Kitchen & Bath Business November/December 2023 - 18

INDUS TR Y
CHALLENGE S
Establishing the Payoff
Is there a best way to charge for design services?
IN TODAY'S WORLD of both interior design
and kitchen and bath design, there's nothing
more confusing than the myriad options available
when it comes to charging for your services.
When I started in the kitchen and bath fi eld,
I worked for a kitchen and bath design/build
fi rm. We would price the project, including all
the associated costs, assign a gross profi t margin
percentage to that net value, and boom, we would
have a sales price for the contract. Depending on
the profi tability of the fi nal job cost, we would
then be paid a commission on what we called
" gross profi t margin. "
I was a designer selling my design, the showroom
products and the labor and materials to
complete the project. What does that mean for
somebody who isn't working for a kitchen and
bath design studio? Is there a good, better, best
option for a solopreneur or a small fi rm?
Kitchen and bath design professionals are
adopting a more flexible approach as to how
they charge, and I have seen a shift in the pricing
methods used. I use three diff erent pricing structures
depending on the project, scope of work
and the client. Here are some options to consider
when deciding how to charge for your services.
THE HOURLY RATE
Interior designers have been using an hour's rate
to bill for services for many years. An hourly rate is
more complicated because on a busy day I can be
working on several projects, and time tracking can
be time consuming. For clients, it is an open-ended
billing system. Th ey may not understand how
many hours it takes to complete a project, and you
can get pushback regarding what they consider " a
reasonable amount of time " to develop and implement
a design.
If I am working as a consultant on design or
material selection, project management or construction
observation, hourly works well, and
I fi nd a four- or eight-hour block works best.
Depending on your business model, this may
also work well for you. I invoice every two weeks
and send statements at the end of each month.
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SQUARE FOOT/PROJECT PERCENTAGE/FLAT FEE
Square footage and fl at-fee structures are gaining in popularity. Depending
on where you are located, your experience and what others in the area are
charging, this method is a fairly easy way to determine your return on the
project. Square footage rates can vary from $8 per square foot to as much
as $25 per square foot, and this is just for the design portion.
It is helpful to know how much time it takes you to develop the design,
create the plans and make presentations to the client. I worked with a designer
to convert her system from hourly to a square foot percentage, and
we used past projects to " proof " the system. She used these comparisons to
decide on the rate she charged, and once she became comfortable working
this way, she never went back.
" An hourly rate is more complicated because on
a busy day I can be working on several projects,
and time tracking can be time consuming. "
When using a fl at-fee structure, it is up to the designer to determine the
number of hours they believe it will take to complete the design work. If
you know yourself and your client well, this can be a great system. If the
client cannot make decisions quickly or often changes their mind, your
time calculation can be underestimated.
You can also use percentages of the total dollar cost of the project; this
is generally how a project manager would work, being paid to oversee
the entire project, ordering materials and approving contractor invoices.
In my experience, 25% to 30% of the project seems to be the number
in my region.
To me, this is easier for clients to wrap their heads around. You can
also divide your billing into three parts, (initial meeting and measure,
initial plan presentation, fi nal plans), which is going to allow you to
have a little more cash fl ow. No matter which system you choose, make
sure that your contract specifi es how many revisions are included with
the agreement.
WHAT ABOUT PROCUREMENT?
Once the design phase is complete, it is time to order/procure materials,
and the last few years have wreaked havoc with the process. I feel that
gave rise to using combined methods of billing.
You have designed a kitchen, you've been paid your fee, and now you're
supplying the cabinets, countertops and all the other parts and pieces that
go along with the project. In your contract, you can specify the percentage
of the materials you will be paid to order everything. Clearly specify how
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