If 2024 wasn’t your best business year, you’re not alone. According to the 2025 U.S. Houzz State of the Industry report, based on a survey of more than 1,500 architects, interior designers, general contractors and more,* it was a tough year for many. See exactly what challenges businesses were up against in 2024, to help you plan for the rest of 2025.
10-Year-Record Revenue Dip
Across all seven industry groups we surveyed,* more firms reported an annual profit decrease in 2024 than in 2023 (44% to 60% versus 23% to 39%). It was the biggest year-over-year dip in average annual revenue since 2014.
Majority Cite Higher Business Costs
The decline in profit is not surprising, given that the majority of firms (65% to 81%) across the seven industry groups experienced an increase in the cost of doing business in 2024 compared with 2023.
As the majority of firms across all the industry groups experienced a hike in operational costs, it makes sense that many pointed to an increase in the cost of doing business as one of their top three challenges. In fact, it was the top challenge for four groups: general contractors, design-build firms, specialty contractors, and landscaping and outdoor service firms. Specialty interior service firms were the only group not citing it as a top-three challenge.
Many cited the weak or uncertain national economy and difficulty finding prospective customers as well. Design-build firms and specialty contractors were the only two groups that listed managing client concerns about costs among their top three challenges.
Top Cost Driver: Products and Materials
For six of the seven industry groups, rising product and material prices contributed most strongly to the increase in their cost of doing business in 2024. Architects were the exception. For them, the top three cost drivers were software (36%), employee wages or benefits (35%), and business insurance (32%).
Interior designers and specialty interior firms were the only two groups to cite advertising/marketing among their top three cost drivers.
Little Change in Staff Count
The majority of businesses across all seven industry groups reported no change in their number of employees in 2024. Among firms that did experience change, speciality interior service firms saw the most widespread decline in employee numbers, with 26% citing it, and architects saw the most broad increase in employee numbers, with 20% citing it.
Increasing Efficiency Is a High Priority
Dovetailing with the relative lack of change in staff headcount, many firms invested time or money in increasing efficiency among their employees and systems. This was the top investment focus for speciality service contractors (42%) architects (40%) and design-build firms (40%).
Improving communication with clients and teams also was a significant priority, particularly among design-build firms (45%), general contractors (44%) and interior designers (39%). And 21% of architects, 16% of interior designers and 16% of design-build firms focused on maximizing returns on existing technology investments. Other frequently cited investment areas for many firms include improving the sales process and reducing cost or risk.
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Many Tap Specialized Software
For 6 of the 7 industry groups, the top use for specialized software is either accounting/bookkeeping or billing/invoicing. Architects are the exception, with 84% naming drafting/rendering as their top software use. More than half of interior design firms (58%) and landscaping and outdoor service firms (51%) also use rendering software.
In the construction sector, 38% of design-build firms, 37% of specialty contractors and 33% of general contractors utilize software for estimating costs and bids. Beyond these specialized tools, businesses also often turn to software for their marketing and CRM efforts, to track employees’ time and to build websites. Conversely, only 4% to 15% of firms use software to manage inventory or orders.
While we’re not fully out of the challenging business woods yet, there’s cause for optimism in 2025. “Pros report that they’ve implemented new processes for operational efficiency and client communication, and made strategic investments in technology to address the challenges they faced last year,” Houzz staff economist Marine Sargsyan says. “This can better position them for an anticipated increase in demand, enhance their resilience amidst potential tariffs and leverage expected improvements in both local and national economic conditions.”
To see more data from 2024 and expectations for 2025, download the 2025 State of the Industry report.
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*Architects, interior designers, general contractors, design-build firms, specialty contractors, landscaping and outdoor service firms, and specialty interior service firms.
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