You recently opened your interior design business and you are panicking about how to set a selling price for your services.
It’s alright because every startup faces this challenge. Don’t open up the spreadsheet yet because first you need to understand how pricing works.
There are a dozen things involved in interior designing fees such as material cost, labor cost, overheads, etc. You charge the clients for the product, service, and labor cost and then you pay your workers for their hard work.
It’s a give-and-take kind of situation, so you need to keep track of how much is coming in and how much is going out.
Don’t forget the cost of printing, sampling, office supplies, business development, website, gas, licenses, travel, phone calls to the clients, and other costs. These are your overheads.
Now that you have an idea of the types of costs involved in a project, let’s talk about how to calculate the fee:
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Different Types of Calculating Methods for Interior Design Fee
One thing you need to understand is that when it comes to interior designers, there’s no regulating body. Therefore, there are various types of pricing models and every interior designer chooses the one they can easily work with.
Of course, the fee in each structure varies, which is why customers might find one model acceptable and the other: not so much.
Also known as fixed fee, this pricing model works on a single rate that you charge for the project. It only includes the price of your time spend on the project and the work you and your workers did.
Any other cost like buying furniture, along with other items, is not included in the final price. Still, you need to spell out in the contract how the flat fee was calculated. Usually, the fee is dependent on four factors. These include experience, estimated time, square footage, and budget.
Example: You were called in for an interior design consultation. After looking at the house, you consulted with your workers and came up with a fixed fee of $20,000.
Also known as markup fee, this pricing model is as simple as the flat fee model. Basically, the designer charges a small markup on the total project cost, which is their fee.
The markup percentage might be different for expensive items such as antiques, rugs, etc. However, if you are charging extra, then this should be mentioned in the contract.
Example: You brought all the furniture and the items from the same retailer for a single project. The total cost of these items was $8,999. You got a designer discount of 40%, which reduced the cost to $5,399.40. Now when charging your client, you add a markup of 35%. This means that your fee will be $7,289.19.
This fee model is the same as cost-plus fee model but with one small difference. The net price is paid by the designer and the client pays retail. Here, the designer fee differs and you might not receive a set percentage. The change depends on the discount you receive.
Example: The total cost of the items you bought for the client was $8,999. You got a designer discount of 40%, which reduced the cost to $5,399.40. So retail minus designer’s net equals $3599.60.
This fee model is pretty self-explanatory. The client pays you for the number of hours you work on the project. Typically, the rates are between $50 and $300, which are dependent on the designer’s talent and experience and the client’s location.
Clients should not go for the cheapest option because it doesn’t guarantee that the project will be completed early. When it comes to the hourly model, you need to charge for every minute that is spent on the project.
This includes emails, phone calls, logistics, ordering, troubleshooting, purchasing and procurement, meetings, shopping, delivery/installation, designing/drafting, driving, sample returns, etc.
Example: $150/hour x 45 hours = $6,750.
Square Footage Fee
As the name says, the designer fee is calculated based on the space. You don’t take in furnishings, fixture or labor cost – just the space you work on. This model is the same as the hourly fee model, only the hours have been replaced by the square footage.
Example: $45/sq. ft. x 3000 sq. ft. = $135,000.
Percentage of Budget Fee
This fee model is based on the estimate. When you provide the client an estimate of what an interior design project will cost him, you take out a small percentage of that cost and mark it as your fee.
This fee model is just like the flat fee model but does not have a cap. If you feel that the cost might go slightly high than the budget, then inform the client and charge him on installments.
Example: Final Budget: $70,000 x 25% = $49,000.
So there you go – different ways to calculate your interior designer fee. It’s pretty simple, right? All you need to do is keep a detailed inventory of the direct and indirect costs to your business and you will be easily able to calculate your fee. If you are looking for more informatory articles about interior design like this, then visit Epic Home Ideas.
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