FEATURED ON THIS EPISODE:

JOIN MY UPCOMING WORKSHOP ON THURSDAY, MAY 8 AT 12:30 EST: HOW TO PRICE CONSTRUCTION PROJECTS WHEN YOU’RE MORE THAN JUST THE DESIGNER

JOIN THE WAIT LIST FOR MY REVAMPED COURSE INTERIOR DESIGNER’S GUIDE TO CONSTRUCTION MANAGEMENT

WHAT YOU’LL LEARN IN TODAY’S EPISODE:

THE DIFFERENCE BETWEEN DESIGN AND CONSTRUCTION PROJECTS YOU NEED TO BE AWARE OF WHEN PRICING

THE MENTAL TOLL OF LOSING PROFITS IN YOUR BUSINESS YOU NEED TO CONSIDER 

HOW TO BUILD A PROFITABLE PRICING MODEL FOR CONSTRUCTION PROJECTS

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I am not here to tell you to stop using formulas in your decorating work, but I am here to tell you that time and time again, I hear from designers, the aftermath from using their same formulas from decorating projects, which are successful for them, over to construction projects, and it just isn’t working out for all the designers I’m talking to.

Let’s be fair to these formulas

Why do they work in decorating? Well, you’re dealing with a relatively closed system. You have a room, you have a defying number of furnishings and finishes that will go into this room,  you can walk through every predictable process. From the meetings you will have with the client, to go through the discovery, to the concept drawings, to the sourcing, the purchasing, the installation, the styling, all of it. 

Even if you’re layering in customization, the core of the work is finite, it’s predictable. And that’s why formulas can work. You can tier your service based on the complexity. So if one job is heavier in customization than another, you can tier your pricing internally and know that you are covered.

You can also use historical data from where you tracked hours of design boards, the presentations, the meetings, the conceptual design, the sourcing, all of it. There’s a true logic to it. And that’s why formulas can work for decorating.

So yes, pricing formulas have their absolute place, but they just don’t belong in construction management.

Why don’t they work?

It’s unfortunately very simple, construction management demands an entirely different role from you as a designer. You are not just specifying beautiful things – I mean, don’t get me wrong, you are, but beyond that, you are coordinating with the builder, the trades, the architect, you’re managing decisions in real time, sometimes multiple times per day or week. 

You are acting as a leader on this project. Therefore, your responsibilities and role are different. 

So many things can happen on a construction job site that it cannot fit into, say, a per square foot formula. No two construction projects will be alike. Even if it’s the same size, same timeline, same room, same scope, same budget, the people involved will change everything. 

It’s not just about square footage or line items. It’s about personalities, communication style, and decision making power, how well you meld together, it’s everything in between that makes each job different. 

A highly collaborative contractor that brings you every decision is going to create a very different working rhythm than one who prefers to keep things siloed. Maybe you enjoy that, but then you also have on that same job, a client who responds quickly and trusts your input, which is a whole different experience than ones who is indecisive and second guessing every decision everyone makes, not just you.

Then there’s the team dynamic. Does the architect expect you to take the lead on finishes, or is he holding on to them, and you’re left trying to convince them that you’re on the project to be doing those finishes and selections? 

Or, are the trades used to working with designers? More often than not, they’re probably resistant to your direction. 

Is your contractor more detail oriented or more of a big picture kind of person? 

And what does that do to the flow and rhythm of your project? And how do you meld into this team and bring all of your expertise, your skill set to add the value you know you can bring?

All of these human variables directly impact your time, your stress levels, as well as the value you bring. 

So even if the construction specs look the same on paper, your experience and  your responsibilities, can vary, sometimes wildly. 

The formula that is based on a percentage of construction costs

At first glance, this seems logical, some architects bill this way, and you’re thinking to yourself, bigger budget, bigger fee, right?

But here’s the catch, when that logic flips in the other direction, when designers start lowering their fees, simply because the construction budget is smaller, it creates a serious problem. 

Here’s the thing, why should your role, or would you think your role would shrink just because the client is spending less. 

The level of involvement is likely the same, or even greater on a tighter budget where more creativity and management is needed. 

This is where profitability starts to erode.

As designers we are not hobbyist we are business owners and our goal is to grow our businesses. So if the business is not profitable it simply isn’t sustainable. 

The reality is there is a mental toll to consider to all of this.

When you are barely breaking even, constantly scrambling for new work or trying to make up for those underpriced jobs, it’s really hard to show up as your best creative self. 

Stress and scarcity will drain your energy faster than any install ever will. I know when I run myself raged, my creativity suffers.

It’s important to know that if you are underpricing your work, you will put yourself under unnecessary stress and therefore create an impact on your creative genius.

I don’t hear this as often, but sometimes designers are getting paid a flat percentage through the contractor.

On the surface, it sounds like a win: you’re going to have fewer client invoices to manage, you’re going to have a guaranteed fee, but it comes with risks. 

First, you are now tied to that builder’s reputation. If something goes sideways with the contractor or with the job, whether it is his fault or not, you are caught in the middle because you are seen as a contract worker under his business. 

We work really hard to develop a solid, professional reputation that moves our business forward, and I would never encourage a designer to get paid directly by a contractor simply to avoid some paperwork and possibly some awkward conversations with the client. 

You can absolutely do this without needing to be under the umbrella of the contractor.

Second, and probably most importantly, that contractor will never pay you what the client would have paid you directly. Your fee just becomes another line item in their overhead and that means for you less control, less transparency, and almost always less money. 

Again, this is why I would advocate for you to work directly with the client, so you and maintain your independence, protect your value and your reputation, as well as building the profit that will support the hours that you actually spend on the project. 

There’s also a toll that underpricing your fees takes with your relationship with the client. Because again, if you are carrying a lot of stress because you know you’re being underpaid and underworked, the client will pick up on that. When your pricing doesn’t match your performance, they will start to undervalue the role you play. 

Now what should you do?

You need to ask yourself a couple of things….

Are you consulting?

Or are you managing this construction project? There is a difference, and the difference matters in time in how you price your fees and set boundaries. 

What is the complexity of this project? Is it something you’ve done before? Do you have historical data you can lean on to at least get a gage on what time you spent there?

What’s your role in each phase of construction?

How involved will you need to be given the set of perimeters that each project brings?

What is the dynamic of the team?

And what not only they expect from you, but what you expect to get from them?

These are the building blocks to actually creating a real pricing model. 

This will take time, but this is an investment in this project in your business and will save you so much more time on the back end as well as making sure you stay profitable.