Running a business requires a lot of decision making but none as important as pricing your interior design services. If you can’t get that right, it’s going to be hard to make money. As much as most of us designers love everything design related, we still want to earn money in our business.
And this is not an issue that specifically relates to new designers. It took me yearrrrrs to get my pricing strategy right. There’s just not enough information about pricing interior design services and most of us get so busy in the day-to-day stuff. We just move along and never go back to evaluate whether our model is working or not.
what to consider in pricing your interior design services
If you’ve been undercharging you’re not alone. The majority of designers I speak with are struggling to nail down the pricing model in their business. It’s possible to be undercharging but it’s also very common to have a good pricing structure but not track time and get lost in sourcing or creating technical drawings. In the end, you may as well have undercharged because the result is the same – you’re not making enough money compared to how many hours you work.
Here are the most important things to ask yourself:Do you know and understand the different pricing methods?
- Are you consistently tracking your time?
- Do you know and understand the different pricing models?
- Do you know how many hours each stage of a project takes?
If you can answer those questions you likely have a great handle on pricing. Assuming that you’re reading this because you’re not happy with your current model, let’s dig into those areas.
Before you begin working on your pricing be sure you’ve defined the services you want to offer. Read more about how to confidently define the services you WANT to offer.
💰FACTORS THAT AFFECT YOUR PRICING
Calculating how long each stage of a project will cost is hard. These are things to consider that will affect the pricing.
SCOPE OF WORK
Make sure you’re absolutely confident of what you’re being hired to do. Outline all the steps in a Scope of Work document and review it closely with your clients. Their understanding of what’s included may differ and the time to get clear is at the beginning, before you’ve set the pricing.
Here are a few of the things I see most commonly overlooked when preparing a scope of work:
- not accounting for time spent on site talking to trades.
- underestimating how many client meetings are required.
- not enough hours allocated to client communication (weekly emails, phone calls or texts).
- haven’t included review of shop drawings.
- too few hours allocated to sourcing (virtual and in-person).
- underestimating revisions and time needed to resource. *this one is a huge issue*
PRO TIP: Be sure to sit down and review your Scope of Work document in thorough detail. A big mistake I see happening when clients haven’t reviewed the SOW is that their expectations are not aligned with yours.
TIMELINE
The biggest pricing error I ever made was on my first new build construction project. I created a thorough Scope of Work but I didn’t include an end date or a maximum hours.
I anticipated being involved in the project for 8 months. In the end it lasted 13 months and I essentially worked for free for those last 5 months. That cut into my profit but it also increased my stress because I was already onboarding new clients who had been scheduled to start during those months.
ALWAYS calculate how much time (in months or hours) you’ll be involved. One of these options should be included in your Scope of Work:
- End Date – your scope of work will be completed by (date)
- Block of Hours – client is entitled to services totalling (hours)
YOUR EXPERIENCE
It will take you much longer to do something in the beginning so you have to factor that in and consider how it impacts both you and the client.
CLIENT EXPERIENCE WORKING WITH DESIGNER
Generally, if a client hasn’t worked with a designer they’ll require more attention. They have more questions and need more guidance. They also tend to me more involved than clients who have gone through the process previously.
PRO TIP – always ask how much involvement a client expects to have. Clients slow us down! Shopping with a client will take twice as long. Reviewing every product and discussing budget for each individual material will cost you excessive hours.
OPTIONS FOR PRICING YOUR INTERIOR DESIGN SERVICES
⏰ HOURLY
This option works well when you’re starting and have smaller projects. It’s a great way to get used to how long each stage of design takes.
Start by exploring the competition in your local area. You never want your hourly rate to be the lowest. People don’t value less expensive things and it will hurt you in being able to choose great projects if you undercharge.
PROS OF HOURLY PRICING – you are compensated for every hour of your time. Can be a great way to price in the beginning until you have some experience estimating time.
CONS OF HOURLY PRICING – clients don’t love this model because they have no understanding of what the final pricing will be.
🧾 FIXED FEE
This is a common model but it does require a fair amount of experience to be sure you’re pricing fairly for both yourself and your client.
Be sure if you propose the fixed fee model that your client has great decision making abilities. This can devastating to your bottom line if you don’t anticipate indecision.
PROS OF FIXED FEE – you can anticipate what you’ll earn from your projects. Clients love to know what they’re paying before the project begins.
CONS OF FIXED FEE– if you’re not comfortable estimating time you can undercharge and there is no method to recover the lost amount.
➕COMBINATION FIXED PLUS HOURLY
I personally think this is the best model. It allows for some allowance for unanticipated work.
Each phase of the project would have a fixed fee for a set of work outlined in the Scope of Work. There is an hourly fee for going beyond the scope.
PROS OF COMBINATION FIXED PLUS HOURLY – if you underestimate on the fixed portion you have the opportunity to regain loss in hourly fees. Clients are dissuaded from overthinking and endlessly revising.
CONS OF COMBINATION FIXED PLUS HOURLY– you’ll need to have excellent time management and record all of your hours.
🗓️ MONTHLY RETAINER
This is a great model for large construction and new build projects. Your Scope of Work will be complex because you’ll want to allocate work to each month to calculate how long you’ll be involved. You’ll be fairly compensated for the duration of the project and you can give a warning whenever the hours are creeping up to the maximum for any month.
PROS OF MONTHLY RETAINER – you’re well paid for each month that you’re involved. You can plan for future projects knowing how many hours you’ve allocated to this project.
CONS OF MONTHLY RETAINER – you’ll need to have excellent time management and record all of your hours.
It’s tricky pricing interior design services but you can get your business to the point where you’re earning the money you want. You just need to be diligent in managing your projects.
If there’s only one thing you do after reading this, START TRACKING YOUR TIME ON EVERY PROJECT. You won’t have to do this forever but at least do it until you have an ability to accurately estimate.
I hope this helps you have the confidence to start pricing and making money in your business.