An interior designer’s income is in large part based on their confidence, fee structure, business strategy, and ability to turn expenses into ROI.
At DesignFiles, we believe in seeking help from the experts. That’s why we recently interviewed Nancy Ganzekaufer and Megan Dahle to discover how designers can increase their income and control their expenses.
Keep reading for their best tips on growing and protecting your income!
How much can interior designers make?
For interior designers running their own businesses, the sky’s the limit. The median salary for interior designers in California is $110,000. Many self-employed designers seek to hit that six-figure mark as their take-home income. However, designers can also bring in multi-six figure income all on their own, or by scaling their firm.
18 ways to increase your income as an interior designer
Ready to not only grow your income but protect it? Here’s what you need to do.
1. Track and forecast your income
You need to not only track your revenue for tax purposes, but for your own uses as a business owner. When you track your income, you also have more data for accurate forecasts and projections.
Megan explains the process like this: “Plot that out for as far forward as you can. What money is going out the door for my employees, for my overhead, for shiny objects, for experiments, for products, for taxes, for marketing, for all of these things, and when? By doing this we can get to the bottom of how much cash will be produced in what time period and what that cash will be used for.
So before the revenue even comes in the door you’ll know:
- What is being used for overhead
- What is being used for marketing
- What is being used to pay yourself,
- What is being used to protect the business
- What is being used to get you towards your personal goal.”
As a fractional CFO, this is the exact process Megan uses with all her designer clients to help them visualize the revenue coming in and how they can use it to better grow their business.
2. Charge for consultations
Charging for consultations. Should you do it or not? Ultimately the decision is yours but when we asked Nancy Ganzekaufer her answer was a flat out YES. Charging for your consultation ensures that you get paid for your time. You can do a short, free 15-minute discovery session in order to sell your consultation offer.
“Whether they move forward with you or someone else or do it themselves, what you’ve shared with them is valuable, so you should get paid for that. And then there’s a lot less resentment too,” says Nancy.
3. Choose the right pricing structure
There are a number of ways interior designers structure their pricing. Here’s a look at three of the most common models.
When it comes to charging a flat rate, there is definitely a little more work involved at the beginning to accurately calculate the overall scope of the project. In your flat rate fee you’ll want to factor in a set number of hours for discussing the project with the client, the time it takes you to complete the design deliverables and what your limitation will be for requested design revisions.
If you’ve been actively tracking your hours on all your projects you should have a pretty good idea about how long this process typically takes.
The beauty of a flat rate structure is that clients love it. They know what their investment is going to be right out the gate for your design fees. And as you get better (and faster) over time, you can make more money per hour, even without raising your prices.
The downside of this method is that it doesn’t work well for project management and implementation. It’s nearly impossible to quote a flat rate fee accurately when you’re working with contractors and in charge of the installation. There are just too many variables that are out of your control.
By square footage
With this method, designers charge an amount per square footage, meaning a larger living room project would result in a higher fee than a living room of a smaller size.
If you feel that a larger room really does require more work, then this allows you to get paid for that. However, rather than charge by square footage for every project, it might make sense to have flat rates for rooms and different room sizes. For example, you might have a higher flat rate for large living rooms, and you can set the square footage parameters. You can decide whether to communicate these parameters to clients or not when quoting.
The downside of this method is that you might undercharge for a smaller living room that actually takes the same amount of time. “I don’t love the square footage model,” says Nancy, “because if you are doing a living room, and you’re doing floor to ceiling and everything in between, why should you get paid less for all the same decisions, because the room is a little smaller?”
By the hour
An hour worked is an hour paid. Depending on the type of work you do, this method might be a great fit but it does require you to be diligent about tracking those hours. That means tracking everything from phone calls, client meetings, designing, drafting, sourcing, ordering, purchasing and procurement, handling unforeseen complications, driving, installations, handling returns… you get the idea. By the hour is particularly ideal for hands-on, unpredictable work like working with contractors and handling installations.
It’s the most accurate way to get paid for your work without having to worry about underquoting a project.
Your clients might feel like they don’t know what’s coming. The uncertainty around the project total can cause stress and awkwardness, so be sure to do your best to quote hourly totals as accurately as possible, and update your clients with any hiccups.
Want to blend pricing models together into your own perfect combination? Nancy recommends her own hybrid pricing model, which we discuss in detail below.
4. Try a hybrid pricing model
With Nancy’s hybrid pricing model, designers charge a flat fee for the design phase and then move to hourly pricing when it comes to project management (working with contractors, ordering products, installation, …etc).
