. And I said, but I'm not talking about what I had for dinner the night before or a movie I went to. I said, I'm trying to be a sponge and learn this industry. So not only do I Deliver the mail. I open the mail, I read all the mail, and when I'm delivering it, I say, there's nothing in here, or there's a couple of things you may want to take and pay attention to. I was just trying to be a sponge and learn the industry. And she goes, that's great, but I kind of made up my mind. And I go, how long has this been bothering me?
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A
Wow.
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C
And. And she said, since you started. I go, you waited 90 days to tell me this? Lessons learned, right?
- [06:09]
B
Oh, my goodness.
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A
Yeah.
- [06:12]
C
So I. And I never would recommend this to any other 22 year old, but I stood up and I said, I'll be right back. And I walked into the managing principal of the San Francisco office and I said, could you come with me? And if looks could kill, I wouldn't be talking to you right now. Because he walked into her office and I said, could you repeat to him what you just told me? And she did. And he goes, that's ridiculous. We love Keith. He's staying. And that was it.
- [06:39]
B
And you're going. Keith is staying and you're leaving.
- [06:44]
C
And by the way, she was there till the day I left. But six months into it, I got transferred to the corporate office. And the point was that at that time, Gensler wasn't charging for reimbursables for FedEx and mail. And I put all these systems in place and like, well, if you can do this in the mail room, what else could you do? And so I was hired to then work with the Director of finance. He actually got sick very quickly after I started, and Art Gensler came to me and said, you know, I know you're studying it to get your MBA from San Francisco State, but I could give you the best education if you give me your time. And I said, you're telling me to drop out and not do that and trust you're going to give me an education? And he goes, yes. And I said, okay. And I worked directly for Art Gensler for six and a half of those years and got the best education in this industry anybody could ask for.
- [07:42]
A
Yes.
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C
And I remember the day I resigned because I always said to him, as soon as I feel like I'm not growing, I've got to leave. And I walked into his office and he was a very sort of boisterous man. And he was silent for a full minute, and I was like, oh, my God, what have I done? And he said, we believe in letting people spread their wings and then come back to us. You're always welcome. But Please come back. I never came back. And in fact, Gensler has a boomerang award where if you come back, you get actually a physical boomerang, because they like the fact that you've gained knowledge elsewhere and you brought it back to them today. And I just ran into Andy Cohn, who's the CEO, and there's 6,500 people in that firm. It's insane. Yeah, when I was there it was 250 and when I left it was 800. And that was huge growth. But I learned the entire business through the eyes of our chancellor, who wrote the foreword to my first book.
- [08:47]
B
What an incredible story and an incredible education. And did you ever look back and think, oh, I should have gotten the MBA or I should have? I mean, never.
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A
Never.
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B
Yeah. And when you felt that you weren't growing anymore, did you have thoughts beyond that? So I need to go because I'm not growing and I'm gonna go do what?
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C
So I always knew that eventually I'd like to have my own practice. And I thought at Gensler I was pigeonholed into doing very specific tasks. And it was some project management stuff and mostly financial budgeting. I go, what is it like to run a firm? And so I got recruited to run a 60 person architectural firm in San Diego and figured that way I would have this large firm experience and then this mid sized firm experience. So I was a director of finance and administration. And basically they said the financial side of this is about 90% of your job. The administrative will be about 10. Well, he was completely wrong. The administrative side was 90%. And I did all the finances late at night because I was dealing with people's problems all day long. But it was a huge learning lesson about how to manage people. And I stayed there for four years and then it was 1991 and. And the economy in Southern California had finally sort of hit the skids. And people were calling and saying, can you tell me how we survive? And I go, well, if you pay me, I will. That's how I started my practice.
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B
Well, when you were working for Art Gensler, what was he mostly having you do when you were working? So around the clock for him, what was he focused on?
- [10:25]
C
So I literally would fly around at that point. We had seven offices and I would do all their operational budgets. They never had any budgets. And the interesting thing is I walk the first computer into Gensler. So we were in the middle of moving our offices and so we had a temporary office was in a two story garage that was subterranean, which we Stayed in for two years while they built the rest of our offices. And there were escalators, and I was holding an Apple one computer. And he was coming up the escalator. I was going down, and he goes, get that out of here. It's going to destroy our business. I'm like, I just want to do spreadsheets. Leave me alone. And I was like, watch this. I change a number, the total changes.
- [11:10]
B
Magic.
