I recently received an e-mail from a colleague of mine here in Austin, Texas who was looking for some business advice. We both started our companies at the same time and we used to meet at the playground while our toddlers would play and we would brainstorm, talk about marketing ideas and share our wins and failures. Now, our “toddlers” are snaggle toothed 8 year olds. My how time flies. Anyway, I digress…
After I received her e-mail and sent my response, she said I should turn the response into a blog entry or article. So, here you have it. (Some names have been changed to protect the innocent.)
Monday, February 22, 2010
I know when I met with you several months back, you mentioned I should probably raise my rates. I raised them just 10% and now, I’m wondering if I raised them enough. In your honest opinion do you think they need to be higher? Since I just raised my rates a few months ago, should I stay at this awhile and then set a date to raise them? I want to be in line with my market, but not over charge.
I really appreciate your input on this. I know you work with a lot of designers & stagers and you have good feel for what I should be doing.
Thanks for you help,
Monday, February 22, 2010
Dear “Debbie Designer”,
A common mistake that many designers make is they set their rates too low and forget to consider that they don’t get to charge anyone an hourly rate when they are doing all of those other things involved with running a successful and stable design business (i.e. bookkeeping, training, marketing, driving to and fro, basic business operations.) If you’re not charging enough, you’ll find that by the time you factor in your fixed expenses, variable expenses, COGS/COS & taxes, your net isn’t that much. It’s worth REALLY taking the time to see how much you are actually making, vs. how much time you are working. Calculate the # of hours you spent last year on your business. Include the obvious (i.e. meeting with clients, book keeping, etc.) but also factor in commute times, arranging for child care and even the time and money it takes to get dressed up to look like a savvy & stylish designer. Now, look at your bottom line and divide that by the # of hours you worked last year. How much did you truly make an hour last year?
When you see this net hourly rate, it will usually be a rude awakening which will motivate you into raising your rates. Think about the time you spend away from your family and the time you take away from yourself – is it worth it? I’m all for charity work, I just don’t think “Mrs. Jones” in her $500,000 home who wants custom draperies but doesn’t want to pay our price qualifies for a charity case. Nor does Mr. Jones, who agrees that staging a home increases the perceived value, but doesn’t want hire an expert and pay the expert’s rate to properly execute a staging. If I’m going to donate my time, it will be for a homeless shelter, Haiti, child advocacy, Humane Society, etc. People who truly need it, NOT MR. OR MRS. JONES! You only have one life and one family. Why whittle it away by charging less than you’re worth? Profit is not a bad word or an embarrassing thing and you shouldn’t feel guilty about making a profit to earn what you’re worth.
With that said, I definitely think you would be justified in a rate hike. If you don’t feel comfortable doing it right away, there are lots of ways to raise your rates, without a flat out rate hike:
• Revise the discount structure.
• Change the minimum order size.
• Charge for delivery and special services.
• Invoice for repairs.
• Charge for engineering, installation.
• Charge for overtime on rushed orders.
• Collect interest on overdue accounts.
• Produce less of the lower margin “widgets”.
• Write penalty clauses into contracts.
My mission for 2010 is to combat the plague of under-earning in our industry. When I spoke before 250 stagers at the Real Estate Staging Association Conference in January, and asked the room how many felt their net profit at the end of 2009 reflected what they are worth, and how many felt like, “Yeah, that’s fair. That’s what I should’ve made.” You know how many stood up? 5. I knew it wouldn’t be a lot, but was stunned at how few.
It’s an epidemic. It’s got to stop. If we don’t value ourselves and our work, no one else will. We’re giving away our most precious commodities — our time, our talents, ourselves. For what? For the Jones’ so they can keep up with the other Jones while we struggle and sacrifice ourselves and our time? And so we can work ourselves into the ground for leftovers? I don’t think so!
I won’t go into the details, but during my presentation, I walked everyone through a simple exercise involving “Sally the Stager” who charges $50 an hour. At the end of the exercise, we see how Sally actually makes less than $6 an hour if she’s charging $50 an hour to her clients. Needless to say, most people left the room vowing to increase their rates as soon as they returned from the conference.
Let me know if you need anything else! You’re taking all the right steps and you’ll soon reap the rewards! Keep at it & stay focused. You’re definitely moving in the right direction.
