For most of you, I would guess one of the first
things you sold your client was time.
Your design fee was included in the letter of agreement or contract,
wasn’t it? So, how did you arrive at
that figure? In the beginning, you might
have simply charged what everyone else was charging. That’s not the right approach. Your fees should be based on your acumen and
experience as a professional. It might
be possible for you to charge more than other designers in the area because of
your ability to market more effectively or get better editorial press. Your fees will also be affected by your
business overhead. Large offices, fancy
cars and an ample staff all contribute to the equation of hourly fee setting.
Let’s
take a look. No matter what others say,
there is an overhead attached to every movement you make from the moment you
step into your office until you turn off the lights in the evening. So, no matter what task you perform there
should be an overhead charge attached.
Wait a minute; aren’t we talking about the art of the sale, here? Yes, but to get to a sale you, as a
professional interior designer and project manager need to understand how
important costs and profits are to a successful business. This will enhance your client management
skills by understanding what, exactly, you are selling when you present to a
client. It’s the benefit above and
beyond the actual cost of a particular product or service that is the engine of
profit. As you become more comfortable
with that idea you will be able to sell with ease.
Design
fees are not just free money coming in.
You, after all, deserve to be paid for your time just as any other
designer in your office. By looking at
how much you pay yourself you will have a good idea of what the net cost of
your time is. Now, add something for
profit and you will define the cost of an hour of your time to your
client. Add to the cost of your salary
the cost of overhead associated with you being in the office and you begin to
see how much your hourly fee should really be.
If you’ve been charging $ 100.00 for hourly time and it costs your
company $ 77.50 to have you on site the profit is only $ 33.50 or a margin of
profit of only twenty-three percent. Not
a particularly stellar performance. You
need to look for ways to increase that particular profit margin. One of the best ways I’ve found to increase
the margin of profit on hourly fees is to increase the amount you charge for
that hour of your time. I actually
advocate raising fees at least once a year.
Don’t worry; this needn’t be a deal breaker. In our particular business an increase of one
percent is huge. Now try five
percent. Taking your fees from $ 100.00
to $ 105.00 will increase your profit margin to twenty-six percent. A three percent increase in margin of profit
is great. Although you may think $ 5.00
an hour isn’t enough to really matter, consider this. If your billable time is in the neighborhood
of forty-five to fifty percent of the time you spend in your office each week a
three percent increase to your bottom line could amount to over $ 5,000.00 a
year. What could you do with that
money? How do you feel about that paltry
three percent now?
If you do
that once a year for three years it will enhance your bottom line for design
fees by over ten percent and most clients won’t even notice. Selling your expertise as a professional
interior designer is an important part of your overall business plan and should
be included in any conversation you have with your peer group about mark-up,
overhead and profit. As the principal of
your firm your time in many ways is more valuable than those who work in your
offices. Your staff overhead must always
be included in any calculation you might incorporate for pricing. Remember, they will be working the orders once
the sale is completed and you have moved on to the search for new clients and
other client presentations.
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