In my last post I introduced you to home stager Kimberly (not her real name), who had amassed enough home staging furniture and accessories to fill at least ten 2-bedroom condos. She is a wonderfully talented decorator and home stager. Her work looks like it could be in a decorating magazine.
In part 2 of this cautionary tale for home stagers thinking of investing in their own home staging inventory, I’ll share some of the classic mistakes Kimberly made so that you won’t make the same ones. And for those of you who know you’ll never allow yourself to get into this situation, you can read on and feel smug about your own business savvy!
Unfortunately, Kimberly didn’t approach her home staging business with a business focus. Instead, she was obsessed with how lovely she wanted to make all her clients’ condos look.
“Creating beauty” was her driving force, rather than making money.
There’s nothing wrong with allowing your desire to decorate beautiful spaces be what keeps you inspired, but unless this is a hobby, it’s also critical to remember that you’re also creating a home staging business that’s supposed to make money!
Kimberly did amazing work. I saw the photos, and honestly they all looked like they were magazine shoots out of decorating magazines. She really did everything up to the nine’s from beautiful furniture and window treatments in every room, to dishes on the breakfast bar. Her home staging projects looked lovely, and she can be very proud of the creativity she brought to it. But her creative talent was not only a strength, it became her biggest weakness.
In her desire to be a home stager and decorator, Kimberly forgot that she was also a businessperson. She needed to make money in her home staging business, not just feed her own creative desires.
She also didn’t understand that the way she structured her staging business meant that she was really in the furniture rental business. Since she didn’t realize that, she also didn’t realize how quickly she was headed for bankruptcy.
The date she had to pay off her debt was fast approaching and she had no cash flow because her inventory was all tied up in open-ended contracts.
Kimberly made the classic mistake of setting it up so that people could have her home staging furniture and accessories for up to a year for a fixed amount. This meant there was no ongoing revenue stream if the items remained with the same client month after month after month.
Unfortunately, she assumed that if her home staging customers only needed the items for a few months, it would be like being paid for the whole year. Which it wasn’t because she was charging too low a percentage of the retail price (her first mistake). She assumed that she’d be able to re-rent the items 3 or 4 times in a single year and that by the time the debt was due she would have made enough in home staging rental fees to pay for it (her second mistake).
Making her contracts so open-ended that way, and not ensuring that she had a steady cash flow coming in, she had nothing to protect her when the real estate market slowed down. Her clients’ luxury condos were not selling, and she had all her home staging furniture and accessories tied up for at least a year with no other income coming in (her biggest mistake). By the way, I should mention at this point that she had a lawyer help her with the contracts! Unfortunately he doesn’t seem to have brought a business mind to the task either!
Rather than realizing what was happening, perhaps because she was so driven by her desire to decorate, Kimberly kept repeating the same mistakes.
She’d get a new project, she’d go out and get the furniture and do it again and again. In fact, I distinctly remember her describing a new project where she had inventory from an already sold client project to use. She had it all moved in for the new home staging client and spent a day moving it all around. Then she decided this furniture wasn’t exactly “right” for this particular project and went out and bought new inventory to suit the new project.
Naturally, her expense of moving all her original inventory in and moving it back to storage again, plus the new expense of buying an entire condo’s worth of new furniture was hers to bear. All she did was bill her originally agreed upon fee. When she described this to me, I knew I was talking to a decorating addict or perhaps a shop-a-holic!
Very scary. When I listened to her I kept thinking, “Is there no one in her life that saw the road she was heading down, least of all her husband?” It was amazing. I couldn’t believe how she got herself into that situation.
I wanted to share Kimberly’s story with you, because if you are going to get into the furniture rental business, then you need to approach that carefully with a lot of business analysis and your eyes wide open to the potential pitfalls.
Not only are you investing in furniture, you’ve got to pay for storage and insurance. Then you have to think about how the furniture is getting from wherever your storage is to the client’s home. So that means you now have to start hiring a truck and movers, etc. It’s a complex way to do things that involves lots of overhead.
In Course 2, The Business of Home Staging: What You Need to Start and How to Grow, and Course 3, Taking the Mystery Out of Home Staging Consultations, I teach home stagers how to work with their own inventory in more detail. But I also teach you how to work without it (and make lots of money along the way), so you don’t have to get into all these risks.
I’ve run my own home staging business since 2002 and staged many vacant homes as well as ones that people are living in. I have not invested in my own inventory, and I have made a lot of money doing it that way as have many of my students.
Kimberly never took the Staging Diva Home Staging Business Training Program but hired me to help her with one-on-one business coaching after she found herself $100,000 in debt! I wish she had spoken to me two years earlier because I could have saved her so much grief (and money). I helped her restructure her pricing strategy and develop new terms for future furniture rentals. We also developed a strategy for her to maximize the value of her current inventory and turn some of it into cash to pay down her debts.
I’ve taught thousands of home stagers and personally coached hundreds of others. Their questions, challenges and triumphs provide a rich ground for the examples and tips I share with you in this blog (though I never use anyone’s real name without their permission).
Please share your feedback to this story and any advice you would have given Kimberly to avoid the situation she found herself in. Do you use your own home staging inventory?
Debra Gould, The Staging Diva®
President, Six Elements Inc. Home Staging
Internationally recognized home staging expert Debra Gould is President of Six Elements Inc. and creator of the Staging Diva Home Staging Business Training Program. An entrepreneur for almost 25 years and author of several guides, Debra has staged millions of dollars worth of real estate and uses her expertise to train others worldwide.