Get the most value from your interior design project pricing. What this really means is, stop giving away services for free. The traditional model for interior design project pricing is relatively straightforward. That’s to say, £30-50 per hour for services such as project management and 10% to 30% mark-up on supplier costs. Even so, interior designers often cost themselves money. Either knowingly or without realising it. Because the client later questions what the service covers. Or interior design project pricing is too optimistic and missing key elements.
If you focus on these areas, you’re likely to get the most value from your interior design project pricing:
– Make sure the client knows what they’ll receive from the service.
– Know what it costs to provide the service.
– Don’t provide loans or ignore the risk of non-payment.
Make Sure the Client Knows What They’ll Receive from the Service
For your interior design project pricing to be accurate from the outset, your client must know what the service includes. Moreover, what they won’t get. So, to avoid confusion and negotiation later, a first step is a letter of engagement. That sets out what, when, and how they’ll receive your service. As you’re still in the sales process, I suggest using marketing language rather than legal terms. But this is only a first step. And it’s the next step that will really help you avoid profit-eroding project creep.
Set out what the next services could be when your contribution to a project is about to end. For instance, if delivering the concept design, provide a description of your sourcing or project management services. Preferably in the same pack. Not only will clients read this information more recently than the engagement letter, it’s also more likely to stick. This means you have something to refer to when confronted with questions that begin with, ‘Can you just…?’.
While we’re here, let’s touch on another tricky subject. Client access to trade prices. Trade prices are just that, prices available to those in the trade. People like you, who’ve invested considerable time, effort, and money. And that investment is incredibly valuable. Therefore, it’s probably best not to cheapen it, and your suppliers’ products, by offering trade prices to those outside the trade.
Know What it Costs to Provide Your Services
Know what it costs to provide your services. To illustrate, take a concept design that costs £450. Whenever you spend more than 15 hours on it, your hourly rate drops below the expected range of £30-50/hour. And be sure to include all the hours you put into it. For instance, don’t forget planning, research, and even travel.
You can apply the same method if you charge fees as a mark-up on materials. Again by example, 15% mark-up on a £30,000 project returns £4,500. To achieve an hour rate of £30 or more, you need to spend less than 150 hours on the project. Including negotiating with suppliers, being onsite, getting to and from site, problem solving, rework, and so on.
The only way to know how many hours you’re truly putting into each project is to monitor yourself. This doesn’t mean you need a complicated time tracking system. Rather, pen and paper plus 5 minutes a day is all you need. At the end of each day, think back over it. And write down what you spent your time on. You’re unlikely to recall everything. But don’t beat yourself up about it. Instead, aim for roughly right. Over just a few weeks your basic time tracking approach will provide you amazing insights.
Don’t Provide Loans or Ignore the Risk of Non-Payment
Are you providing loans and ignoring the risk of non-payment? The answers to both are almost certainly ‘yes’. Although without realising it.
It’s justifiable your client pays you monthly. For the reason that’s how the rest of the world works. For example, businesses will generally receive monthly invoices payable within 30 days for rent, utilities. Equally, personal credit cards have monthly billing cycles with short interest-free periods. If clients owe you money for longer, then you’re providing them with a loan. For free.
Sooner or later, a client will refuse to pay. It’s inevitable. So, your pricing must reflect this. Otherwise, you’re unlikely to be profitable. Similarly, stay afloat. And the longer you wait for money, the more you’re owed, the greater the impact of non-payment is. Which is why it makes sense to be paid frequently.
Besides, it’s easy to adjust your interior design project pricing. While you bill monthly and wait no more than 30 days for your money, there’s nothing extra to charge. For each further month you wait for your money add 1.5% to the bill for private clients. Why 1.5%? Because 1.5% per month is equal to 20% per year. And comparable to the average credit card APR. The credit card companies have done the hard part, working out the profit and risk. All you have to do is follow suit.
For business clients, it’s the same arithmetic except replace 1.5% with 0.75% per month. That is, for safe clients. As this monthly percentage is equivalent to the average business loan APR of around 9%. Who are safe clients? In general, those doing well. For example, finance companies, anything digital. Along with solid industries like healthcare, utilities. On the other hand, risky? That’s mainly retail and hospitality. For these clients consider a monthly charge of 2.5% (35% APR).
To Get the Most Value from Your Interior Design Project Pricing, Don’t Give Away Services for Free
In summary, to get the most value from interior design project pricing, don’t give away services for free. And to do this, concentrate on 3 areas:
- Take steps so your clients understand what they’re getting. More importantly, not getting.
- Identify what your services cost you. Remember, if you don’t measure it, you won’t know. Thus, track the time you put into projects, roughly using pen and paper.
- Finally, it isn’t an interior designer’s role to provide interest-free loans. No one else does!
Does your client keep asking for extra work, but without paying anymore? Are you generally being too nice? Then your unlikely to be getting the most value from your pricing. In which case get in touch. During November, I’m extending the YourCoachApproach free 30-minute initial chat to 45 minutes. But only for MyDesignHub users. As such, please mention MyDesignHub when getting in contact: https://yourcoachapproach.co.uk/contact-interior-design-coach/