Community Q&A: How to price design services
In this community Q&A series I answer questions that come up in my Facebook group and outline my thoughts on what people are asking.
If you want to submit a question for me to answer for this series make sure to join the Facebook group and post your question!
Today I’m going to be addressing the question of how you might price your design services, as asked in this question:
Here are my thoughts on this:
The different pricing options
As you will likely know there are a number of different options for pricing your interior design or decoration services.
So before I share the model that has worked for me over the years I will cover off the other main options so you can make an informed choice about what might work best for your business model.
1: Fixed Fee (Package pricing)
This is a single flat fee for (your work on) an entire project. This does not include any purchasing you might do for clients for fixtures, furniture or accessories, as this would generally be an additional cost or part of the budget.
A fixed fee can be calculated based on a number of formulas. You might do it by estimating the number of hours you spend working on a project, you might do it based on a cost per sqm of space, you might do it based on a percentage of their overall budget. There’s a number of options here.
The main risk with fixed pricing is that you undercharge and then end up spending more time on the project than you were paid for. So it’s important to cover yourself by adding in some buffer hours to your fixed fee. This will cover you if your client ends up being indecisive or pickier than you expected.
You should also make sure you are clear in your fee proposal and client agreement about how many revisions your client will be allowed to make within this fixed fee. If there are additional revision requests beyond that you should make sure you state that you will be charging for these by the hour or for a charge per additional change/revision (e.g. $150/per hour for additional revisions). Make sure to make this clear in person to your client as well as in the proposal and your client agreement - as this is something they may need to hear more than once!
Finally, you’ll want to make sure the scope of work is extremely clear - what is included in the fixed price and what's not. Your client agreement will be critically important for a fixed fee proposal.
Pros:
Clients tend to like the transparency with pricing and the ability to be able to budget for their project
Your income is set and you know how much you will be earning
Cons:
Exposes you to more risk as you need to be careful to estimate how long the project will take you so you are really making money on it. Make sure you add in a bit extra to cover risk against extra time that is out of your control – e.g. if a client is indecisive and holds you up.
You have to be careful not to end up undercharging as there is a lot of hidden work in design.
Can be hard to estimate fixed fee for inexperienced designers who aren’t sure how long things take.
2: Hourly rate
Hourly rate is where the client pays you for each hour that you work on their project – either in your office, doing sourcing or shopping or on site. Your hourly rate is based on what sort of work you’re doing, your experience, qualifications and generally what your client would be willing to pay for your services. More well known designers are obviously able to charge a higher rate than newer designers (although established designers very rarely charge by the hour).
Generally when you work by the hour you would charge for everything that you do on the project – including client emails, phone calls, ordering, meetings, shopping, sourcing, design and drawings.
Here are some of the situations where hourly charging can be beneficial:
Can be a good model for smaller projects that aren’t easy to estimate.
Good for times when the project scope hasn’t been clearly set (although it’s never advisable to go in to a project without a clear scope set).
When working with indecisive or difficult to work with clients. So if you’re mainly going to be helping them source or go shopping with them, an hourly rate will suit you better as if they want to spend longer than you do deciding on a sofa they realise they are paying you by the hour to make that decision.
When the deliverables are not clear
When you have completed a larger project but the scope keeps creeping so you might move to an hourly model to continue.
When you’re doing complex work that you might not have done before and you aren’t sure how long it might take you
Pros
You are exposed to less risk as you can charge for exactly the time that you spend on the project
You don’t feel resentful towards a project as you are paid for exactly the work you are putting in.
Cons
Can be hard to keep track of the time you spend on projects – e.g. a quick email here and there will all add up but if you don’t charge for it you are losing money on that project.
Can be awkward sending invoices for many hours spent on a project for design work that the client doesn’t ‘see’.
Clients don’t tend to like the instability of the hourly pricing model as it exposes them to more risk for the project to run over budget or for them to not feel in control of the spending.
3: Retainer
A retainer model is where a client will pay you an agreed fee per month to help them work on a particular scope of works. You normally would discount your hourly rate and package this up – e.g. your hourly rate might be $120 but you might agree to a retainer model where you will work for 10 hours per month for $1000 (i.e. $100/hour).
