How to Set Up a Pricing Structure

Jun 12

One of the most common questions we get from our interior designers as they navigate small business ownership is, “How should I set up pricing?” Throwing out numbers when you’re just getting off the ground can be super intimidating, especially because it just isn’t something you can Google. Even the most established businesses might find that it’s time to modify their pricing as their services expand or change.

We have all experienced taking on a project that takes far more time than what was outlined in the contract. Having consistent pricing that makes sense for you and your business is essential to ensure that you’re being paid fairly, you’re able to give employees a competitive wage, and you’re able to take on a number of projects that is sustainable instead of overloading your plate to make ends meet.

 

Modern, layered bedroom design with black door, oak floors and ivory channeled headboard and folded hermes blanket.

Design: Studio McGee

 

Additionally, the more clearly your prices are spelled out for your clients, the better. By implementing clear, defined rates and having them accessible to your clients throughout a design project, you minimize the possibility for overwhelm or surprises. We’ve outlined the two most popular pricing options below to help you decide what works best for your business.

 

 

Pricing by the Hour

 

 

In our experience, designers typically charge a flat hourly rate, no matter the phase of the project they’re in. Where we see business owners selling themselves short is not in the set-up but in their valuation. If you go the hourly rate route, pricing should include your personal rate plus your costs for any additional team members. Your clients should expect to pay more for each additional person working on their project.

As you’re formulating your rates, always start with what you think is fair for you to charge for an hour. Don’t start with the total you want to ask for and work down. You might find little left for yourself and undercutting yourself can lead to burn out quickly.

For example, if you want your personal hourly rate to be $100/hour, and you pay your design assistant $30/hour, you should mark up the assistant’s rate by 20% and add it all together for an hourly billing rate of $136/hour. If you’re wondering why we recommend marking up the rates of your employees, there’s more on that here. Don’t forget: you need to pay taxes out of that total hourly rate as well, so make sure it includes 25% taxes that will be taken off the top.

 

Moody green kitchen with white walls, dark floors and oversized statement pendants.

Design: Ashley Montgomery Design  Photography: Lauren Miller

 

Pricing by Package

 

 

For designers charging a package price for projects or by room (we see this most commonly in e-design), our best recommendation is specificity. Each package option should clearly outline how many rounds of revisions they will receive per room (two is great!). Stating up front what your process includes lets the client know what to expect and protects you in the event that someone tries to take advantage of your all-in pricing structure. If you’re comfortable with it, you can also offer additional rounds of revisions billed at your hourly rate.

One of the parameters you should put into place is hours of work included in price. Unexpected issues can arise during projects so it’s best to have limits in place for yourself. Just as with revisions, you can give clients the opportunity to add hours at your hourly rate.

 

 

Bright and airy dining room with oak table, black farmhouse chairs and a brass statement chandelier.

Design: Ashley Montgomery Design  Photography: Lauren Miller

 

Pricing in Tiers

 

 

Some designers who specialize in new construction projects or full construction renovations have tiered pricing for different phases of their project, depending on the level of expertise involved. For example, the design phase of the project is billed highest, while ordering and site visits are billed at a lower rate as they are typically completed by a junior designer or design assistant.

 

Another option for ordering? Lindsey Borchard of Lindsey Brook Design advises:

“Instead of an hourly fee, charge an 8-10% markup on order invoices.”

Just a reminder: even the lowest tier pricing for these projects needs to be more than what you pay your junior designers and/or design assistants hourly.

 

 

Billing Items That Are Often Forgotten

 

 

1. Consultations

An initial free phone consult is great, but charge for an in-person meeting. It’s important to set boundaries to protect your time and knowledge, as it’s your product.

 

2. Time spent sourcing

If you’re charging by the hour, you might forget to bill for the more behind-the-scenes work that you do on your client’s behalf. Even if sourcing the products is your favorite part, it still takes time away from other tasks and should be paid for.

 

3. Time spent preparing presentations

When all your focus is on one project, even if it’s preparation for a presentation, that is time that has to be accounted for. There are apps that can help you track billed hours like these in your day-to-day (a few suggestions here).

 

4. Travel fees (if the project is further than 20 miles away)

If you aren’t billing for the time and gas, mileage, etc., that a project takes, your profits are going to take a major hit over time. Little things like that add up!

 

5. Time making revisions

Again, for the hourly rate folks, any work you do for a specific project is billable. Your time is valuable and revisions are a normal part of the process, and therefore, should not be freebies.

 

6. Scheduled phone calls

Billing for scheduled calls might seem over-the-top, but it’s a great way to set boundaries and create efficiency as clients are more likely to be prepared and attentive for a call they’re paying for.

 

 

“Should I publish my prices on my website?”

 

 

Our recommendation is to publish them, but not in plain sight. We like to have a hidden page on our website that’s available to send to inquiries. It includes published rates, FAQs, and more details about a project. This works better than a PDF pricing sheet because it’s automatically updated across the board should your rates change. As an added bonus, it increases your website traffic + length of time spent on your site and all you have to do is copy and paste a link!

 

Okay, how do I implement a rate change?

 

Generally speaking, any existing clients will be honored at your current rate. From this moment forward, every new inquiry should be sent your new, published pricing. With a clear pricing outline, potential clients are more willing to book with confidence. You’ll eliminate surprises and help guarantee the smoothest client process possible. And oh hey, congrats on your raise. 🙌🏼

 

We hope this post inspires you to either set up a consistent pricing structure or amend yours if it isn’t working for you. Owning a small business is tough, and designers give so much of their creative and physical energy to their projects – often drawn out over many months (or years!). If you want clients to respect your time and expertise, it’s important that you set the standard and place a valuation on it that reflects the quality of work they’re receiving.

 

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  1. Delia Kaplan

    June 29th, 2019 at 12:35 pm

    The information in this post is amazing & so insightful. Thank you for sharing and answering so many questions… I will definitely be referring back to it when I set up my pricing!

  2. acasey

    July 13th, 2019 at 3:46 pm

    I’m so glad you will be – make sure to bookmark it for easy reading later. XOXO

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