Can Interior Design Firms Scale Like Construction Companies?
We've been thinking a lot about how to grow AVCO Design in ways that better serve our clients and give us more creative freedom. So we researched how design firms scale—and what we learned surprised us. It's not about chasing revenue. It's about choosing the right business model for your strengths.
If you've ever wondered why construction companies seem to build more profitable, sustainable businesses than interior design firms, you're not alone. It's a question that many of us in the design world have asked—and the answer isn't that design is less valuable. It's structural. But here's the good news: those structures are changing, and the firms that understand the new landscape will thrive.
Why Construction Has Built More Profitable Businesses at Scale
Construction companies have built-in scaling advantages that map directly to revenue:
Repeatable labor units that can run in parallel across multiple jobsites
Project management systems designed for simultaneous execution
Large ticket items where labor plus materials creates substantial revenue flows
Progress billing that generates predictable cash flow and working capital
The formula is straightforward: more jobs → more labor → more materials → more revenue.
Most design firms don’t have equivalent throughput mechanics. But that doesn't mean they can't scale profitability more effectively.
Because remember, revenue isn’t profit. Construction’s capital intensity, thinner margins, with average profit margins of 5% to 6%, and a typical range of 2% to 10%1.
Interior design firms retain significantly higher percentages of revenue, with average profit margins between 15% and 30%, and high-end or specialized firms achieving margins above 30%.
A $10M construction company with average profit margins of 5% generates $500K in profit. A $3M interior design firm with average profit margins of 25% generates $750K.
You don't need to match construction's revenue to exceed its profitability.
The "Boutique Trap" and Why It Persists
Interior design has long been positioned as a boutique service, driven by specific client expectations:
The principal is the tastemaker
Quality feels inherently subjective
Clients want direct founder involvement
Each project is entirely custom
This positioning creates a ceiling. But it's worth noting that taste can be institutionalized—fashion houses, hospitality brands, and global architecture firms prove this every day. They do it through design language systems, strong creative directors, trained studio leads, and brand playbooks.
The boutique model is often a choice, not a destiny. Many founders prefer creative control over organizational scale, and that's a completely valid decision. But it's important to recognize it as a choice rather than an inevitability.
Where Design Actually Has Scaling Advantages
While construction has its levers, design has different—and increasingly powerful—ones:
Brand and Intellectual Property can scale globally with minimal incremental cost. Unlike construction, which is constrained by geography, licensing, and local labor markets, design can reach clients anywhere.
Digital delivery through e-design, remote collaboration, and standardized systems creates nearly limitless reach.
AI and automation are dramatically expanding throughput. Design bottlenecks—concepting, selections, documentation, procurement oversight—are knowledge-work bottlenecks. These are exactly the bottlenecks that technology solves. Construction still requires boots on the ground; concrete pours and carpentry can't be automated the same way.
Higher profit margins with lower overhead mean design firms can often achieve higher profit per employee and more stable margins than construction companies, even if they capture fewer dollars per project.
Four Proven Models for Scaling Design Firms
Some design firms already rival construction companies in size. They rely on different levers, and each model has distinct strengths:
1. Design + Product Sales
Merchandising is highly scalable when well-systematized. Firms following this model become sophisticated retail engines with design expertise.
Examples: RH Interiors, Studio McGee, high-end hospitality firms with FF&E departments
Strengths: Predictable workflows, volume-based vendor relationships, multiple revenue streams
Considerations: Requires systems thinking, inventory management, and operations expertise
Profitability Profile:
Initial investment: Moderate to high (inventory systems, vendor relationships, working capital)
Short-term margin impact: May compress (10-15% during buildout)
Medium-term: Strong recovery (20-30% as systems mature)
Long-term: Highly profitable at scale (25-35%+ with established vendor terms)
Capital requirement: Higher (inventory, showroom, merchandising systems)
2. Design + Architecture
Commercial-scale projects with institutional clients and fee structures tied to construction value.
Examples: Gensler, HKS, HOK
Strengths: Larger scopes, repeatable workflows, established percentage-based billing
Considerations: Different licensing requirements, often requires pivoting from residential focus
Profitability Profile:
Initial investment: High (licensing, insurance, larger projects require more capital)
Short-term margin impact: Lower margins initially (8-15% typical for A&D)
Medium-term: Stable but compressed (12-18%)
Long-term: Consistent but rarely exceeds 20%
Capital requirement: High (professional liability, longer payment cycles)
3. IP-Based Design
Commercializing design through templates, product lines, licensing, brand partnerships, and digital products.
Examples: Designers with furniture lines, template shops, builder partnerships
Strengths: Revenue scales beyond billable hours, builds long-term brand equity
Considerations: Requires product development skills, different marketing approach
Profitability Profile:
Initial investment: Low to moderate (product development, digital infrastructure)
Short-term margin impact: Potentially negative (R&D phase)
Medium-term: Breakout potential (30-50%+ on licensing/digital products)
Long-term: Exceptional if successful (40-60%+, highly scalable)
Capital requirement: Low (mostly time and expertise)
4. Integrated Design-Procurement-Construction Management
Closing the gap between design and construction by owning more phases of the value chain—from concept through procurement and construction management—without taking on general contractor risk.