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C
Magic. So that happened, and I started doing all of the operational budgets for the firm. And then he's like, we have to get a computer system in here, so we need cad. And we hired Intergraph to build this. And so I had to negotiate. It was a half a million dollar investment back then. And then on top of that, there was a program called Harper and Schumann, which is now Deltec. And it's basically the accounting system that many architects still use to today. And I worked very closely with them to customize our program so that Gensler could use it. And one of those things I wanted to do was a comparison of our actual expenses versus our budget. And so I wrote that program with them. And so when I went out on my own, I was like, okay, how am I going to get clients? So I called them up and I said, look, I don't need any money from you, but every time you, Somebody, someone buys your program, could you let them know that I could help install it? And that opened up huge doors, some very big firms. And I would go install their software, and then when I would look at their financials, I'd be like, you need help? And that led to helping them manage and grow their firms. And some of those clients are still clients today.
- [12:22]
B
Yeah, well, so tell me how it evolved. And this is so interesting. I had forgotten so some of those details about the early days. And so in the beginning, you're sort of looking at people's financials, and times got tough for a lot of them, it sounds like. And so they needed your help. When did you start to realize you
- [12:42]
A
had a whole array of services that you could start to offer them? And how did you develop those services and those offerings?
- [12:50]
C
Well, like, everybody made a lot of mistakes along the way and gave advice that probably wasn't the best, but eventually learned what the better advice was. In fact, I was just in Palm Springs last week, week during Modernism Week, and was with one of my clients where we did his first retreat. And he's been a client also for 30 years. The firm is KAA and Grant Kirkpatrick. And we were just sitting and Talking because he was staying in the hotel where we did that first retreat. And I walked in to have breakfast, and I said, I've got PTSD from this place. And he goes, why? And he goes, because the first retreat we did, one of the questions you made me ask your team was, can we each just be honest with each other about our strengths and weaknesses? And let's go around the room, and it was a disaster.
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A
Oh, horrible.
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C
And he goes, so why was that so bad? And I go, well, the lesson I learned was, you got to ask for permission. You can't just tell somebody how you think of them. You got to get their permission to say, look, where are my strengths? Where are my weaknesses? Talk to me. But by just telling somebody. And one of their employees ran out of the room and started crying. And I was like, okay, I don't even know how to do retreats, but I've done hundreds of them at this point and have learned those lessons of what works, what doesn't work. When you look at somebody's financials, you can see holes in their business and the things they're doing, and whether it's. They don't get their billing out in time, whether nobody turns in their time cards, which is usually the principle. It just slows everything down. And so all of those led to learning how to manage firms, both people and their money. And along the way, I got experience in all those areas. And then clients would ask for different things, like, I want to do a product line. And that led to. Barbara Berry was my first client. And she came to me and said, I want to do licensing. And I'm like, what's that? She goes, I don't know. We're going to do it together. And we did. And we did. You know, the first line I did was with Baker Furniture, which became the most successful wine in the history of Baker.
- [15:01]
B
In the history of the world, as far as I'm concerned. I mean, that was so big at the time. It was.
- [15:05]
C
It was.
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B
It really was unbelievable.
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C
And people say, how did you make that happen? I go, well, she has a lot of talent, and we put a good deal together. And, you know, it was all her. To be honest. I just got to learn how to do the business side of it.
- [15:20]
B
Yeah, no, no, that was huge. And people, many listeners, might not remember the days when that high point market would come around and Barbara's new collection would be this huge building and hundreds and thousands of SKUs. And it was really quite. And she became this huge personality and star herself. It was quite Something. And that led to many big A list names for you over the years.
- [15:47]
C
I think we have put about a half a billion dollars worth of products in the marketplace after all these years. And it's fun to do, but there's a lot of. Everyone thinks they can do it right. But the success with licensing is you have to reach the masses. I remember years ago having a client show me this beautiful chair and said, we're going to turn this into a collection. And I'm like, The chair costs $15,000. How many are you going to sell? And I said, it's a beautiful chair, and you can sell them to your private clients, but this is not going to the marketplace. We'll never get there. So you really have to find the right connection that both the designer fits and that you realize it's going to reach the masses. And probably the most successful client I've had in that world, other than Barbara, is Suzanne Kastler. Her collections have done very well. And, you know, we're probably 15 years into this, and, you know, she sought me out because she wanted to know who did Barbara's lines. But we've worked with Charlotte Moss and Tom Felicia and Mary McDonald, the list goes on, and put a lot of products in the market, and very exciting. And to be honest, to this day, it still pays residuals for all of us.
- [17:09]
B
Yeah, yeah. No, and that's. And that's the hope. So often and we talk about mailbox money and what it becomes over time, it seems to. Your point? And I want to get to some other things before I come back to this, but it seems like it's a
- [17:25]
A
lot more challenging today, the licensing world and what the market needs and all of that.
- [17:32]
C
Yes, Well, I mean, I. I get asked this all the time, and they say, is it saturated? And, you know, good design is never saturated if you can, you know, bring something new and different. It's just that there's a lot out there. You know, you go look at, you know, go to the 200 Lex. It's like, do we need another fabric? There's a million out there. But yet, you know, taste changes, trends change. And so if someone has a new idea and a good idea, it's got a potential. But it is pretty saturated when you think about how much is out there.
