You are so right! The big issue is being firm on the “while you're at” it requests! Need to learn how to educate clients up-front on how these aren't usually quick, easy, or “what's the big deal?”

After 12 years of business I have never, ever had so many problems with people paying my hourly fees. I know I am losing jobs to people who actually charge more but charge differently and of course, to those who don't charge for certain services or time (drives me mad) or just charge less per hour. Why can't we all just have one way of doing things to allow people to choose us based on how we click with them and on our skill and experience?! I have been trying to create a system of charging a flat rate for all projects but I just can't see how to avoid the final payment problems, no matter how clear you are or if they sign a contract or not. How do others do it? Why do so many other people (professions) charge by the hour and make it work? Lawyers, consultants, computer technicians, etc. We accept that! Why not for design and why less now than before?? Economy yes…but if they hire you they should pay, no? If the economy has hit you, don't hire me! Why do they always agree to paying xx per hour then flip out when you actually charge by the hour??? I'm sorry, but if I spend 20 minutes driving to your house or faxing the cabinet maker FOR YOUR PROJECT then why do I have to fight for that? It has to be done for the project to move ahead, if you're not doing it then it means I am for you. Why should I not be paid for that? Why is there even a question? What in the world is the magic formula to charge the best and safest flat fee? How do you get them to actually PAY for the overages they have previously agreed to? I am so frustrated I hardly know just one good question to ask. I am looking forward to everyone's comments. Gail, in one post you mention that there are “some professions you avoid”, I think in the initial qualifying of the client, if I understand correctly. Could you please explain that? Thank you for posting this question.

Much has changed in the Home Furnishings and Professional Interior Design Industry over the past 20 years that I have personally observed. Most recently the down turn in the economy has really forced clients to look for the most style for their money and best quality value.
The majority of the Home Furnishings main stream clients are not looking for the quality level our parents looked for. Our generation has become a disposable generation. If they can get 3 to 6 years out of a sofa that is great, they are not looking to have it reupholstered they are looking to replace it. They are also not looking to pass down their fine quality dining or bedroom set to their children. This has become a fast paced changing world when they get tired of the style they will dispose of it and look for something new. That is why most of the Home Furnishings sold today are coming out of China. A good portion of the Home Furnishings clients will get inspired by a House and Garden TV Show, go on-line and order a room full of furniture from Pottery Barn, Crate and Barrel, Restoration Hardware just to name a few. Another portion of the market will visit a local furniture chain Raymore & Flanagan, Ethan Allen, Thomasville just to name a few, work with a staff decorator/designer that might also come to their home and purchase a room full of furnishings. To the trade only is now open to the public and have decorators/designers on staff to service the walk in business. Billions of dollars each year will be spent on Home Furnishings and none of these clients paid a dime in Professional Interior Design Fees. The client today wants to purchase their products at a competitive retail price. All of these Home Furnishings Retailers purchased the product at wholesale and sold it with a gross profit of at least 50%. In most cases the shopping experience met the client’s expectations. Yes, I know this is not the Professional Interior Designer client! But why is that? Is it your choice or the future of this business?

Yes that high end high quality provide me with your credentials, signature style and service the hell out of me client still exist but it is a very small and shrinking part of the overall market. Sure another very small portion of clients today might be interested in built in cabinetry, architectural changes, structural elements, lighting plans, cad drawings and other Professional Interior Design services that will require fees for time. But today there is less and less of these ideal clients for the growing Interior Design Industry to fight over. With all the Designers to choose from the client will be able to interview more, negotiate more and demand more for their money. If you find yourself educating (arm wrestling) your client about the difference between a Professional Interior Designer and a Professional Decorator and the value of your credentials you most likely already lost the sale. Let the best Designer/Decorator win! So what opportunity does that leave for the rest of the Professional Interior Design industry?

If the Professional Interior Designer of today is going to compete for the larger share of this Billion Dollar Industry they must have a competitive business model. A business model that is Profit Driven and not fee based. They must be able to provide a competitive retail price to their client that does not get into a fee conversation. They need to have a conversation with the client about how they can provide them with better quality, greater value, more style, extraordinary service and for less money. This is what the consumer of today is looking for. The consumer of today also prefers to work with a National Brand Name because they want financial security and piece of mind when making a large purchase.

