Decoding Design Fees
Design fees are confusing.
More specifically, how different designers charge for their services and the products they sell can be very confusing.
There's unfortunately not one consistent way designers charge, and that can make it very challenging for a client to know if they are paying a fair price for what they are purchasing.
The good news is, most designers are reputable business people who aren't trying to cheat anyone (though there have been a few notable exceptions), so if you do your research and trust your designer, you're paying a fair price for their services.
There's a good reason we all charge differently too; we're all designers, but we run different types of businesses! Some of us only decorate, some manage construction. Some specify, but do not procure. Some consult; others have a full retail space. Some of us are architects or have another specialty.
Here's an explanation of a few of the most common ways your designer may charge:
Windsor Smith's 'Room in a Box' Service
Flat fees might seem straightforward, but there are a few different ways to handle even the simplest of structures!
A flat fee can be based on an estimated number of hours to be spent on the project (a not-to-exceed agreement), or on the total square footage (common for commercial projects).
A flat fee can be billed all upfront for a specific deliverable (which is how I've priced my packages) or number of hours (designers who offer an "on call" service often do this).
Or, it can be billed monthly for a large ongoing project (this is usually the specification or administration fee when a designer or firm is offering consulting services, but not acting as a contractor and therefore not making any money on labor or materials. I've seen it more commonly in large firms so the manager doesn't have to invoice for multiple team members at different rates regularly- it can get convoluted fast).
An hourly fee may be familiar to lawyers or others who work with billable hours regularly.
Hourly fees are great for smaller consulting projects, like where the designer is specifying materials, but not selling them. Hourly fees are also appropriate to cover the skilled time spent on deliverables such as drawings.
For my full service clients, I charge an hourly fee up until furniture is ordered (because I charge retail pricing for furniture; read on for a full explanation!). This eliminates any restriction on revisions; my clients can have as many options or revisions as they would like (though usually not much is needed!) and I make sure that my time is covered.
This also helps my process be a little bit flexible; if a client has my design in hand and decides to wait a few months to order furniture, I'm still paid for my design on time and can happily begin ordering whenever they are ready to proceed.
"So, what's your markup?"
Surprise! Designers hate this question, but not for the reason you think! Remember, we're not out to cheat you. We're not worried you've caught us.
We hate it because no one ever asks West Elm what their markup is, so it feels like you think we are going to cheat you and makes us sad. We want you to trust us. We know we have to earn that trust. But we also want clients that understand we're earning a living. We understand that there is a lot of skepticism of our industry, partially because there are so many ways to charge!
So, why is there a markup? See above ;) We're earning a living! We have experience and the investment of time and money it took to earn that experience. We also have business costs that go beyond the direct cost of a piece of furniture, like my client portal. I love it; it makes me look good! But it costs me a little bit of money every month. If I could bankroll operational costs myself and offer design services as a hobby, I absolutely would! Alas, I cannot, so I'll step off my Ted Talk stage and move on.
My full service clients stop paying hourly fees for design when they place a furniture order, because I'm no longer designing at that point. But I am still working behind the scenes: procurement, expediting, and installation take a lot of coordination, so charging a markup (I always charge retail price or less, depending on my trade pricing and the vendor requirements) covers my administration time for all of the crazy phases of custom furnishings.
What about those trade prices or designer discounts? Laurel Bern goes into it in more depth here, so I'll leave it to her!
Sawyer | Berson
Cost plus may be familiar if you've ever built or remodeled a home; many contractors price this way. If you're unfamiliar, cost plus means that the client pays the designer's cost on an item, plus a percentage (usually 20%-30%). Cost plus makes most sense for design build firms who are actually selling construction materials that they've specified, such as floor tile, or the gorgeous marble above.
Your designer may use more than one of these structures if your project has more than one phase (like construction and decoration), which is why it's so hard to compare pricing! An insider secret: most designers at the same level will cost about the same, no matter which way they charge. Just make sure you understand their process and connect with them well, and everything should go smoothly!