- [18:10]
B
Yeah, well, something has to take the place of Ivory Boucle, Keith. So, I mean, I'm excited to see what that's going to be. So you become, I take it, Keith Granite, becomes this industry consultant to all these big designers and firms and how does the business evolve from there there? And how do we get to the Leaders of Design and your book and all of that?
- [18:38]
C
It's interesting. So I run right now five different companies, and I guess I call it adult onset. Add that I see opportunity and want to grab it. So if I go back, I guess Leaders of Design would be the next thing that I took on, which many of you know that it was a DLN in the beginning. So Waterworks hired me way back when and said, we want a deeper relationship with the design community, and we know, you know, everybody. And so I said, let's do this. Let's do these. And Dennis, do you remember these days?
- [19:14]
B
I do remember them well. You were there, believe me. Yes, exactly. I believe that the townhouse that I got married in was actually a testing ground for the.
- [19:26]
C
Yeah, you're right. That's right.
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B
Yes.
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C
It was next to Charlotte Moss's townhouse. Exactly, Actually, yes. And so I said, why don't we do a full day where we bring in designer, your top designers from each of these six cities. They'll get a half day of me talking about best business practices, and you'll get a half day of them talking about your product, and we'll build some kind of a relationship with them. And we did New York, L.A. san Francisco, Boston, Chicago, and Miami. But after the 6 one, I turned to both Meg and Peter, and I go, all they want to do is talk about business. We've got to do something. And that led to aspen, which was 95 people. And we created the Design Leadership Summit at the time. And we did that for seven years, four of them in the States. And then the economy hit the skids, as we all know, in 2000. And by 2009, we were in. Right after Katrina, we were in New Orleans. And in 2010, I was working with Fortuny, and they said, you need to come to Venice. And the response I got was, no one has any money. They're not coming to Venice. 200 designers showed up in Venice.
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B
They were all up for coming to Venice, it turns out.
- [20:43]
C
Exactly. Well, it turns out if designers have two nickels to rub together, they'll show up. And so they came to Venice, and then we did Venice and Copenhagen and Marrakesh. And then at that point, I was like, this is getting too big. And I would like it to be much more principle oriented. And that's when Leaders of Design was formed. And that was 2012 when we did Americash. So 2013 was our first conference in Berlin, and we're about to celebrate 20 years. We are celebrating 20 years and we're leaving Monday for Bangkok.
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A
That's right.
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C
It's a far flung trip, but it's a great group and we're really excited about it. And we do now these poster pre trips and literally almost everybody who's coming to Bangkok is going to Cambodia for the post trip. So it's going to be great.
- [21:39]
A
We're taking a quick break to remind you about Resource furniture. For over 25 years, resource has defined the multifunctional furniture category with Italian made custom solutions. Their curated collection includes wall beds, transforming tables, flexible seating and storage systems, all designed to make spaces more functional and beautiful. Visit their showroom in New York, Los Angeles, San Francisco and Seattle to experience the remarkable transformations in person. Or visit resourcefurniture.com to join their trade program and unlock exclusive pricing and rendering support. And now back to the show.
- [22:26]
B
Do I understand that it was the leaders of design that acquired the dfa? Something that I'm eager to ask you about and better understand. Is that the entity that you used in. In that. Or tell me how that is structured?
- [22:41]
C
Well, sort of legally, it's a little bit different, only in that the DDFA is a 501C3 and we didn't want to lose that status. So we are running it. And we did acquire it, but we're keeping it as its own entity. We can't fold it under our umbrella because otherwise we would lose their nonprofit status. But it came to me actually through David Cohn, who was very close with Meredith Xavier, who was running it at the time. And they felt like it just needed a jump start. And so we looked at it and I said the only way I would do this if I could hire an executive director, which I did, which is Rachel York. And we're really excited. We're just starting to kick it off and we think we can do the same thing for that community that we did for the design community. And, and for me, it felt like we were closing that ecosystem by having architects, interior designers, and then manufacturers, landscapes, sorry, manufacturers, showrooms, and vendors who, you know, have to have a community like that as well. There'll be some crossover, but mostly we're going to keep the company separate.
- [23:50]
B
Interesting. And we should remind people what the DFA is and the role that it has played over the years. We talked about it a little bit on the show at the time of the. But now, not acquisition. But tell me the history a little bit. I know, as you say, since 1934, if I recall. It used to be the decorative fabrics, and then it became the Decorative Furnishings group. So tell us a little bit about it.
- [24:11]
C
You're exactly right. It was the Decorative Fabrics association, and then it became the Decorative Furnishings association, so that anybody making product for the industry had a community. And one of the first people I talked to was Jim Druckmann and said, I'm thinking of doing this. What do you think? And he goes, please bring it back so we can go have cocktails at lunch.