“As you get more experienced, you can design faster, and you can still keep your flat rate price high,” explains Nancy. However, when it comes to managing installation and working with general contractors, so many factors are out of your control. That’s why an hourly fee makes sense.
Not only are you able to charge for your time fairly, but the client can also decide to manage the project themselves if, after the design is approved, they need to save money by going it alone.
5. Always track your hours
Whether you’re charging flat rate or hourly, you should always track your hours. Otherwise, you’ll have no way of actually calculating how much time you spend on projects and whether or not your fees are high enough.
“I know everyone hates tracking their hours, but, sorry, you need to track your hours,” says Nancy. “I think where people get hung up is they feel like they have to do it with perfection. A really close estimate is good enough, as long as you’re being fair to your clients.”
If you need a little help staying on top of your hours can use DesignFile’s time tracking feature to make it easy.
6. Get comfortable talking about money
“Get really, really comfortable talking about money with your clients. If you’re starting a proposal and you’re feeling like, I don’t want to talk about the money – you need to work through that,” says Megan. “We want to talk about money as freely and openly as if we were talking about our kids.”
When her interior designer clients get upset that their clients are asking questions, Nancy reminds them, “They have the right to ask questions. It’s their money. And it’s our job to answer them without getting upset.”
To get to that level of comfort, you need to practice:
- Practice with leads and clients – The more you talk about money, the easier it will get. There’s simply no way around the fact that for some business owners, it takes dozens of conversations with leads and clients over a couple of years in order to get really comfortable with stating prices.
- Practice with business owner friends – Talk about money with your friends who own businesses. Talk about your prices, when you plan to raise them, and why.
7. Work on your money mindset
Women in particular often need to do a lot of money mindset work, because we tend to focus on being of service and pleasing others more than boosting profits.
There are lots of different formats of money mindset work. You can seek out help and resources from trusted friends and community members, or check out popular books like Money, a Love Story and The Soul of Money.
8. Take all payments upfront
Always take payment for your services upfront. This includes consultations, design fees, and the cost of any products you’ll be ordering.
“I’ve never come across a really successful designer that bills in arrears,” says Megan. “It’s an authority position to demand your money upfront and people respect it. If you frame it correctly, you stand in your power behind it, and you’re confident in it, then clients see it as just the normal thing.”
When using Nancy’s hybrid model, you should also take payments upfront for bulks of hours. So, you would charge for the design fee upfront and then when it’s time to move onto managing implementation, you should estimate how many hours that will take and bill for some or all of those hours upfront as well.
Nancy explains that you can say something like this to your client, “I’m estimating about 20 to 30 hours to order, track, handle any damages, get it delivered to your house, get it placed, so let’s start with 20 hours. You’ll pay in advance, and I work backwards from there. I will give you a report every other week on how much time has been used.” Nancy recommends charging for all of the estimated time, unless it is a very big project. In that case, you can break it down into two to four chunks.
9. Increase your profits from products
You should never feel guilty about marking up products that you recommend to your client. Just because you are making money as a service provider does not mean you can’t also earn a profit on product recommendations. “There’s no such thing as double-dipping. Your margin on your furnishings is for your years of education or self-education, keeping up with your product library, with all your reps, all the latest trends, and the quality of the furnishings. Your project management hourly rate is for any time your hands, your feet, or your eyes are doing what a client would have to do if you didn’t exist. It’s not double-dipping. It’s two separate profitability streams that you’re entitled to.”
Not only are you entitled to earn money from product recommendations, but you also can find ways to increase your profits from these products.
Here are some of Nancy’s top tips:
- Don’t divulge your markup. You don’t need to mention this in your contract, your website, your proposal, or anywhere else.
- Keep working on sourcing. Continue to speak with other designers about great companies that offer profitable trade products.
- Never feel pressured to pass on your discount. You deserve to get paid for your expertise when it comes to choosing products.
- When asked about how you charge for products, simply say, “I do my best to keep my prices at or under retail.” You don’t need to explain any further.
- Aim for a 35% profit margin on products at the very least. If you can get stocking dealer prices, you can push that all the way up to 70%.
10. Don’t discount your virtual services
Designers tend to default on discounting their virtual services. But that isn’t necessary. And it certainly shouldn’t be done without cause.
“What I teach is virtual design, which is not eDesign, meaning, you really don’t have to change your prices at all,” says Nancy. “You’re still going to have that relationship with the client. If you want to discount slightly because you’re not traveling, that’s up to you. But your hourly rate is your hourly rate. For your design phase, you’re going to be doing all the same things, so why would you price it any differently?”
