We all know plenty of customers who love to exist in the excruciatingly boring land of catalog decoration. Refusing to punch a train ticket to boring town and encouraging mediocrity in the safe land of the famous is part of what makes you a star designer.
Now let’s do the same for your business. It is difficult to break the cycle of the status quo. I understand. What one thinks one knows is not easy to challenge, but is an essential aspect of perfecting the best business model for sustained growth and revenue projection.
Your business is a business:
Determination of Fees
Where do you start? Know your “cost to be open” number.
This is a key metric as we need to determine our profit projections to cover this “cost of being open” number. And to project the profit, we need to know where our fees and product sales are going to be.
Follow your projects obsessively and revise religiously.
You need to create a system that has parameters that make sense for determining fixed fees and these are usually based on your historical averages and a clear scope of work. I can not emphasize it enough.
Develop a systematic approach to fee calculations. No guessing allowed.
We determine our fees without guesswork with a specific system that is different from what others do. It takes the emotion out of the equation. But most importantly, it gives you confidence in your methodology. Establishing any strong business model is much more than simply “charging what you’re worth” or doing “cost plus” or “flat fee billing”.
A keen awareness of what your product is worth on the market.
The price of a project should be about the finished product – what is this “product” worth on the open market? It’s not about determining what YOU are worth, but what your PRODUCT is worth. Yes, yes, I know you may be thinking, “well, I am my product!” But that’s not really the whole picture. Being able to articulate your product features, or benefits, to the customer is key to conveying a flat fee and the value you provide.
Flat fee vs. hourly billing
Charging flat fees forces you to be a better business owner.
The conventional “head-trash” residence in some designers is that they hourly prevent losing money when clients have a scope creep, if they go over the allowed revisions in the agreement or change their mind. A fixed fee contract can do the same, but it requires more upfront planning and understanding consumer behavior much more than throwing out a small number for hourly billing, getting the job done, and then dealing with the fallout later.
Get the money talk out of the way and focus on delivering a creative vision
for your client rather than dealing with the fear every two weeks when you send out hourly charges.
You must also be able to carefully determine the deliverables and objectives that comprise the scope of work and outline what happens when a client wants to deviate from the LOA or contract. Success is for those who are willing to put in the time to be prepared.
Set a minimum spend
Don’t hope or tell your customer that “all purchases go through me.” Ask for what you want. This minimum expenditure value is a figure that we develop based on the scope of work of the specific job to engage in the work. We use a proprietary calculator that determines the fixed fee and minimum expenses based on various criteria. This value is not a budget, but is a minimum investment in the job for materials, furniture, lighting, window treatments and other items that can be purchased from our firm.
The items included in this expense are items that the client would have purchased for this project regardless – we simply ask that the client invest these funds with our firm so that we can help facilitate the project seamlessly and make it worthwhile for us to work together towards the successful completion of the house.
It’s the ideal win/win for you and the customer if you do it on purpose and make it a business model, not a gimmick. What does it mean? This means that you need to change the way you think about your “product” and your brand. That means you have to find your A-game and hone it until it shines brighter than the silver at Tiffany’s. It’s not just a “good idea”. I want to emphasize this strongly as part of the problem in this industry is that there are too many “good ideas” floating around that lack the substantive business skills needed behind them.
This type of pricing model is without a doubt the best option for the customer’s experience and peace of mind. It also gives you, the designer, the ability to project income. However, you need to understand product sourcing and how to find the best prices in order to be competitive at an IMAP level.
You need to be knowledgeable about your key lines or create custom relationships. You also need to calculate your profit margins and know where you need to fall to be profitable. This is not a business model for those who are hobbyists or designers who cannot or do not want to commit to the overall growth you need to achieve in your business to make it work without any obstacles. Project management Controlling, organizing or managing the circus performers is extra. Project management is important for the type of work we do. And by this I mean actually engaging with subs and contractors and helping them execute the project to our design standards on behalf of the client. There are so many moving parts to new construction and remodeling projects, and most good designers don’t relish the idea of letting the circus performers go without some kind of supervision, even with a contractor.
This hourly fee is intentionally less than the design published. I want to elevate design in the customer’s mind and this is a subtle way to do it. It is much more difficult to provide these types of fees in a project, and I find it causes too much anxiety for clients and our team to even try, so we don’t.
Cheryl Kees Clendenon is founder, lead designer and retailer at In Detail Interiors. As a business coach, she shares savvy strategies for design businesses at Damn Good Designer. Learn more at damngooddesigner.com