Pricing Interior Design Services
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Figuring out pricing is one of the most challenging parts of any interior design business. Flat fee? Hourly? The debate rages on. I’ll introduce the two basic models - hourly and flat fees, provide my two cents based on my experience (pun intended), but know that this is one of the most open-ended topics concerning any design business and there’s no perfect answer.
Hourly Fees
Flat Fees
Pricing Model Reality
Design Agreements & Pricing
First, what is an hourly vs. flat fee in an interior design business?
Hourly Fee
An hourly fee is when clients are provided a contract or agreement that specifies the designer will charge according to the number of hours worked on a project. This is a model often used by attorneys, accountants, and some other service providers. She will carefully track the amount of time spent on a project, usually broken down to 15 minute increments. Clients will receive invoices at specified intervals detailing how time was spent and clients will be billed accordingly.
TIPS:
This is typically accompanied by some kind of “NTS” clause in the contract, which stands for “Not To Exceed.” It would be a rare client indeed who would agree to a carte blanche hourly contract. So you’ll need to provide an estimate of how much time (cost) a job will require.
Many designers do a retainer or pre-paid blocks of design hours with this model. So the client will pay upfront for blocks of 10 hours at a time for instance. Invoices are issued regularly or as the block is ending and is accompanied with a breakdown of how that time was spent.
PROS: It can be argued that hourly is “more fair” to both the designer and client. A common complaint in design business is that designers don’t actually get paid for all the hours it takes. Hourly theoretically removes that issue. However, see TIPS above! You’ll need to have a good idea of how long it will take to perform the work regardless.
Hourly also helps address “scope creep” which is where the clients asks for additional work outside of what was defined in the original agreement. When charging hourly, it’s very easy to say “Sure I’d be happy to do that for you, I’ll just add it on the time already allotted.”
CONS: Sometimes clients may start getting nervous as remaining hours wind down and start micro-managing how that time is spent. They want assurance their time is being spent efficiently and to avoid having to pay for more hours.
Flat Fee
With a flat fee model, the work is outlined in the contract for a specified amount, regardless of how long it takes to perform.
PROS: Many designers prefer a flat fee because t’s straightforward and upfront. There are no surprises for the client with a flat fee down the road. If the scope of work changes, it can be added onto the original scope.
You don’t have to have recurring discussions about time blocks or how time was spent; it’s been agreed to up front.
CONS: There are no surprises for the client but that’s not always the case for the designer! If something unexpected comes up, you can’t add extra hours on to cover your additional time (unless it’s really unexpected and/or reflects a change in the scope of work).
As discussed above, designers sometimes have a tougher time addressing scope creep when working on a flat fee model. I can attest from personal experience that scope creep can happen more easily with flat fee. I know I’ve said to myself “It’s not a big deal to just add in (additional scope).” whereas if I were charging hourly, it would simply be reflected in the time spent and invoiced.
Also, in the rare instance where a real problem does arise with a client and you want to part ways, it can be messier to agree on how to sever ties since the project progress may be less easily defined than with an hourly contract.
The reality of pricing interior design services
No matter which pricing camp you’re in, (or if you’re currently camp-less) most everybody in fact does a hybrid model, even if they claim they aren’t. What I mean by this is if you are charging a flat fee, you need a pretty clear understanding of how many hours it takes to do the job to protect yourself and actually earn money. The reverse for hourly fees - clients are unlikely to accept an invoice with hours that are double their expectations, so you’ll need to provide an NTS as discussed above.
A hybrid model
Many prefer a flat fee for the work that you have control over like conceptual design, drafting, rendering etc.
Hourly is often preferred when it comes to work that is not so much in your control such as project management, the number of site visits, and with jobs where the scope of work isn’t well defined.
Whichever one you choose to present to the client, in my opinion, they all are basically hourly to me on the back end since I’m always tracking how long it takes against the fee to calculate an hourly rate.
But if you’re a new business…
However when you are new at this, you should probably assume that your first few jobs aren't going to be big money makers. They’re more for getting experience both as a designer and also for running your business.