- [24:36]
B
Many in the industry seem to have fond memories of boozy lunches at this organization.
- [24:42]
C
Well, when I first started, I would go to lunch at Gensler, and I was 22 years old, and they're like, let's have a drink. And I'm like, I have to go to sleep now. I don't know how you do that, but it was that error where people cocktails at lunch was okay. So basically, the organization was founded to deal with issues. And obviously the biggest issue we've been all dealing with in that world is tariffs and how do we address them. And so having support, that isn't just you trying to figure it out, but your industry supporting you is what that's about. And that's our hope, is that even though this is production, we know AI is going to have an impact on it. That's where we have to really dig deep to know what the top issues are for the industry and help them address them. Bring in experts, have regular meetings, create a community that supports each other.
- [25:44]
B
As you say, it used to be a big industry gathering, talking about everything from the early days of the Internet and how that was going to affect showrooms, business and all of that. And then this whole debate about whether the trade world was ultimately going to evolve and would consumers need to be addressed in some meaningful way. I think everyone's still trying to figure that one out, and not too much seems to evolve.
- [26:13]
A
But also an important issue that was being raised in the latter years of
- [26:17]
B
the organization was how do we get more consumers or homeowners to want to hire interior designers and to help really sort of keep this industry growing in a meaningful way?
- [26:30]
C
I mean, you mentioned the Internet. I mean, that was such a major change for them. And I remember the days where when we launched product lines, you couldn't come in and look at the showroom unless you were invited, and then you couldn't take any picture. Now it's like it's a free for all. So, you know, all those things that evolved and then the DIY movement became huge, and then people like oh my God, they don't never need an interior designer again. They can do it all online. And now I was actually having lunch with one of my employees yesterday and saying, oh, my stepmother is decorating her house and using Chat GPT. And I'm like, what?
- [27:06]
B
Oh no,
- [27:09]
C
how's that going? And you know, but we've got to adapt as things change and that's what we're, you know, that's what keeps me alive every day. It's like, what's going on and how can we help address it and not just let it pass us by? Because if we don't stay relevant, we're gone.
- [27:30]
B
Well, it's so true. And the issue of AI is just coming up more and more. Not just in the home industry obviously, but every industry is just being throttled by it. I mean, the software industry has just been decimated in the past few weeks with everyone thinking that AI is just going to replace all of these tools that we've come to rely on. And to your point, many designers share stories of their very high end clients jumping on ChatGPT and saying, oh, how would Peter Marino design this room? Or how would Bunny Williams outfit this living room? And it's unsettling. And I get it.
- [28:13]
C
Well, to that point is I was in Gil Schaeffer's office recently and they said, let's just do this. And they typed into ChatGPT, show me a project by Gil Schaeffer. And this house that couldn't be any more or any further from his designs shows up. This is a Gillschafer designed house. And then we typed in show me a project by Norman Foster. The same house came up and it was like, it would not be Norman Foster either. So it's like, how confusing is this that it exists now? Obviously it's going to get tweaked and get better, but it is a little frightening to think that one is your IP protected because your designs are now open to anybody's interpretation. It's a fascinating time, in fact, that's leading to us doing an AI symposium in May. The speakers are the head of digital at Gensler, one of the partners at Big, an executive from Nvidia. And then we just got the dean of the school of Architecture at usc. So great, great people talking about, you know, what, what to expect and what they're doing in this world. And it's, you know, this is part of my consulting business to do things like this. But we're really excited about this particular program.
- [29:29]
B
Where is it going to be? And tell me Again, when it's in
- [29:32]
C
Los Angeles May 14th and 15th. And right now we're in negotiations with CAA to do it at their, their offices, but we're waiting on confirmation for that just because of the dates. And I've, you know, I sort of tested the asking clients. Would you come to this? And they're like, I'll send four people. They really want to know what they can do. And we also are looking for an IP attorney to talk about that as well, to speak. And there's some artists that are doing some amazing things in LA that we're going to bring in as well. So the program is meant to be two days where it's a day and a half of speakers and panels, and then the last half day will be breakout sessions of all that knowledge and how you're going to bring it back to your firm so that it really becomes a very useful symposium.
- [30:23]
B
Yeah, no, it really sounds, it really sounds amazing. I can't wait to hear more about it. You are a big shot in the software world as well with Studio Designer. So you mentioned your five different companies and hats and everything. So a big one is Studio Designer. Tell us about that.