11. Don’t offer volume discounts
You also don’t need to offer volume discounts. Meaning, if someone wants to design four rooms with you, you don’t need to offer them a discount for doing more than two rooms. “Don’t feel like you have to discount says Nancy. “Clients hire you because they love your work. They’re not hiring you because you extended a 10% volume discount.”
12. Calculate your expected ROI before investing in new business expenses
How can you be sure that you’ll get ROI from a business expense? You can never be completely sure, but you can be smart about it.
“The missing question that people forget to ask is when. We ask how much all the time, but not really when. So if I’m going to invest $5,000 in a program and I expect a $20,000 return from what I learn in a program, when do I expect to see this return?” explains Megan.
To put this tip into practice, write down your business expenses as if they were experiments. Log how much you’re spending, what impact you expect that to have (in terms of money earned, time savings, or something else), and when you expect to see that result.
Megan offers this example, “I’m going to try this piece of software and I’m going to come back in two months and see if it did what I thought it was going to do.”
You can even write in your calendar to check the result, or make it part of your monthly expense review process to look back at your log of experiments. If something isn’t working, cut it.
13. Don’t scale and hire just because
It’s easy to attempt to scale our businesses simply because we think we’re supposed to. But is that really what we want? And if so, is now the right time?
“Don’t necessarily be scaling because everybody else is doing it,” says Megan. “Some people even scale beyond profitability because their expenses are rising too fast. Find that sweet spot for yourself. If you want to grow and you know you need to hire someone to help you, make sure that you are figuring out how much revenue that person can contribute to the business and when. How long is it going to take them to get up to speed?”
14. Monitor your fixed and variable costs
“There are two types of expenses,” says Megan. “You need to be acutely aware of your fixed versus variable costs, and keep your variable cost percentage as low as possible.”
Your fixed costs occur no matter how many clients you take on. These are things like your website hosting, your bookkeeper’s fee, and your health insurance premiums. Your variable costs, however, are directly tied to projects. So, if you have a new consultation on the other side of town, the cost of gas is a variable cost tied to that appointment.
When it comes to variable costs, you want to keep them low so that your projects are profitable. And for fixed costs, you want to watch that they’re not eating into your profits during slower months.
15. Calculate your profitability per project
You should aim for 40-60% profitability on every project. “Imagine if you had a $10,000 job and you’re making $6,000 on that and $4,000 is your cost,” says Nancy. “That’s the sweet spot and you can get there. It’s doable.”
For each project, you’ll want to calculate how much time you spent on the project, how much time your team spent on the project, and what purchases you made. The more you track these details, the better you’ll be at estimating time and costs for future projects so you can be sure to reach that profit sweet spot.
16. Always have a pre-defined purpose for your revenue
“Ultimately your business is meant to serve a purpose in your life and people lose track of this, especially when they’re comparing themselves to other businesses,” says Megan. “And so the first thing that I do with my clients is figure out their real goals behind the business goals. What does it mean for you personally, to be able to bring home $10,000 a month? What are you going to do with that money?”
When you have a clear and defined use for your revenue, like saving for a vacation home or a child’s college fund, you’ll be less tempted to spend it on unnecessary or ill-timed expenses.
17. Charge what you’re worth even if you’re just starting out
Depending on where you live, $100 per hour should probably be the lowest starting point. This is the rate you’ll use to calculate your flat rates and to charge for project management if using the hybrid pricing model. “If you have the confidence to start at $150 or $200,” says Nancy, “then that’s where you start.”
Sometimes designers are worried about what clients will say if they have high prices right from the get-go. But Nancy has a mindset solution for this. “This is a mindset issue. You are going in with fear that they’re going to ask you. And if they do ask you, you say, ‘I decided to set up my pricing from the beginning to allow me to stay in business long term, as opposed to struggling the first couple years, and then being afraid that I wouldn’t continue to be able to be here for you today.’ There is no shame in making the money you deserve to make.”
18. Raise your prices if you feel resentful
When should you raise your prices? You can certainly do it before you feel resentful, but resentment is a good sign that it’s definitely time.
“There are clients who just want to shop West Elm, Pottery Barn, and you know what, if that is a service you offer, then offer it without resentment, and make sure that your pricing on your design fee is making you enough money to make you happy,” says Nancy. “If it’s not making you happy, then you’re not making enough money. If you’re getting resentful, you’re not making enough money. If you’re at that point, you have to look at your business model and either add services or change the pricing model.”
And if you have clients that prefer to do the shopping themselves, consider using affiliate links so you can earn a little extra on every purchase.
Interested in learning more about using affiliate links in your design business? Check out our complete guide to affiliate marketing here.
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