FEATURED ON THIS EPISODE:

Please join me for my free Webinar, Unlocking Profitability: Pricing Strategies for Interior Designers, on September 12th & 13th at 12:30pm EST >>>https://www.reneedevignierdesign.com/pricing-webinar<<< 

WHAT YOU WILL LEARN IN THIS EPISODE:

PRICING PERCENTAGE COMPARED TO FLAT FEE STRUCTURE

DETERMINING TIME ON A PROJECT WHILE CREATING A FLAT FEE PROPOSAL

HOW TO OVERCOME CLIENT OBJECTIONS TO YOUR DESIGN FEE

PROTECTING YOURSELF VIA YOUR CONTRACTS

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I received the emails I’m sharing in today’s episode from so many designers after they signed up for my upcoming webinar. They were letting me know their issues, concerns, and the top 1—and sometimes 10—problems they’re having with the profitability of their projects. 

The first email I got from a designer was straight to the point! I love a designer who gets straight to the point! “Renee, my number one struggle is determining the time I need. This makes flat fee proposals difficult, ‘impossible,’ and I have typically not made much, ‘if anything.’ If proposing an hourly fee contract, I’d like to be more confident in providing a good, educated estimate on the number of hours the project ‘should’ involve.  

Who can’t relate to that??

The struggle is real. Let’s be honest,  let’s be fair, and let’s talk straight here today.  But there are ways of getting through the struggle and getting to a profitable number that covers your hours and gets you paid what you deserve regardless of the project and it’s complexities.

The next email I got said, “On my last several construction jobs, the client does not want to pay for a design fee. I work independently from my contractors and it’s starting to become a real issue. I am having contractors hide my fees on some of the jobs, but I am wondering how I can work through this to show them my worth. I’ve been doing this for over 20 years, and I have a very high construction IQ, but I feel like people are very resistant, maybe due to the upcoming election and current inflation.”

This is full of really good questions, and I’ve heard them from countless designers. So, she has clients who do not want to pay her a design fee, and since she works independently from her contractors, obviously, that’s becoming an issue, so she’s having the contractors hide her fees on some of the jobs. That is not going to be a winning strategy in the long term for two reasons:

1. If the contractor is not disclosing that to the client, he could get in a mess with the client if the client figures this out.
2. Not all contractors will do that.

That is not a sustainable path and will not be needed once she builds her confidence because she has over 20 years of experience managing construction projects. 

As for people being resistant due to the upcoming election and current inflation, in my opinion, that has not been the case. Decorating, which is seen as a luxury, can be impacted by economic conditions, forecasting, and world events. But construction projects are seen as an investment that they will have an ROI on and therefore, it’s something that they do move forward with. 

The next email I received said, “The biggest challenge since switching to flat fee is the sticker shock for the clients. I know the pricing is right. They just can’t believe that that’s how much it’s going to cost when it’s all said and done. I probably need to present the quote in person but I just feel like it’s one more meeting. What is the best strategy for presenting scope of work?”

Phenomenal question. It doesn’t matter if you dial in your numbers right if your client doesn’t sign on. And I get the sticker shock. I share a story about this in today’s episode of getting a client’s personal experience/opinion of this. A new client doesn’t always understand what we will be doing or why a project will cost what it does, but we do have the power to change that. 

My next question is one I get a lot of. “Hi, my question has to do with our profit on certain materials. When working with a contractor on a project, do we offer to split commission on tile, countertops, cabinets, etc.? Or do we say from the beginning that we are providing it alone? I have found that they’re ok with it but will not be very helpful when it comes to picking it up, problem-solving, or becoming accommodating when it comes to delays or vendor issues. What’s the best way to handle that?”

Bravo to this designer, who is already implementing procurements in her business model. Each and every one of you listening to today’s episode needs to be doing the same thing. The way to profitability is to provide fees for your services and markups from procurements. It is that simple.  

As far as contractors not being helpful, you are making the markup. You do this in your decorating work all day, every day. You have receivers. You have delivery people. You deal with issues, shortages, delays, backorders, and damaged goods. It’s just a different material. Instead of a sofa, it’s a pallet of tile. Send it to your receiver and have them deliver it. It’s the same thing. You’re dealing with damaged furniture. You’re going to talk to the vendor. It’s the exact same process. It’s just getting over the mental leap that it isn’t soft goods and furnishings. That’s truly the only difference. 

This next question said, “I have always tracked my hours on projects. Historically when I’ve analyzed my hourly fees, I’ve found the total to be approximately 18% of the project costs. Example, that means a $100,000 project budget would cost my client $18,000 in design fees. I’ve compared my costs to other colleagues who charge flat fees or have a different billing structure. Surprisingly, we have all come out to about the same profit number regardless of how we structure it. Would you say that my 18% fee structure is an equal comparison to your flat fee proposal?” 