- [30:42]
C
So it sort of followed leaders of design as far as the next thing I took on. And the founder of Studio Designer, a man named Lance Haberly, is somebody that I had recommended all the time. This is the best program, you should be using it. And he came to me 10 years ago and he said, I brought this to the cloud, I have tremendous amount of data and I'm not sure what I could do with it. And I looked at it and said, this has so much potential. I was mostly interested in the data than I was necessarily in just growing the business. And spoke to my attorney and we basically said, we want to buy it. And so I raised money through all these great people that I know. And we purchased the company with two employees and 2,000 users. Today we have 120 employees and 22,000 users. And we process about $6 billion through the software. Seven years into it, we brought in private equity, a company that really knew how to manage data and payments. And along the way I said, the software is great, but I'll compare it to farming a land in Texas and you've got a great crop, you're doing a good job. And all along you know that you're sitting on top of an oil well. And that oil well was our data and our payments so that when we move money around we could capture some of that. And so when now When a designer wants to submit an invoice or proposal to their clients, the client can pay them directly through our system, and then we can scrape some dollars from moving that money for them. And that's been very successful for us. And I believe we probably have the largest database in home furnishings, because we see. Absolutely. But every designer in the industry that works with us pass to buy. Now, we'll always protect them and not ever share specific data. But think of the aggregated data that we have. We can show trends. We can even like, we're even supporting the DFA in saying, look, I'll make up a showroom. Phillip Jeffries. We can not make it up. I love those guys.
- [33:05]
B
I've heard of that showroom, actually.
- [33:06]
C
Yes, exactly. We can tell you that 85% of your proposals turn into purchase orders, and 15% goes somewhere else. Now, we're not going to tell you who's doing that, but we will tell you that it could be price, it could be color, it could be whatever. And that's immensely valuable to them to really understand why they're getting sort of why they're losing the 15%. And so we're trying to put that data in play so that they can use that in a very valuable way to help their businesses grow.
- [33:41]
B
That was always the big question, Keith, and sticking with your oil analogy, I mean, you sort of know that the oil is there. It's how do you extract the value of it? So, I mean, with this data, there's always been the question of how can this be meaningful for you and the industry, as you say, to see these trends again, protecting people's privacy with the data, but also really helping the industry to understand what's happening and where the opportunities are.
- [34:11]
C
Our goal is never to use our data to hurt anybody. Right. It's only to help the industry. It's my entire career has been that. Right. I'm out there to every day finding ways to make the industry better. And as Art Gensler wrote in my forward in my first book, it's like all boats rise in a rising tide. So we really want to help people. And so how do we use that data in a positive way? Because as soon as you take data and people feel like you're going to use it against them or to help somebody else other than them, they're going to walk away. And I remember when I first bought the software and I was just talking about what we potentially could do, they're like, oh, my God, my data is private. Want you to know that I just bought Brad Pitt a sofa. And I go, trust me, nobody cares that you bought Brad Pitt a sofa. But if you don't want anybody to know your business, then stop Googling and stop using the Internet because they know much more than we do. And we all know that as we're talking, half of this stuff's going to show up on our feeds in social media because we're talking about it. Everyone's listening all the time. So how do you take information like that and help people? That's our ultimate goal.
- [35:25]
B
Yeah. Also, I would just think you get a pretty good idea of where business is going in general. Some people seem to have had an amazing year last year and other people less so.
- [35:35]
A
I was surprised to learn, you know,
- [35:37]
C
I have clients that can't take on any more work. I mean, they're fully booked for the next 18 months and I have other clients. Like, I need work.
- [35:46]
B
Yeah.
- [35:46]
C
And so, you know, sometimes it's regional, other times it just happens to be where you're at. And one of the things I've been saying for years, you need to look for work when you're busiest because if you wait till you need the work, it's too late. We know it takes six months to bring in a client. It could take probably not, but it probably takes six to eight weeks. And if you don't have enough work during that six to eight week time, you're not going to make it.
- [36:13]
B
It's interesting because our industry and design firms in general are sometimes criticized for not really knowing how profitable they are or where business really is at any given time. And many designers will say that profitability isn't their primary focus when they're running their day to day, obviously. Right. They're not minding the shop in that way. They're busy designing. And we've had people on recently. We had Seth Kaplowitz on not too long ago to talk about some of his notions of best practices. You've been telling designers for a long time what their best practices should be as far as billing. Where do you come down with how designers ought to be charging these days?