P.S. Sorry to be so long winded. Can’t you tell I’m passionate about this?
P.S.S. If you want to take the Pricing Strategies course online, you can now apply it towards your RESA Pro Designation. Here’s the link w/ more info. on RESA-PRO Designation and the classes. (The Pricing Strategies course is under “Business Principles”.)
Tuesday, February 23, 2010
Thanks so much for all of the valuable information and input. Wow…you are passionate about this! Yes…I am going to raise my rates. I think it might be a good idea to roll that increase out with our rebranding so that it all lines up at one time.
I have already felt much better about hourly consultation after raising my rates the first time, and so I know everything you are saying is so true.
I so appreciate all of the great advice and support you have been to me over the years. Please let me know anytime you need a favor back.
CEO, Ashley Whittenberger Companies, Inc.
Want To Use This Article In Your Ezine or Website? You have my permission, as long as you include this complete blurb with it: Ashley Whittenberger is the Principal and Chief Decorating Officer of Interiority Complex. You can visit Interiority Complex, access the free article archive of design prescriptions or learn more about home staging and creative design therapy at www.myinterioritycomplex.com. Ashley lives in Austin, Texas with her husband, son, two dogs, and two cats, and she is proud that she has learned to successfully live and thrive with her compulsive and chronic rearranging and re-designing disorders.
Don’t forget to tune in to www.DesignBizRadio.com — the design & home staging industry’s first trade radio show!
There is much talk and confusion nowadays about how to make money as an interior designer.
So I thought I would define most common ways which can bring you money. In no uncertain terms. Without commentary or opinion. Just straight up list – clear, succinct, and to the point.
1. Hourly rate only. National rates usually fall within the $75-195 range. The rates usually differ based on the service rendered: design work, architectural work, shopping, project management, construction management
2. Product – cost plus, where the designer adds 30%-100% to the cost supplied by the manufacturer, supplier, or subcontractor.
3. Product – discount off of retail, where the designer takes 10%-50% off the retail prices supplied by manufacturer, supplier, or subcontractor
4. Flat, project-based fee. Designer charges one fee for the entire project. This requires clear identification of the scope, previous knowledge and experience for accurate calculations, and tight management of time.
5. Tiered pricing. Viewed by some as a subset of project-based fee, I break it out here because these are predetermined packages based on time, complexity, and attention involved.
6. Per square foot.
7. Combination of all of the above.
While on the surface all of these ways seem straight-forward, like anything in design, the devil is in the detail. Some the ways are complex, fraught with pitfalls, and are potentially costly if not done right. And in this lies the confusion, frustration, and anxiety mentioned by me earlier in the article.
If you’re tired of feeling frustrated, confused, and anxious, you must get ALL the knowledge you can get in the subject of pricing. And your first step is the Business of Design: Smart Pricing Strategies in the New Economy – a 3-hour virtual tele-panel of experts speaking about this very subject. Get more information herehttp://www.kickstartcart.com/app/?Clk=4012460
The topic of pricing, as we all know, is highly challenging, controversial, and confusing. And if it weren’t hard enough, I’ve noticed another challenge, that’s more of an undercurrent, making the issue even more frustrating.
What is interlaced through designers’ often hap-hazard efforts and panicked attempts to adjust their pricing, is the internal rejection that it is even necessary.
Designers feel that things are changing around them. They see the bank account not growing. They hear the buzz about modern pricing strategies. But, deep inside, they really have not come to terms that it’s for them, it’s for real, it’s here to stay, and they must change to survive.
I’m here to tell you that it’s for you, it’s for real, it’s here to stay, and you must change to survive.
Here are just a few reasons:
1. There has been a real generational shift in how we value things. We no longer make purchases for their life-time value, as our grandparents did, or even as we once did. Now, we are looking for faster, more updated, and more relevant – even at the expense of long-lasting.
2. Inspired and propagated by TV, design is supposedly cheap and quick. We know it’s not true. What matters, though, is what our customer know, think, and perceive.