Here’s the thing: I do not believe a calculator or a percentage is the answer to your pricing worries. Now, I am not saying it is bad that this designer is using a percentage, but it appears that it’s been working for her. That said, without even seeing her projects or knowing her numbers, I am confident that she has either overcharged some clients and undercharged others. I like to charge for each project that is unique to itself. I’m going to go out on a limb and say she probably could be making more money. 

This one isn’t a question but I sure as hell agree with it. It says, “My number one challenge is that I really, really, really dislike keeping track of my hours and end up not tracking them properly.” 

Guilty! Hello, my friends! It is so ingrained in me to think by hours. It’s awful and annoying. But I will show you how to take care of this in the upcoming webinar!

This next one really pains me because I know we all fell into this during the Covid years. It said, “I had a project where I was brought on board. The scope increased, and we needed a contractor. The contractor was brought on board and then immediately delayed the project. My fee structure and payment calendar were already set and signed. This impacted my revenue dramatically for the entire year, yet it is at no fault of either the client or the contractor. I assumed all the risk. This cannot happen again. I need a strategy for this. This rolls over to my monthly retainer payments for a project. If the project is delayed in permitting, my firm gets pushed on the payments as the client claims construction delays beyond their control. Again, this impacts revenue projections and of course, the now never ending finish date of the project.”  

She said she’s looking for best practices. I’ve got them.

Look, this is painful, truly painful for so many designers, myself included, during Covid. We just weren’t used to these dramatic delays and waits. And while most of these have gone away, something will happen again. You must have something in place to protect yourself so that your company is not assuming all of the risks. 

Confidence matters. You need to have the confidence to say something. We are in the business of making money, again, why we are not a hobby, we are a business. There must be a level of confidence to speak to the client, to discuss whatever needs to happen. 

The next one said, “I am a small firm that is struggling to grow. My bandwidth is maxed so I’m adding contracted employees to help with the work, but now my profit is in the tank, so I’m obviously pricing my services incorrectly. I am working on my books and trying to understand where I am going wrong as far as markup and expenses, but I think pricing is a big issue for me. I work from home and try to remain present with my family, husband, and two kids most days after 6 pm. But I can see that’s slipping more lately due to the consulting gig that I took on in order to make ends meet.”

Here’s the thing about growth: You need to be careful about what kind of growth you need to be making and our initial gut reaction is I’m busy. I need more bodies. That is not always what you need. We all need to figure out a way of growing, if we want to be growing, in a manner that actually moves our business forward and not drag it down. 

The next email said, “I’ve been listening to Renee and inspired by her podcast for a while. I’ve been an interior designer, drafter, and project manager with a love and focus on the construction side for over 15 years. I was working under another designer, just her and I, and I was able to work on all aspects of the project, from concept to implementation, graphic design to blog post content. This year, I’ve branched out on my own, and though I feel really comfortable with the processes and project side of the business, I can feel the learning curve of the business itself. Pricing, finding new leads in business, marketing, etc. 

In my previous firm I did a standard flat fee. However, during the Covid years that turned into a major loss because of so many delays and complications out of our control. That we were either time consuming or stretched projects out for too long. I’m leaning towards a hybrid fee structure. Flat fee for the design and hourly for the project management and construction implementation services, starting with an estimated base fee, which turns into hourly as needed. 

I’m excited to hear Renee’s perspective, as always.”

This goes back to what I said about the other designers about the delays. We have the ability to control that.  And it is possible to do that in a proactive way, that keeps your profitability stable. 

The next one is also about pricing: “Renee, I’ve had my own business for 15 years and offer services in interior design and renovation management. (I didn’t start calling out the renovation management services until listening to Renee’s podcast.) Pricing was and is a struggle. I feel I’m much better at it than I was, but there’s aways room for improvement. I’ve been charging a flat fee for most things for several years.”

I’m glad she’s already charging flat fees. I think the only thing she would need is a few tweaks to really understand how to get those numbers actually covering the hours she’s spending on these projects. 

The last one is from a designer I replied back to, and then she had another question that I wanted to end with today. She said, “I thought of another one too. So, you take your client to a plumbing showroom and select all the plumbing for an entire house. It takes 3 hours. Then, the sales rep takes more time once you leave to put it all into a quote, check stock, pricing, etc. Now the plumbing is specified, and you have been paid for your time as the designer. However, the GC is ordering the plumbing. So now the showroom does not get the sale because the plumber wants to use ‘his or her resources.’”

Since this will not be covered in either the Webinar or Selling Your Services coming up, I wanted to cover this because it is a problem. So I really break this down in today’s episode. 

If you saw yourself in any of these questions, you are not alone, and this is just the tip of the iceberg of the questions that I get and why we are all in this together. We are stronger together and capable of insane things when we lean into supporting each other.