- [37:02]
C
Well, you know, it's interesting. I always say that architects and designers are born without the conflict, Gene, so they avoid it at all costs. And it's almost like, please pay my bill, and they don't care. But let's face it, these are big businesses. They run a lot of money through their businesses. I don't think anybody should be naive to think that they don't know what they're doing. Now there are Plenty of people who are very creative that have run their business by the skin of their teeth because they love what they do and their creativity carries them through. But they probably could have been 10 times more successful if they really ran it like a business. I would say most of. Well, I say all of my clients run their business like a business because of me, but that's why I have a career. That was my goal, to be that support system so that they could let their talent thrive. And years ago, and I think this is in my first book, I came to the conclusion that why were these clients that I work with? And I've been honestly so privileged to work with the best of the best. I mean, at one point, I think. I think this year we had 40% of 8100 as clients. And I was thinking, what are their attributes? What do they have that makes them stand out? And I came up with these six things. Hopefully I can remember them. Yeah, but they are finding your particular talent. So, like me, I suddenly realized that I wasn't going to be an architect, but my talent lied in doing the finance or business side. Having a passion for what you do, this doesn't work unless you're passionate about it. Having discipline, the ability to work at something a little bit every day so you get it done. Having a good knowledge of the industry, and then having chutzpah, which is the ability to take risk. And then I can't think of the sixth one. It'll come to me. I looked at all of these people and I realized that they had all of those things, and there's plenty of people that have tremendous amount of talent that won't take risk, and their practices have not thrived the way they possibly could. And then there are people, as we all know, who are not the talent, but they have the personality to sell, and they have very big businesses and they rely on others to bring to that talent. But if you've got these six pieces, then you will truly be successful, I believe.
- [39:35]
A
Well, it's interesting because I'm always trying
- [39:37]
B
to figure out as I interview so
- [39:39]
A
many designers, is it that they're great salespeople? And that's a huge part of it.
- [39:44]
B
They can sell themselves, but they also sell their clients. On moving forward with all these different elements of a project, or to your point about chutzpah, do they just, like, do they just have the courage to throw themselves out there? And to your point about working with 40% of the AD100, I mean, does the drive. Do people have this drive to be on this list to be on the Eldecor A list and the AD100 list, is that part of what you identify as what's going to make them successful? And as we've been talking about recently,
- [40:19]
A
do those lists have the same significance
- [40:22]
B
that they did years ago in your mind?
- [40:25]
C
Well, you know, one of the reasons during the pandemic that I rewrote the first book was it was 10 years old, and there was nothing about social media, There was nothing about work from home. And I think social media has taken the place of those lists to some degree, because there are people who aren't on those lists that are very well known because of their ability to expose themselves in a way that's very positive. I do think they're important to some degree. They're important for acknowledgment. They're important for the ego of that designer, mostly, sure, because they want to be acknowledged for what the work they do. But those lists are driven by individuals, and if that individual doesn't like you, you're not making the list. So is that fair? I mean, there are people on those lists that I would say you've missed a lot of other people that I think are far more talented for whatever reason. And then, you know, you'll talk to the editors and they'll say, well, once you're on the list, you're always on the list. But it doesn't really feel that way to a designer. I remember a designer who had been on the list for maybe 10 or 15 years, from back, from the days of Paige through Peggy. And they got taken off and they felt devastated. And it's like, people know who you are. You don't need to be on this list. But it didn't feel great. And the people they replaced it with, I think were people who were rising stars, which is fine. So give them a chance. And to your point where you said, if you're a great salesperson, you can have a successful business. And there are designers out there that just know how to do it, and they sell and they've got incredible businesses, but don't have the same kind of recognition. And they don't need it because they know their audience, they know how to address it, and they have great work. And there's designers out there that are wildly talented, can't publish anything that we never hear from. They have amazing businesses.
- [42:29]
A
Right.
- [42:30]
B
Everything's under NDAs. And so they can't share any of that great work that they're doing.
- [42:35]
C
And guess what? I just remembered the sixth thing oh, here we go.
- [42:39]
B
Drumroll, please.
- [42:40]
C
It's hysterical that this is the sixth thing that I forgot, which is common sense. That I think the world's too hard to navigate without common sense. And, you know, you just really have to know what's, you know, good judgment and common sense.
- [43:00]
A
We're taking a quick break to remind you about Ernesta beautiful interiors. Start with the right foundation. Get custom sized rugs from Ernesta designed to your project's precise dimensions, delivered in as little as two weeks. Join Ernesto's trade program to also receive complimentary unlimited samples, exclusive discounts and personalized support. To apply for membership to Ernesto's trade program or to learn more, visit ernesta.com boh and now back to the show.
- [43:39]
B
Our industry is often criticized because it seems like everyone has a different structure. Or you ask 10 designers how they bill and they all give you some different answer, and you think, what kind of industry is this, that everyone has a different way of doing it? Has that changed over the years? And are we doing ourselves a disservice with that? Should we all get on board with hourly billing or not charge markups or. I don't know where you come down on any of those issues, but what's your sense?