Strengths:
Captures more revenue per client through design fees, procurement margins, and construction management fees
Creates repeatable systems across the entire project lifecycle
Reduces client risk by providing single-point accountability without the liability of self-performed work
Maintains design control through completion, ensuring creative vision is executed
Higher-margin construction oversight revenue (15-20%) vs. GC margins (2-5%)
Avoids the capital intensity of carrying labor, equipment, and subcontractor risk
Considerations:
Requires strong project management systems and construction literacy
More staff needed across design, procurement, and construction oversight functions
Client education required—many don't understand CM vs. GC distinction
Increased coordination complexity across multiple vendors and trades
Professional liability insurance requirements expand beyond pure design
Longer project timelines mean extended cash flow cycles
Profitability Profile:
Initial investment: High (project management systems, construction-literate staff, expanded insurance, working capital for procurement)
Short-term margin impact: Moderate compression (15-20% during integration phase as systems are built)
Medium-term: Strong if well-executed (22-30% blended margins across services)
Long-term: Excellent potential (28-35%+ margins) by combining high-margin procurement and CM fees with design revenue, while avoiding GC capital intensity and risk
Capital requirement: Moderate to high (less than GC/design-build, more than pure design—primarily procurement working capital and systems investment)
Key Distinction from Design-Build:
Unlike traditional design-build firms that act as general contractors, this model separates financial and performance risk:
Client contracts directly with trade contractors
Firm manages and coordinates but doesn't guarantee construction outcomes
Revenue comes from professional services (design, procurement, management) not construction markup
Capital requirements focused on operations and working capital, not bonding and construction risk
Rethinking Business Models for Sustainable Profitability
Revenue growth without profit discipline destroys value. The most successful design firms focus on margin quality, capital efficiency, and long-term sustainability—not just top-line growth.
Traditional design billing—flat fees, hourly work, procurement markup—creates strong margins but not always high volume. However, fee structures are choices, not laws of physics.
Design firms can:
Charge a percentage of construction value (architecture-style)
Structure retainers and ongoing service contracts
Add success fees tied to outcomes
Systematize procurement for volume-based rebates
Create product lines and licensing revenue
The question isn't whether these models work—it's which one aligns with your vision, your team's strengths, and your market.
The Capacity Question
Adding more designers doesn't automatically double the output, unlike adding more framers on a construction site. Design requires collaboration, creative direction, and thoughtful coordination.
But here's the counterpoint: construction faces the same challenge, arguably worse. Adding project managers doesn't linearly scale construction either—coordination overhead, site constraints, and subcontractor availability all create friction.
Design bottlenecks are increasingly automatable. Selections, documentation, rendering, and procurement oversight can all be systematized. Remote teams can create 24-hour design cycles that construction—bound by physical jobsites—cannot match.
The Profitability Paradox
As we said above, bigger isn't always more profitable. A $10M design firm with 30% margins ($3M profit) can be far more valuable than a $20M firm with 10% margins ($2M profit)—and far less stressful to run.
The wrong growth model can actually destroy profitability:
Adding complexity without systems increases overhead faster than revenue
Scaling too quickly strains cash flow and quality control
Chasing revenue in low-margin segments dilutes overall profitability
Building infrastructure before validating the model burns capital
The right growth model compounds profitability over time:
Short-term: Maintains healthy margins while building systems
Medium-term: Leverages systems to improve margins as volume grows
Long-term: Creates enterprise value through sustainable competitive advantages
Choose your model based on which path offers the best risk-adjusted returns over your intended time horizon—not which generates the most impressive revenue number.
And remember, profitability allows you to take more risks with your design.
What This Means for Your Firm's Future
The conditions that historically kept design firms small are shifting:
AI and automation are transforming design bottlenecks
Procurement and merchandising systems can become powerful scaling engines
Digital delivery expands reach far beyond local markets
IP and brand extensions create new revenue channels
Specialization or integration (managing the full journey from design through construction management) can both work—when executed intentionally
The real question isn't whether interior design firms can grow as large as construction companies. It's which sustainable growth model fits your strengths.
Choosing Your Path Forward
As you plan for 2026 and beyond, consider:
What do you want your firm to be? A boutique studio with exceptional creative control? A multi-city operation with trained design directors? A brand that extends into products and licensing? An integrated firm that manages the entire client journey through construction management (without taking on GC risk)?
What are your unique strengths? Some principals are exceptional creative directors who can train and guide large teams. Others are operators who excel at systems and process. Still others are brand builders or product visionaries.
What does your market reward? Different client segments value different things. Ultra-high-net-worth clients might prefer bespoke boutique service. Production builders might need repeatable, systematized design. Developers might value integration and risk reduction.
What kind of complexity are you willing to manage? More revenue streams can mean more operational complexity. Integration brings more staff, more systems, and more responsibility. Hyper-specialization can be cleaner but may limit total addressable market.
What’s your profit target? Which model gets you there with the least risk? More profit and reduced business risk mean you can take more creative risks.
The Bottom Line
Interior design firms rarely achieve construction-company scale by default—but scale isn't the goal. Sustainable, profitable growth is.
The firms that intentionally choose a business model aligned with their strengths, systematize for profitability (not just revenue), and build competitive moats will create far more value than firms that simply chase size.
Profitability depends on the model you build and how well you execute it.
Whether you choose product sales, specialization, IP development, or procurement/construction management integration at scale, the opportunity is there for firms willing to think strategically about their business model, not just their design work.
The future belongs to design leaders who recognize that scale isn't about compromising creativity—it's about architecting a business that allows your creative vision to reach more people, generate compounding profit margins, and build lasting enterprise value.
What path will you choose?
1 Autodesk (Digital Builder): Average Profit Margin for the Construction Industry https://www.autodesk.com/blogs/construction/profit-margin-construction/ Data point: Cites the 6% average and 2–10% net margin range.
