Choosing the Best Way to Charge for Your Services
December 15, 2023
In today’s world of both interior design and kitchen and bath design, there’s nothing more confusing than the myriad options available when it comes to how to charge for your services. When I started in the kitchen and bath field, I worked for a kitchen and bath design/build firm. We would price the project, including all the associated costs, assign a gross profit margin percentage to that net value, and boom, we would have a sales price for the contract. Depending on the profitability of the final job cost, we would then be paid a commission on what we called “gross profit margin.”
I was a designer selling my design, the showroom products and the labor and materials to complete the project. What does that mean for somebody who isn’t working for a kitchen and bath design studio? Is there a good, better, best option for a solopreneur or a small firm? Kitchen and bath design professionals are adopting a more flexible approach as to how they charge, and I have seen a shift in the pricing methods used. I use three different pricing structures depending on the project, scope of work and the client. Here are some options to consider when deciding how to charge for your services.
The Hourly Rate
Interior designers have been using an hour’s rate to bill for services for many years. An hourly rate is more complicated because on a busy day I can be working on several projects, and time tracking can be time consuming. For clients, it is an open-ended billing system. They may not understand how many hours it takes to complete a project, and you can get pushback regarding what they consider “a reasonable amount of time” to develop and implement a design.
“An hourly rate is more complicated because on a busy day I can be working on several projects,
and time tracking can be time consuming.”
If I am working as a consultant on design or material selection, project management or construction observation, hourly works well, and I find a four- or eight-hour block works best. Depending on your business model, this may also work well for you. I invoice every two weeks and send statements at the end of each month.
Square Foot/Project Percentage/Flat Fee
Square footage and flat-fee structures are gaining in popularity. Depending on where you are located, your experience and what others in the area are charging, this method is a fairly easy way to determine your return on the project. Square footage rates can vary from $8 per square foot to as much as $25 per square foot, and this is just for the design portion.
“When using a flat-fee structure, it is up to the designer to determine the number of hours they believe it will take to complete the design work. If you know yourself and your client well, this can be a great system.”
It is helpful to know how much time it takes you to develop the design, create the plans and make presentations to the client. I worked with a designer to convert her system from hourly to a square foot percentage, and we used past projects to “proof” the system. She used these comparisons to decide on the rate she charged, and once she became comfortable working this way, she never went back.
When using a flat-fee structure, it is up to the designer to determine the number of hours they believe it will take to complete the design work. If you know yourself and your client well, this can be a great system. If the client cannot make decisions quickly or often changes their mind, your time calculation can be underestimated.
You can also use percentages of the total dollar cost of the project; this is generally how a project manager would work, being paid to oversee the entire project, ordering materials and approving contractor invoices. In my experience, 25% to 30% of the project seems to be the number in my region.
To me, this is easier for clients to wrap their heads around. You can also divide your billing into three parts, (initial meeting and measure, initial plan presentation, final plans), which is going to allow you to have a little more cash flow. No matter which system you choose, make sure that your contract specifies how many revisions are included with the agreement.
What About Procurement?
Once the design phase is complete, it is time to order/procure materials, and the last few years have wreaked havoc with the process. I feel that gave rise to using combined methods of billing.
You have designed a kitchen, you’ve been paid your fee, and now you’re supplying the cabinets, countertops and all the other parts and pieces that go along with the project. In your contract, you can specify the percentage of the materials you will be paid to order everything. Clearly specify how this portion will work, i.e., “Client will pay said designer 25% above wholesale net for all purchased products not including tax and delivery.”
If you prefer giving a discount off retail, then do so. No matter what, you are getting paid for the procurement process, and make sure all your time and travel commitment is included.
What’s the Best Way?
Choose whatever you and your client are most comfortable with. I generally write one contract that covers everything; I specialize in K&B, and that is how most of the showrooms in my area work. I do not break down design cost, material cost, etc., unless I have a client who wants to see everything. I have many years of experience, and I have “proofed” my pricing so I can easily explain how each system works. Most of my clients like the one-contract system. On a large whole-house project, I am using all three methods: square footage, procurement percentage and project management.
Being paid for what you do is the most important part of your business. No one should work for less than they are worth. I suggest you take a project you completed, try pricing it with each of the options above and see how they work out. Remember, there is no right or wrong answer, just what is better and more profitable for you.
By Sharon Sherman, CKD, ASID, CID, NCIDQ, founder and principal of Thyme & Place Design
Photo credit: KOTO/Adobe Stock
February 27, 2024 | Trends & Inspirations
James Herriot Launches ‘The Essence of Kitchen Design’
February 1, 2024 | Sponsored
Improving Life at Home Through Appliance Innovation