How do most designers set their fees? Often, they find out what their competitors charge, then either match that rate or stay just below it.

This is the wrong method.

Instead of determining your rate based on the current market, build your financial model before setting your rate. Taking this approach will convince you to be courageous, and it will ensure that the money coming in meets and exceeds your needs. Remember: This is no time for feeling guilty or modest. You deserve to make more money doing what you love.

Following the pack with your rates can often mean coming up short. For example, for years I’ve heard that the “standard” markup for designers in New York is 35 percent. Savvy prospects know this, and they guilt many designers into keeping the markup at that level. Unfortunately, that is a 26 percent gross margin. Most firms’ operating costs are around 40 percent, so they are losing 14 percent on product sales. That’s not good business. (Stuck on the math? Here’s how you calculate your gross margin: $100 product cost + $35 markup = $135 sale price. Take the $35 profit and divide it by the $135 total revenue.)

If you know what it costs to operate your business profitably, you can decide on your markup strategy accordingly and script your answer when people ask how you charge. (For more information on how designers across the country charge, check out page 16 of our 2023 Interior Design Business Survey.)

Unfortunately, emotions are often involved in fee-setting decisions, and approaching this process with feelings at the forefront almost guarantees that you will charge less than you should.

Why is that?

• Imposter syndrome: Maybe you don’t have a design degree, so you don’t believe you can charge as much as others in your market.
• Fear of losing projects: Maybe business is slow and you think that you won’t get the next project, so you’re anxious about your ability to pay your bills and/or your team.
• Lack of confidence: You don’t feel that you are as talented as your competitors or have the experience or client roster that your peers have.

Years ago, a designer joined my coaching program, and the first things we examined were her financial results. She wasn’t making much money, but she was afraid of raising her rates for her longtime clients. In fact, it had been years since she had adjusted her fees. I told her she needed to double them. Her eyes got big and she asked, “How do I do that?” We created a plan, and then she met the first client and explained that she hadn’t raised his rates in many years but would be doing so now. He agreed to the price increase.

It only takes one win to build the belief that you’re worth the higher rates.

That same designer met with the next client, who also loved her and her work, and he accepted her new prices. When she went to her third client with the news, he smiled and said, “I should do the same thing!” (He asked her how she came to the decision, and she told him her coach made her do it.)

How do you increase your rates and markups?

• Find someone to hold you accountable for doing it.
• Make a decision to change them by a specific date.
• Set up the client appointments.
• Practice what you’re going to say.
• Have the conversations.

Always start with raising the rates for new clients first. To ease the transition for existing clients, you can always offer them a few months or a block of hours at the old prices before their rate increases. You can also set the tone by adding a clause in your contract indicating that your rates will increase at least annually.

Then confidently move forward saying no to projects that aren’t profitable for you. You’ll be glad you were courageous.

For insights and analysis on how designers across the country run their firms, download the 2023 Interior Design Business Survey report, presented by Pearl Collective, Interior Talent and Business of Home.

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Gail Doby is co-founder of Pearl Collective (formerly Gail Doby Coaching & Consulting), an interior design business consultancy that helps designers, architects and other creatives increase their profitability. Doby ran her own design firm in Denver for nearly 20 years and has a degree in finance and banking. Since 2008, she has been helping designers scale their businesses profitably and reach financial freedom. As a coach, mentor and business transformation specialist, she shares innovative ways to overcome the roadblocks, challenges and detours creative entrepreneurs face. She is also the bestselling author of Business Breakthrough: Your Creative Value Blueprint to Get Paid What You’re Worth. Her goal is to empower design industry clients to differentiate themselves, drive measurable results, achieve business projections, and create personal satisfaction through game-changing strategies and business practices.