- [44:11]
C
Well, there was a time years ago, even before I started in this industry, where they tried to create a structure and it was considered price fixing. And that's why it wasn't allowed to sort of be one way of doing things. And it's interesting. For years I've noticed that cities like Chicago and Boston and San Francisco charge hourly for everything, plus a markup. And LA and New York were a lump sum fee. And then we found during the pandemic, a lot of people switched hourly because they wanted. They were working all kinds of crazy hours, but they just wanted to be paid for their time. And my thing about hourly is that if it takes you 20 years to develop a detail and you can deliver it in an hour, is it only worth an hour? It's not value based. This is a fascinating conversation to have right now because of AI. And the fact is that there's going to be a time where a lot of the work that people are charging hourly for will be done in minutes. How do you charge for that? And so we're going to have to figure out how to convert that to value. And that if you hire a talented designer and it only takes them 10 hours to do something that in the past they got paid 50 hours for, then suddenly their businesses are going to have to model. Now people will say, well, with AI you have more time, so keep designing. But that doesn't work either because you can't have a million clients just doing design. And then all the back end stuff is being done by somebody else or being done by AI. So there's a lot to figure out here as far as how we charge and how we create value for our time. And that it's not only based on time, it's based on talent. So there's some work to be done there. And it actually leads to something I wanted to talk to you about, which is education. Because they say today 18% of graduating students have lost their jobs to AI. And in every profession, the legal field, they hire junior lawyers so that they can do all this research. Well, now AI can do that, so who needs them? But if you don't have junior lawyers, how do you get to senior lawyers? This is a conversation I was having with the dean of the School of Architecture and this seems like going backwards, but we need to get to an education system where we're really co oping students so that when they graduate they actually have experience so that they become a much more viable candidate.
- [46:51]
A
So tell me what you mean by co oping.
- [46:53]
B
So tell me what that means.
- [46:55]
C
So, meaning that, you know, maybe a college education isn't four years anymore, maybe it's six years and in two of those years you're working. You know, after your junior year you're out for a year and then you come back and you learn more. So when you get that diploma, you're actually a professional at that point. To get into Stanford's business school, they expect that you've had a couple of years of on the ground training through a firm between your undergraduate and your graduate before you get accepted, because they want you to come with some knowledge of the real world. And I think that we're going to have to figure that out. I mean, colleges are so expensive right now and I don't know how you drag it out for two more years and afford it. But if they're working in between, maybe that's the solution. I don't have the answer to this. We don't have a crystal ball. And that also leads to my fourth book, which I'm working on right now, which is what does a design firm look like in 2035? It's going to be so different. And I don't have all the answers.
- [48:01]
B
You don't have all the answers, but I mean, you're thinking about it and I mean, what's coming to mind for you, because I'm fascinated by how much of what you wrote about in business of design you imagine will just be completely different in the next 10 years.
- [48:16]
C
Well, I think the pandemic was a huge wake up call for all of us. And a lot of firms have gone back to full workforces and coming in the office, but some have created a very successful hybrid. And so that's something to look at, how that proceeds and how that evolves. Obviously, as we've talked about all the. For the last hour is AI and how is that going to affect us? And then value based billing. I mean, those are my sort of three big topics about it. And you know the thing, it's interesting. When I was talking to the publisher about when they needed to turn it, I needed to turn in the manuscript and they want 18 months to print it, I said, well, here's the problem. There's going to be a whole section on AI. It's going to be obsolete by the time this printing comes out. Can we like have a placeholder until you tell me the ink needs to be put on the paper and then add that chapter? So we're trying to figure all that out as well.
- [49:14]
B
Yeah, yeah. I mean, I'm sure Claude has been updated several times since we've been in this conversation. I mean, it's just, it's moving that quickly. And again, the awesome ability that it has now, that will be far greater
- [49:29]
A
18 months from now.
- [49:31]
B
And again we talk about disruption, but again, the positive side is maybe it will be this incredibly, this productivity enhancer that will help people to find more hours. So often you and I have spoken to designers for so many years, they all say, oh, I wish I had more time to be creative. I wish I had more time to design.
- [49:50]
C
Right.
- [49:50]
B
So to your point, if the AI is finally making all of that time available to them, will they be able to explore more? Will they be able to have new ideas about new furniture collections to come out with or. Or just more interesting and exotic design for clients? That's the question.
- [50:10]
C
It really is. And I hear this from all my clients. It's like I came into this industry to be creative and to design and it probably is what I get to do 10% of the time because I spend my time managing my staff or managing clients. And it is just the nature of it. You can come into this as a great designer, but if you want a great business, it's going to take. You have to create a great support system behind you in order to allow that creativity to flourish. Because otherwise you're going to spend your time doing the business things and those are important as well.
- [50:48]
A
One of the challenges related to that, and you talk about this value based billing, and I don't know what it is about our industry that often, despite
- [50:57]
B
the chutzpah and the great selling ability that some people seem to have, there's
- [51:02]
A
an esteem problem in our industry that
- [51:05]
B
many don't feel confident about what they are charging already, never mind trying to establish some new value based billing approach to their work, because they lack, again, is it confidence, is it a belief that the interior design industry is a real business? The way lawyers and doctors don't have to ever question?