I have certainly done this many times in the earlier days; just accepting from the outset that it’s how it goes when you don’t actually know how long its going to take to complete that schematic design, plan set, rendering, or whatever. 😆
You can't charge clients for your own inexperience and inefficiency, meaning if you don't know how long something will take and it takes a whole lot longer, that's on the designer, not the client.
I'm not talking about unexpected things that come up in construction that add to your scope. I mean for instance if you budgeted 6 hours for a Sketchup plan and it actually took 12 - that kind of thing.
It helps to reframe expectations. In my opinion, it would be unrealistic to expect to be earning much when you start out. What business makes money straight out of the gate? Whether it’s a small business or a large start-up, the answer is “not many!”
And that's okay! Just accept that you may end up working for a what turns out to be a low hourly wage for a while. It’s just a cost of doing business when you’re newer, and it will serve you down the road.
The value of a strong design agreement
Some of my best “pricing” advice actually originates with the contract. IMHO, it’s more important than whatever price model you go with.
The most proactive thing you can do to help protect yourself and your clients and to manage expectations for how you run your business is to have a strong contract.
Weak contracts are the one issue I see coming up over and over again. Nine times out of ten when somebody on one of the Interior Design Facebook groups is upset over a runaway client or a payment dispute and they’re queried about whether or not they had parameters about the issue specified in their contract, the answer is NO. (Make that 9.5 times out of 10.)
A strong contract will head off problems by addressing issues you wouldn’t have anticipated
Another good point about a good contract; it will bring up issues you would not even think of yourself until you have a lot of experience. And even then... (Ever heard of force majure for starters?)
My best advice? Get specific.
Get very specific in your scope of work and make sure it translates to your design agreement. I’ll share a few pointers I picked up either working for landscape architects or learned from other web designers that I made sure to include in my own design agreements.
Example: Conceptual Design Phase
Specify the number of site visits it will include, the number of presentation meetings, and even spell out who must attend.
Example verbiage:
“The first conceptual design phase will have one (1x) hour-long meeting and both decision makers need to be present. One (1x) set of printed plans will be provided.”
(E.g. if the husband doesn't show up, you aren't agreeing to do “a quick second meeting just to go over everything since he couldn’t make it.” He doesn’t have to show, but neither are you doing a second meeting.
Revisions Management:
Specify the time frame and format for submitting revisions to you after that meeting. This is key to preventing projects from dragging on and on and disrupting your future project timelines.
Specify how many rounds of revisions they get after each meeting; one or two etc., and how they are to be submitted - email, phone, whatever. Specify that further revisions will be addressed on an hourly basis.
And if you agree revisions don’t have to be submitted in writing, be sure to type them up after, send them in an email, and have them agree so you have written documentation.
This all may sound overly rigid, but having clearly defined boundaries for how you work sets the tone for your business.
It provides a framework that sets expectations, which then allows you to be flexible in certain situations should you choose.
So if a client comes back with a third round of light revisions and your contract specifies two and you think it's fine then great, no problem!
But if you don't have standards set initially, then some clients may think that it's okay to have 3rd, 4th, or 5th set of revisions because they don’t know any better. Meaning they don’t understand how inefficient this would be for you to get their work done in a timely manner, and/or they have no motivation to not submit well considered feedback at once because there are no consequences in the form of additional hourly fees.
Tying it together
Can you see how clearly defining parameters and the scope of work helps with pricing whether you go with hourly, flat, or a hybrid pricing model?
If it seems like I’ve veered off course from pricing into contracts, it’s because having a good contract and well defined scope of work will help you out with pricing your services.
In my opinion, the pricing model you choose is less important than having an agreement that defines how you work.
Knowing how long it takes to perform tasks comes with time and experience.
If you need an excellent Interior Design contract, I recommend Creative Law. It’s where I’ve purchased my contracts, and Paige Hulse, an attorney who specializes in representing creatives, has a contract specific to interior designers.
Save an extra 10% with my affiliate code TINA10.
Which pricing model do you use - flat, hourly, or a combo? Share your pricing experience in the comments below.
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