INTD 55 business practices

charging for your services

charging for your services

a detailed project evaluation often helps clients understand just what your design services encompass & what the costs entail

an up-front analysis for a small fee is another way to examine the total project & will help you determine how to quote it

job pricing—80/20 rule

choosing the right projects affects your firms success & profit picture

80% of project should be very familiar with very little margin for error—you can be creative with the other 20%

otherwise it will take too much time, be too risky & cause too many problems

job pricing

four things to consider:•scope of the job•services to be rendered•staff required, including their time & cost•schedule

the way your proposal is written strongly dictates management style of project

job pricing—design service outline

explains to clients many aspects of doing a design project through a list of questions 1.define the scope of work2.determine expected quality of project3.evaluate the design team4.consider the schedule5.investigate regulations & codes that apply to project6.assess your competition7.predict what you will gain from the project8.evaluate the client

how to charge

client should be made aware of the way you charge and handle finances right from the beginning

outline all services included—if client says quote is too high, simply point to areas that can be eliminated

many ways to charge—use several different methods of pricing initially & compare

retainers or down payments are an IMPORTANT part of professional contract

how to charge

overhead expenses•generally equal 1 ½ -2 times an employees expenses

•advertising & marketing•automobiles•consulting•dues & subscriptions•education•insurance•loan payments

•separate from any direct expenses •blueprints•reproductions•illustrated drawings•models

•nonbillable support staff•office expenses•professional fees•rent•resource library•taxes & licenses•telephone•utilities

•your travel expenses•shipping•freight & handling costs•procurement & installation costs

how to charge

calculating hourly rates•in 2005 ranged from $50-$700•the way you charge affects the opportunities you are offered, quality & longevity of company, profit you earn

fee bases

•design concept fee—encompasses studying project to see what must be done (programming); one of larger charges in case client takes concept & makes it happen for themselves

•straight design fee—hourly, per diem or fixed-fee basis; only use this method if you have enough experience to provide solid basis for estimating costs

•time & expenses—either per diem or hourly; build your profit into multiplier (3-3½ times cost of designer) and expenses are added

fee bases

•time & expenses with upset limit (“not to exceed”)—very difficult method; offers no room for extra profit & tremendous potential for loss

•time & expenses: estimated amount—based on a scheduled estimate of time; if over estimate there is a basis for covering your extra charges

•fee plus percentage of savings—based on hourly fees plus percentage of what you might save the client; gives designer extra incentive to plan in a price-effective way

fee bases

•time-based fee: open-ended—fairest if designer is developing project & has no idea how long it will take; relies on good communication, trust & ethics so clients understand

•value-oriented fees—best if you are experienced & a specialist; high-risk but offers excellent opportunity for profit; based on lump sum; great if you understand the project & run an efficient firm

•per-square-foot charge—take square footage of space & multiply it with per-square-foot-cost; can be profitable if you have good rate & specialty

fee bases

•retail sales-based methods—a percentage of the items contracted by client; markup & pricing methods vary according to format of business

•contract price—charging clients for total project; firm covers all overhead, fees, delivery, handling, etc… price within range of 10% for standard project & 20-25% for original, highly creative project

•design concept fee plus percentage—% of cost of items purchased or supervised (construction items, furniture, accessories); varies depending on location & experience

fee bases

•hourly fee plus percentage—often necessary on smaller jobs

•percentage of cost—providing complete services (furnishings & labor) at cost & adding a fee based on % of total cost

•percentage of list price—if you act as buying agent can often receive % of cost of items purchased by client from your suppliers

determining fee structure

no matter how you estimate, only way to be accurate is to compare to your own past work

if you have nothing comparable, talk to other designers who have done similar jobs

getting higher fees•if very busy it is a good time to raise your fees•keep up with market—understand what clients want & what they value•relating to client—make client feel like they are getting exactly what they want•repackaging services—create a new category of service; makes fee schedule more flexible

getting higher fees

•showing strong portfolio—value of good photography cannot be overestimated•offering something different—better chance of winning in fierce competition•offering better services•having a good reputation

review charging system on yearly basis:•changes in services?•changes in market?•changes in overhead?