business advice | May 18, 2021 |
Design today will cost more and take longer. How do I explain that to clients?

Dear Sean,

I’m struggling with how to reset our clients’ expectations. When they signed on with us, we could promise a specific, high-touch experience. Now, market forces beyond our control make it impossible to deliver that level of service. How do we convey that we’re doing our best—but that it will take longer, be unpredictable and cost more?

Priced Out

Dear Priced Out,

You could have never predicted that a cargo ship would get stuck in the Suez Canal for more than a week and hugely interrupt international shipping, nor could you have known that a deep freeze in Texas would virtually destroy foam production for months. And the once-in-a-hundred-year pandemic? Guessing you could not have foreseen that one either.

The entire point of your question is, Who is to bear the risk of delay and/or increased expense caused by forces outside of everyone’s control? Maybe this is all covered in the force majeure clause in your contract—but maybe it’s not. Either way, it’s worth unpacking the various risks at play.

The first risk you are facing is time delay. I am betting that your revenue from any particular project is intricately tied to time. For instance, whether you earn a percentage on items purchased or charge a flat fee, there is very little you can do to increase revenue in the event of a delay. And do not kid yourself if you charge hourly—the delays will likely not result in enough work to compensate you for the loss of other work. (While you might get more money relative to those charging flat fees or percentages, you will definitely not get enough money.) So let’s agree that the delay is going to cause pain—and who is to pay for that pain when it is nobody’s fault?

My position is that time delay ought to be borne by both you and your client almost equally, perhaps through an additional monthly fee to recognize that the project is extending and you need to have the resources necessary to finish the job to the level you both agreed upon when you first started. A few caveats: If you come up with alternative ways to complete your work in a tighter time frame at the same level (i.e., work that you would stake your reputation on) and your client rejects the alternative (perhaps they just have to have that French chandelier), then they need to pay wholly for that delay. More important is the reverse: If the client is happy with a more expedient solution and you are rigid in your opinion, then you must bear the entire cost of the delay. There is really no good answer here, but frank communication about the realities of what is happening should go a long way toward an acceptable solution.

The next risk is a much more self-inflicted pain—one that could be a sign that you might need to rethink how you charge for what you do. Putting aside delays, if prices rise for the third-party materials and labor necessary to complete your design, and you make a percentage on those sales—well, good luck. You are going to have to explain to your client how you make more money to do the exact same amount of work. In addition, if you are not the retailer, you might be asked to pay for the difference in the expense. (Yes, really.)

My answer to navigating the increased material and labor expenses: Your client should pay for the increased expense, but you should not make any additional money. After all, you have to be able to distinguish what you and your firm costs and what it costs. If you have synced the cost of production with your percentage on purchases, you will now have to do the work to explain that the percentage was always a shorthand to get to what it takes to have the design come to life in their house once it is out of your head. If that work has not changed, then neither should your price—even if the cost of materials and labor have risen considerably. Clients will understand only if they can see that you will not be making any more money on the price increases, and they cannot see it unless you explain it to them.

While these are extraordinary times, they are not without precedent. Price shocks and delays happen all the time, just not as suddenly and pervasively as now. Discipline is necessary if you are to remain the professional in the room. No matter what, don’t give into martyrdom for the sake of smoothing waters. Yes, you might get the sugar-high of a placated client, but in the end, you will just be dead, as all martyrs are. Instead, do the hard work of having honest and frank conversations. The fair solution is the right solution, even if some feathers are ruffled along the way.

Homepage image: ©Min Chiu/Adobe Stock

____________

Sean Low is the the go-to business coach for interior designers. His clients have included Nate Berkus, Sawyer Berson, Vicente Wolf, Barry Dixon, Kevin Isbell and McGrath II. Low earned his law degree from the University of Pennsylvania, and as founder-president of The Business of Being Creative, he has long consulted for design businesses. In his Business Advice column for BOH, he answers designers’ most pressing questions. Have a dilemma? Send us an email—and don’t worry, we can keep your details anonymous.

Want to stay informed? Sign up for our newsletter, which recaps the week’s stories, and get in-depth industry news and analysis each quarter by subscribing to our print magazine. Join BOH Insider for discounts, workshops and access to special events such as the Future of Home conference.
Advertisement
Advertisement
Jobs
Jobs