Professionally Trained Interior Designers of today in order to compete in this new world must be aligned as a group to negotiate with vendors for the best wholesale prices on the products they will provide their clients. They must have systems in place to ensure a consistent and extraordinary client shopping experience so they can benefit from repeat and referral business. They must have a strong marketing plan to generate an abundance of client leads and not live in a world of scarcity. They need to network with their piers and not feel as if they are collaborating with the competition. This synergy of working with your piers, sharing what works and having a team to talk openly about challenges and opportunities has enormous value especially for the home based independent business owner. Staying current on design trends, manufacturing processes, technology and always challenging yourself to learn the latest and greatest is also really important especially in this industry. Love the business you work in!

There can be a disconnect between clients and designers and what each expect in their business relationship…as others have previously observed. Yet there is a way to close the gap and that is by working closely with the client to define expectations and project criteria right at the start….before the contract is signed, before running to the bank with a check in hand.

Forget about by-the-hour. Forget about “value” pricing or cost-plus. One can't even put a dollar sign to a project, no matter the method, until all the criteria are well established and all parties agree to some scope, to certain expectations, to a number of issues like schedules, projected costs. Its like a blind date. You have to get to know a few things upfront if there is going to be a second date or a third.

Designers often jump too quickly into work + clients are way too anxious to get underway and neither spend adequate time to determine if this client/designer relationship even will meet each others expectations and/or the project is even appropriate to undertake. IDs need to slow down before speeding up especially in those very first critical steps. Just my opinion.

About a year ago I switched from charging an hourly rate to a fixed fee. After attending a IFDA conference featuring the top interior design accounting firm I switched my methods. They suggested calculating your fees based on the project square footage and gave us a range of $4 to $10 per sq ft. He asked us to research past projects to determine where our rate would fall. I also change my rate based on the scope of the project. If it a large project I might even drop the price to $3.50. To pre emp change requests, I always build in choices with the presentation. It is imparative to be really specific when you're gathering information. That will also pre emp change requests. IE (the other day I did a presentation for a client and that's when she told me her husband was allergic to viscose). Now, I ask if anyone in the family is allegic to anything in the interview questions. My agreement is 6 pages long and pretty specific. I ask for a retainer when the client signs the agreement and invoice the balance over the next 3 to 6 months. Again, depends on the scope of the project. My final fee is typically paid before the project is installed but after they have made the big purchases. I also charge a mark up on goods. It isn't a perfect science but I can tell you that I have continued to increase revenue each year for the past five years and it has been completely referral based. Clients don't like being invoiced by the hour. Do we get hosed with change requests ocasionally? Yeah, but I'm shocked at how many ID are resistant to the idea. The longer you are in the business, you get wiser with managing that. I attended a class recently with designer from all over the country. When the conversation turned to fee structure and I explained what I did, it was met with almost outrage and complete resistance. It may not work for everyone but my numbers speak for themselves.

If an hourly rate is working for someone, and they are booked solid, there would be no need to change. You don't need to fix what isn't broken.   However, if you are not getting paid and don't have enough clients, then why not try something else.  To be perfectly honest, I hope my competition keeps charging by the hour.  
I love your topics.
Kristin
PS While attending the Green Design Summit last summer you did a story on your blog about my upcoming eco friendly furniture line.  I have recently launched it on my Decorati website.  I noticed you are writing for them now.  Do you know what writer covers new product stories, where I could forward a press release?  Thanks

Thanks, I really appreciate you willingness to help.  It is refreshing.
I knew you'd get my hint about the hourly billing.
Kristin

Thanks, I'll let keep you posted.  Let me know if you ever need me to participate in a round table discussion of Fixed Fees.  I'd be happy to share my experience with it.  I've loved following the process starting with the survey.  So, many of your topics have paralleled my evolving business.  Since I work on my own, I continue to use DSU for mentoring. Thanks for what you do.
Kristin

I love to help. Kristin

Excellent. This is so great to get everyone's feedback. It will really help our industry get out of the time commodity business. I greatly appreciate your participation.

I am so interested in having more input from Kristin and Ray-Lee. Thank you for being so generous in your comments. Please continue, both of you, to comment on this question. I really believe it is better for everyone in our industry to be open and share. If I discover myself doing something right (I realize how plain lucky I have been in the past) I will pass it on as well!!! So far I can't say I have.

Also, Gail, I am so looking forward to the webinar you mentioned above during which you will discuss the professions to avoid, asking the right qualifying questions and having the right process. Please sign me up!! Also can hardly wait for the next Value Based Fees Class.

All good comments regarding how to charge fees for services rendered. I charge hourly when working as a consultant for other designers or small services for clients that are not full projects. Otherwise, I have always used a fee based method which is very common in commercial design. Have never had a problem charging a flat fee or phased fixed fee. Clients like to know what they will be billed and hourly always leaves you open to questions about “how you spent your time.” Also, one architect I worked for computed the interiors portion of his overall fee using square footage price so I have used all methods depending on the project.