This sort of model is good for long term projects or for the construction period of a project where your clients may like to have you to call on when they need it, but won’t need you day to day.
You would agree to be available across the month to work on their project at times they need – up to the hours you have been paid for. You can then negotiate additional hours if need be beyond that.
Pros
You get some steady monthly income coming in, which is helpful for your cashflow
You get paid for the work you do
You don’t need to be awkwardly sending out invoices each month and documenting and justifying all your hourly work.
Your clients get to ask you to do work for the hours they are paying you for – rather than it feel like they have lost control of the budget.
Cons
It can be hard to allocate the work in to your weekly timetable. You may get called on to do some work that week or you may not.
4: Making money from markups with suppliers
Many designers will make additional revenue on projects by placing markups on trade discounts that they are able to secure for their clients via relationships they have built up with suppliers.
So say you are able to secure a 20% discount on some furniture for your client. You may agree with the client that you split the discount with them. So, you would take 10% of the discount and the client would be given 10% of the discount. Or you may charge your client retail and take the full discount yourself as the ‘payment’ for arranging the purchase on their behalf.
Some designers pass the full discount they are able to secure with suppliers on to their clients in full, as a perk of working with them.
As your discount will be different across all your suppliers I find that marking up client purchases across many different suppliers creates so much additional accounting and paperwork for me that I just simply don’t find it a valuable enough exercise to bother with.
I make it clear in my fee proposal that I provide clients with the discount I’m able to secure for them and that this is a perk for working with me. I also charge more for my fixed fee services, which covers the ‘lost’ revenue from not marking up trade purchases.
This is a core part of the strategy that helped me win a lot of work over the years as clients were able to easily see the value of working with me – they get their design and advice and direction plus are able to make some (if not all) of the design fee back via the trade discounts I can secure for them. For me I feel this method builds trust with my client and is completely transparent. There are no ‘icky’ feelings.
But my way of working isn’t the only method and plenty of designers to mark up their trade discounts.
The only word of warning I would give if you are planning on marking up trade purchases is to make sure the arrangement is clearly spelled out in your client agreement so that it’s very clear what you will be doing. Otherwise it can feel shady to clients if they find out you have been making a profit on their furniture purchases without them knowing (and could also be illegal).
I also find that there can be a sense from clients that there is a conflict of interests if you are receiving a cut from the trade discounts off their furniture. I always try and think how I would feel in the situation and if I had a designer who was telling me I HAD to buy a particular $30,000 sofa over one that costs $20,000 that I like just as much, I think, well she is getting 10% off the top of this so of course she is going to want to recommend I get the more expensive one.
So just always keep in mind how your clients will be feeling about the decisions you make in relation to pricing. The best way to do that is by stepping in to their shoes and thinking about how you would feel in their situation.
I offer my trade discounts as a perk for working with me. I have higher fees but it keeps the transparency with clients and a non-icky feeling about the work with suppliers. In my experience suppliers also tend to prefer to work this way as there is no risk to them with putting their foot in it in terms of hiding anything from clients when they are working with them.
Overall my recommendation about working with suppliers is to not be shady. If you are going to put a mark up on furniture or accessories you are able to access at a discount for your clients that make sure everyone is clear about the arrangement. There can also be legal implications of charging markups so make sure you talk to your lawyer about this before you do it.
I have written a longer post about working with trades over here if you’re interested
5: A combination method
Most designers will use a combination of a number of the methods I’ve described above and that is what I used to do as well. In the next section I’ll tell you a bit about the combination method that I used.
How I used to work
I’m not saying this is the right or only way of doing this. But it’s what evolved for me over the years and is what I felt most comfortable with. To give you context I used to make a multi 6 figure salary from my 1:1 design work - so it’s a model that I know is profitable if you do it right!
At the end of the day the most important thing about setting a pricing model for your business is that you feel comfortable with what you are doing, your pricing model reflects your values and integrity AND you are making money.
For me, my pricing model was a combination of the above structures I outlined above. Each client and project was a bit different as each scope of project was a bit different, but generally for a large project my formula was this:
Work out the scope of the project in the paid initial design consultation
For smaller projects this was normally a single phase project that I provide a fixed fee on.