- [51:30]
C
Well, the biggest pushback we get, and it's not just interior design, it's actually an architecture, is when your fees are based upon the value of their project. So whether it's purchasing furniture or building a house, if your fees are based on that, then there's always a question whether or not you're overly doing something to get more money out of a project. You're putting in marble countertops instead of Corian because you get more money because marble costs more. And my pushback on that to clients all the time, and I help negotiate these deals all the time, is that we're doing what's appropriate. And at the end of the day, you're the client. You always get to say no. So if somebody shows me a $20,000 sofa and I think I can get the same thing for 10,000 somewhere, it's all about communicating the quality and the value. You know that expression, buy once, cry once? It's like, we don't want to create disposable product, we want to create things that last. And the sustainability side of all of this is if you buy things that last, it's better for the environment than throwing out your furniture because you bought it and it lasted two years. And the fact that, you know, we've always had this model where people charge 30 or 35% on top of the cost, you know, where that model came from, is that designers, when they had a relationship with the manufacturer or the vendor, they would get 50% off as a trade person compared to retail, and then they would charge their client 35%. So the client was still getting a 15% discount. So the math all worked for everybody. Right? But, but there's this perception that we're making all of this money off of buying expensive products. If you really add up the time and effort it takes to actually procure that product and make sure it works and make sure, it's scaled right. There's probably 10% profit left in that. And who's going to fight you for making 10% on something? So it's really about understanding your model and understanding how you sell your fees. And all the time I have clients come to me and say, look, they want me to reduce my fee. And my standard answer is, no one, because it's not fair to your other clients. And do you want to be a second class citizen in my office when I know I'm working on your project for a lesser fee than the next person who's going to get the attention? Why would you put yourself in that position? And most clients respond with, you're right. Why would I do that to myself? You deserve the fee you deserve, and that's why I'm hiring you. And if you don't like my fee, then there's plenty of other people to go to. There's plenty of work for everybody. There really is.
- [54:24]
B
Well, and do you feel that way today when. I don't know. Some numbers suggest that there are a hundred thousand interior designers running around the country. I feel like there are so many, many more designers today than there were in the early days of our careers.
- [54:41]
C
Well, I had this conversation with Cary Kravit all the time, and he's like, we have 100,000 unique designers. And I said, yeah, but if that's one person who has a resale number, are they really a designer? Are they just driving around in a Volvo station wagon and selling a bunch of fabric? Or are they legitimate designers who really, they design, they have a pencil in their hand. They, they're making things, they're not just buying things. So I would say studio designer. We have about 22,000 designers using our software. And people often ask me what percentage of the marketplace that is. I think there aren't 100,000 designers out there. I do think it's more like 50,000. I think we have probably close to 50% of the industry. It depends on how you define it. Right. But I would say people with legitimate businesses, look, we're graduating students every year or some retiring. This is an industry where you don't need to retire so quick because you can cherry pick what you want to do and you love what you do. There are people, as we know, and some of the names you brought up, who have been doing this for 50 years and they're thriving. So it's a great industry that way. And it's a great industry because we create beauty every day. You know, we're not just making widgets. And I think that understanding what sort of improves the human spirit, what really elevates it, is we're human beings at the end of the day, and a robot's not going to really tell us how we should live or how we feel. Another human being can help us get there. And I think that everyone's so scared of AI, but the truth is it's historical data it's pulling from. It's not creating anything new. It's pulling from history. So if you're a creative person and you have a new idea, it doesn't know that. And that's why someone's going to hire you because of your creativity. And it's that intersection between craft and technology that we have to embrace. But we do not have to be fearful of it, because if you've got something special, somebody wants it.
- [56:58]
B
And that's the hopeful note that we're going to leave it on. How much longer do we have to wait for the new book to tell us how designers should be running their design firms?
- [57:10]
C
18 months, at least. 18 months. At this point, I think it's 2027. Fall. Yeah.
- [57:16]
B
Okay, fall 2027. So we'll wait for that. But in the meantime, I think we're going to have you back to tell us more about how the AI conference went and all of that. I'm so eager to hear about that. And good luck with all of that. And thank you. I know you've got so many different hats that you wear and you've got so much going on. I'm grateful to you for making a.
- [57:38]
C
Thank you so much and thank you for what you do for this industry. People love your podcast. They love to hear that you're asking the right questions. So really, thank you. We need people like you out there.
- [57:54]
A
Thanks for listening. If you'd like to keep up with
- [57:56]
B
the latest design industry news, visit us
- [57:58]
A
online@businessofhome.com where you can sign up for our newsletter, browser, job listings and join our BoH Insider community for access to online workshops, a free print subscription, and much more. If you have a note for the podcast, drop us a line@podcastbusinessofhome.com if you're enjoying these conversations, please leave us a review on Apple Podcasts. It helps others to discover the show. This show was produced by Fred Nicholas and edited by Michael Castaneda. I'm Dennis. Thanks again for listening and I'll see you next week.