A conversation that comes up often in the design community involves deciding how much to charge for your services. It may revolve around setting a design fee, percentage markup or both. Too often the decision becomes more like picking a number out of a hat rather than placing a value on your services. Maybe you’re basing it on a number that just sounds good to you or a figure that another designer charges. Instead of that approach, do some research first. What do you want to make in net profit (after expenses)? Decide how much you want to work. What does it cost you to open your doors – what is your overhead? In short, understand your value, and be confident in your design pricing and the value you bring.
How much do you want to make?
No matter how much you love design, remember that this is a business – not a hobby. You are in business to make money. What does it cost to keep your doors open – what is your overhead? Be realistic. Is this number too high and is that cutting into your profit? What do you need to make to cover those costs AND create the lifestyle you want? You must know this number before you can think about your design pricing. If you don’t, you’ll find yourself stressing over money problems more than actually doing interior design.
Once you cover your overhead (which includes your salary), then what is left is your net profit. That is what will allow you to create the lifestyle you want. We recommend a goal of 10-25% net profit margin. Just charging what you think others are charging is unrealistic. They probably have different costs and lifestyle choices than you do. This is about YOUR business, your costs, your goals. So make sure your rates reflect your desires.
Know your competition
Often designers base their pricing on who they may perceive as competitors. But are they competitors? Are they truly competing for the same ideal clients in the marketplace? You may want to target a completely different pricing tier, a completely different target market, or a different style.
Do you want to position yourself as a firm offering quantity or quality? This question applies to how much you want to work, also. As in would you rather have more smaller projects or fewer larger projects? Those small projects can take as much if not more time and bring in less profit.
Once you identify your true competition, then identify where you are different. Where do you have a value advantage over them? Is it areas of service, connections to unique industry partners or products, or even your own unique creativity?
The importance of mindset
You must believe in yourself and the products and services you offer. How can you convince a client of the value you offer if you are not confident in it yourself?
Testimonials from current and past ideal clients are great for your website but also for your own mindset. They remind you of why you are worth the client’s decision to invest in working with you. You change lives, because your work touches people every day, in the places where they live and work and spend time. Remember that!
The bottom line is that your client comes to you to solve a problem. Focus on identifying the problem, and being results-oriented rather than comparing your design pricing to others. Ask yourself: “What is it worth to them to have that problem solved?”
Understand your value
Own your worth! People don’t invest in design. They invest in results! You offer financial value to your ideal clients, and you need confidence in that value. AND you need to be compensated for that value. Don’t forget that you have expertise and experience in the profession of interior design. Remember that is of value to those who lack the background that you have.
Value your TIME. Those designers who are financially successful value their time and charge accordingly. This will allow you to grow your business, begin to hire a team, access software to make your job easier, etc. Keep in mind how many hours go into non-billable or nebulous activities like responding to emails, organizing documents, and handling backend business activities.
Don’t sell yourself short. Have confidence in your design pricing – know your value and you know how much you are worth! Your expertise and experience offer access to vendors, products, industry partners, etc. with whom you have developed a relationship. That access and relationship has great value. When you are clear on the value that you offer your clients, you will be more confident in value-based pricing.
Fees and product markup
Your time is worth a great deal – your fees should reflect that. If you are increasing your pricing and want to test it, you might use one of these options:
- Use the new design pricing on new clients, but ease existing clients in by offering them the original price if they sign a contract by a certain date.
- Offer different levels of service, the more expensive ones including better service and more features.
Or, as our client Becky Charton found out, sometimes your clients are happy to pay your increased rates – it can’t hurt to ask.
Be sure to schedule a review of your costs and profitability on an annual or bi-annual basis. Then determine whether you need to adjust your pricing. Is it too high, and you’re scaring clients away? Or is it too low, and you’re not on track to have a profitable business?
Price with confidence
Pull that number you came up with above that covers your costs and gives you the profit you need. How does that compare to the competition? Only use that as a guideline but don’t fixate on it. Instead focus on why you are worth what you charge.
Identify what differentiates you from your competition – what makes you unique. Set your pricing accordingly and confidently. Remember, your ideal client does not shop prices. They value investing in you to solve their problems. You are more than just your rates, especially when it comes to something as costly as interior design fees. Save the race to the bottom for cheap goods, not professional design services!
When you write a blog, an article or interview for local media, etc., you can become seen as an “expert” in your area. As an “expert” your value increases. Leverage these pieces of media, as they give you authority in your field. Consider that the more years of experience you have, the more value you have to offer. Charge accordingly. But also don’t be afraid to set a high rate even if you are new to design – let your work speak for you.
Once you set your design pricing, be confident and stick to it. Do not treat it as if it is negotiable or that is the message you will be sending!
The bottom line is: Do you want to love this business AND get paid what you are worth? If so, then develop confidence in what you offer and remember that you are a problem-solver. Clients are willing to invest in results. That is what you need to sell. Discover the reason behind their project and the results that they are after. Then “paint” the picture of those results that they desire. If you are effective in painting that picture they will be fully engaged, and the question of your rates will be a small footnote in your conversations.