3. Internet and social media – do I need to say more?
If you want to know how to navigate in the new economy, determine your best pricing strategy, and charge what you’re worth, you must check out the virtual event Business of Design: Smart Pricing Strategies in the New Economy – a tele-panel of select guest experts sharing their tips on how to get paid what you deserve. http://www.kickstartcart.com/app/?Clk=4012460
Dear Smart & Savvy Design Biz Owners,
We are entering the home stretch of 2010, and it’s time to start planning for 2011. Not only does this time of year help you to get a fresh start and unleash new ideas, it supports us all to think smarter about our decisions each day. We each have such a huge purpose here on this earth and I hope you know we are here to support you every step of the way.
For the next ten days, (until December 10th) if it serves you, we are offering 25% off our Annual Member Dues, and a flex-pay plan that will allow you to purchase your membership in affordable monthly installments. You will find that the Member Benefits you’ll receive with our association are listed here, but we’ve included a quick overview of what we are sure you will find to be the biggest benefit of them all. Our Monthly Online Workshop Series & LIVE Q&A calls are the most popular benefit we offer. During this monthly series, we cover the following topics, in-depth:
- A Step-by-Step Guide to Crafting Your Design Biz Plan & Operations Manual (A 3-Part Online Workshop Series with everything you’ll need to launch, grow or reinvent your design biz)
- Insider Marketing Secrets for the Bootstrapping Design Biz Owner: Creating a Successful Marketing Plan on a Shoestring Budget
- Uncovering Your Brand, Niche and Unique Offering
- The Art of the Purpose-Driven Design Biz
- Pricing Strategies for Stagers, Designers and Retailers
- Organizational Growth Strategies: When and How to Hire & Manage a Team
- The Secrets of the Wealthy Designer: Creating Multiple Revenue Streams
- PR for the Design Biz Owner: Getting Media Exposure & Positioning Yourself as the Expert in Your Market
- It takes a Village: Building Strong Vendor Relationships, Alliances and Affiliate Partnerships
- Social Media and Social Networking – When, How & Why
- Systems, Processes and Procedures for the Growing Design Business
- Know Your Numbers: Bookkeeping 101 for the Design Biz
Join now and you can get access to the e-learning right away, and join our next live Q&A Call on December 15!
Enjoy the savings and don’t forget to encourage other people to think about their choices each day and to look for the opportunities all around you.
Ashley Whittenberger, President & Founder
The International Association of Design Industry Entrepreneurs™
Are you ready to get a head start in 2011? Click on the subscribe button below to join the International Association of Design Industry Entrepreneurs today for 25% OFF the regular price! PLUS… FOR A LIMITED TIME, we’re offering an affordable flex-pay plan so you can purchase your membership in 6 easy payments of only $49 a month!
Thanksgiving is just a couple of days away and naturally, I’m feeling a bit sentimental.
We all know that gratitude is one of the foundations for business success and life happiness, but most of us don’t do nearly enough to build and nourish this attitude. Busily hustling about during much of the year, we usually get in touch with gratitude during this Thanksgiving week, and only long enough to gobble up the turkey.
So before the turkey malaise hits me (and you), let us take a moment to be really grateful for this past year.
- 1. The economy is seemingly on the rebound, with key economic indicators either improving or staying steady. Have you felt it yet in your business? I’m hearing from many designers who already have. Let’s at least be thankful that 2010 was much better than 2009.
- 2. The amount of available business knowledge is higher than ever! I know that business strategies can often be challenging for an interior designer, who rarely receives any business education in design school. And if you’ve been diligent about investing in yourself (whether it’s money, time, or effort), you would have attended quite a few virtual and physical events, signed up for masterminds, and learned from your colleagues (you know I’m always here for you too). Education is key. Let’s be thankful that 2010 provided many opportunities to get it.
- Our industry is changing. Let’s be thankful for that. Although, never comfortable, change brings about tremendous opportunities for those flexible, capable, and strong enough to handle it. There is no doubt that we will be stronger and more robust in 2011.
If you want to know how to handle our changing industry and this changing world, as we enter the second decade of the 21st century, you must employ the right business strategies.
And if you want more information on how to do that, check out this virtual event: Business of Design: Smart Pricing Strategies in the New Economy – a tele-panel of select guest experts discussing how to charge what you’re worth and do it with confidence. http://www.kickstartcart.com/app/?Clk=4012460