For larger projects I would split the project down in to a number of phases. The phases were normally some version of this:
Phase 1: Concept Development – this is where I would do any space planning, concept development, prepare preliminary concepts for finishes, present suggestions for products/fixtures/fittings using mood boards and physical samples. I normally priced this as a fixed fee for design work plus an hourly rate for meetings and site visits.
Phase 2: Preparation of detailed design documentation – after the initial concept were signed off I moved to finalising the interior selections and preparing scaled design drawings and documentation plus lighting/electrical plans (if required). I normally priced this as a fixed fee for design work plus an hourly rate for meetings and site visits.
Phase 3: Construction period – I wasn’t always involved in this phase of work but it might include the purchasing of the PC items, visiting suppliers and the undertaking regular site visits to monitor design intent and progress. I normally priced this on an hourly rate. Or if a client wanted more certainty over budget I would use a retainer model for this phase.
Phase 4: Furnishing and Styling – this is where I would develop a concept for furniture, soft furnishings and styling. This phase was normally done in conjunction with Phases 1 and 2, but the finalisation of furniture and accessories sourcing and purchasing is done in this phase. I normally worked on a set fee for the design aspect of this phase plus an hourly rate for any onsite styling or any shopping trips the client might want to do.
Over the years I developed this combination method as I found that it was the best balance between helping the client to manage their budget while also covering risk for myself in terms of letting the client take over my time too much without paying me.
If you want to learn more about my full workflow with interior design clients then you can read about that in this post.
In addition this model worked for me because:
It provided a chance for both the client and me to back out of working together between phases (if need be) – i.e. it provided the chance to reassess the project at each phase.
It made pricing appear less overwhelming when broken down in to smaller set fees for each phase.
It allowed clients to see how much work goes in to a project overall and then for them to pick and choose the areas they feel they need help with.
It gave them a good idea of overall pricing for their greater project budget.
It had a good risk profile for me – I could estimate the work that I had control over but I wasn’t exposed to putting a fixed fee on work that clients might take advantage of (e.g. shopping trips or site visits).
There are a number of reasons that I added an hourly rate on top of the fixed fee for most of the phases. These reasons include:
I didn’t waste time shopping for hours and feeling resentful as I stood there with indecisive clients who had paid me a fixed fee.
My clients were able to control how many hours we spent together, which gave them comfort.
It made a client think twice about whether or not they needed me for something – which saved me time doing unnecessary work.
By having an hourly rate for contact hours with my clients there was no hiding how many hours we had done together. This made charging for that hourly work less awkward.
In terms of the actual fixed fees for each phase of work. This is something that you’ll get better at quantifying are you gain experience. As a start what you are going to do is to estimate the number of hours you think a particular phase is going to take you and then multiply those hours by the hourly rate you currently charge. This will help you come up with the fixed fee components of your fees.
You then want to consider whether that fixed fee feels appropriate for what you are offering. If you were your client receiving that fee proposal would you feel like that felt like value for money?
This is where my trade discount policy can come in handy as when I spell that out at the end of my fee proposal it is a way for a client to easily quantify in their mind that the amount they are going to spend on design fees is going to be made up for the perks they get from me in other areas. Not only do they get advice and direction with the design itself they also get access to trade discounts they wouldn’t otherwise be able to secure for themselves. A win win for both of us!
If you want more detail on my full system then I teach you how to do all of this in my business short course - The Pricing System for Designers . In that short course I also have free fee proposal templates ready for you to use with your clients and go much more in depth in to how to think about pricing in a way that works specifically for you and your design business. By the end of the course (just a few hours long) you will have much more clarity about how to price your fees and services around your unique situation.
Finally, if you want to read the rest of the industry views then make sure to join my free community Facebook group where you can read the responses to this post and many more like it (plus ask your own questions as well).
What I've said in this post isn't directed at the person who wrote the post, it’s just a chance to write out my thoughts on the topic.
Thanks for reading and catch you in my next post :)
Clare x
Dr Clare Le Roy
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