One issue that still baffles me is why designers do not do proper programming before starting a project. It is vitally important to get all the information up front regarding scope of work and make sure the client is clear on what you will and will not do for the fee, otherwise you will get used and possibly lose any profit on your project. Yes, there are times to add services for free that are not spelled out in the scope as well as tell a client something they are requesting will be additional services. It takes common sense, belief in one's abilities, and willingness to stand firm with a client…..but this can only be done when it has been clearly spelled out in the beginning.

I am trying to understand how all this Social Media stuff works but find parts very confusing. For example, the above “#5 of 10 Biggest Mistakes Designers make with Fees” is an interesting thought but there is certainly no explanation given as to what it really means. Either that or I am just exceptionally stupid and cannot find it. Lots of questions on this site but not sure where the answers are. Perhaps this is all to entice people into paying for the monthly membership.
This seems the clever part – if something is done online, probably to quite a large audience, how can you rationalize such a high MONTHLY membership fee? I mean $37.00 is not a lot of money, it just seems to me a lot for a monthly online membership – not what I would call good value, but then perhaps that just me.
These sorts of websites can give some great info – some are free and some like yours give bits to hook people in to paying for the real goods, a great money maker for the website owners.
I, like many others, work as an independent Interior Designer and so any money going out is out of my pocket and I want to feel I am getting good value for my money. Sorry to sound so disillusioned by all of this, perhaps I am missing something but I just feel this is a great money maker for the owners. I understand making money is the point of starting a business, people just don’t like to feel as though they are being taken advantage of and I don’t imagine I am the only one who feels a bit this way.

So then how do you arrive at your fee if it is not based on square footage?

Thanks Gail,
I did request the ebook and would like to attend the webinar. However, I have a meeting with this client on Monday morning. Is there any guidance you can give me off-line to help me prepare. Also, am I supposed to download the e-book? Do you send me a link?

Kristin;

Try as I might the sq footage calculation is all over the place for me. It ranges from $3.57 to around $8 per sq ft. If I were to try this method; I would have to decide on a fixed price and charge that way. Next few proposal I do, I will price as I regularly do and keep the sq ft calculation in mind.

That is exactly where it should fall.  The accountant told us that it falls between $4 – $10 a sq ft.  I charge closer to the $4 (sometimes even $3.50 if it is a whole Mcmansion house)  for large projects and for really small ones $10.  There is of course the PITA fee too.  Gail, calls it something else, I think pain in the *&*7.  If I feel that they are going to be a PITA, then I price the project higher.  How do you calulate your fixed price currently?  I think that is what people really struggle with.  They may want to charge a fix fee but don't know how to calculate it.  Some try to calculate the number of hours it will take and multiply that by a per hour dolllar amount.  I've tired that.  I never charge enough.  I'm not saying this is a perfect formula, only a starting point.  I'm constantly tweeking and reevaluating it.  BTW, I only use this fee structure if it is full service design project ( which most of mine are). My contract
defines full service as providing a design study, computer generated space plan and rendering, full room specifications, and having it installed (that is the shorten version). 
Kristin

Hi Paul, It isn't easy to start a business without experience. I can't say otherwise. Do you have business experience? You should start with hourly, but I can tell you that you need to be aware that your clients won't pay for your learning. You can't know how long a job will take without experience. I learned by doing many years ago, and you'll have to do the same if you can't find a job working with someone else. It's really best to work with someone else for a few years before you strike out on your own. You're taking the hard route to do it this way. I have to tell you like it is. I've been where you are.

You could do that, and you'll need to ask around to find out a rate in your area. Since you're new to the business, it will be a real challenge to control your time. Recommendation. Start tracking your time from the beginning so you know how much time it takes to do different activities. Be really committed to this. If you don't know how much time something takes, you'll not be able to control your time. Watch the time drains, too. People, activities that aren't productive, etc. This includes email, etc. Hope that helps.

Hi Paul, you really need to identify your ideal client first, and then figure out where those people are, and who knows them. How long have you been in business and what kind of business do you want to build?

Hi Joyce, Yes, many designers are worried about pricing with a fixed fee because there is more to the process than just calculating a number and giving it to a prospect. We developed a whole Value Based Fee System series that explains the questions, psychology, pricing strategies, etc. It's not a simple answer that can be answered without context. I wish I could!