Small living rooms usually have big jobs to do. They're often the first room a visitor sees, which makes them traffic central for moving through the space to other areas of your home. They have to be comfortable spots for entertaining and relaxing, too. As if that weren't enough, the living area may have to do double duty as the main television viewing area and as an auxiliary sleeping space for visiting friends and family.
Before we start moving the furniture around, let's look at the room itself. Almost any living room will have something going for it. Either it has a nice view from the windows, a high ceiling, a fireplace, an appealing flooring style or even a quirky and interesting shape. It's easy to focus on everything that isn't ideal in a small room instead of playing up the positive elements like those listed above that you can make central to your design efforts.
As for the rest of the room, think of it as the bare bones of your design, and create as clean a palette as you can. Small rooms look smaller when groaning under the weight of lots of dark or vivid colors. To create the best backdrop for your furniture, blend neutral colors and textures for use on the walls and flooring. Make sure the drapes are neutral, too. If you love bright colors, indulge yourself with the accessories. When it comes to the basics, neutrals rule in small spaces.
Light is another element that can be of enormous help in enhancing the look and feel of your small living space. Don't cover up your light sources. Shaded, shadowy rooms look smaller than they are. They can also look cave-like and cramped. Use sheers instead of heavy drapes on your windows, and let the light in as much as possible. A great cheat here is to use mirrors to reflect natural illumination into the room's corners and down hallways. Even though mirrors can get expensive, you can use multiple small mirrors in wall groupings instead of investing in one large, expensive mirror. Light makes a natural focal point, too, so pay attention to the location of windows, skylights and electrical outlets. They'll be important when we start arranging the furnishings in the next section.