By Katy B. Olson
Consultant Jamie Johnson counsels interior design firms in all aspects of business, from hiring, recruiting and reviewing employment policies to marketing, licensing, IT and finance. In her practice, she helps identify common money-draining and time-wasting practices that interior designers employ. Here, she chats with EAL about the top ways designers leave their money on the table.
What are the top ways designers leave cash behind?
Whenever I start working with a new client, I always ask to see a sample of the agreement they’re sending to their prospective clients. Nearly every single time, I’m able to identify fees that are too low for the designer’s marketplace. It could be the percentage on sales or the designer’s hourly rate. Even a couple of percentage points on sales or a few dollars extra per hour can make a big impact on the bottom line.
Not tracking and billing hours, too, is a big way designers leave money on the table. I know that it’s a hassle to track hours, but if that’s how you’re charging for your services, it has to happen on at least a monthly, if not a bimonthly, basis.
Flat-fee arrangements with clients are another big way designers lose money. In my experience, the flat-fee terms are often too open-ended in the agreement. Designers almost always end up working for free at some point, particularly when the project is winding down and has gone over its expected completion date—usually through no fault of the designer. I don’t like these arrangements for these reasons, though I do understand they often bring in a predictable stream of income and are pretty seductive for a business owner that way. If a designer feels compelled to take this on because the client insists and it’s the only way the designer will get the project, then the agreement has to be carefully crafted so the designer’s time isn’t given away at any point.
What are some easy-to-adopt practices that can help save designers money?
It may sound basic, but a way to save money is to make sure that everything that can possibly be billed, according to the client agreement, is billed. A lot can slip through the cracks, not just billable hours, but things like freight for fabric, or small items (like picture hooks, extension cords, light bulbs) charged on the designer’s credit card, or reimbursable expenses directly attributed to the project. It can really add up. And why should the designer have to pay for this?
In addition to managing a business, servicing clients and making efforts to secure future projects, how can a designer find time to train a new employee?
Orienting a new hire in terms of the company’s processes, design aesthetic and particular resources is always necessary, no matter what. So, it’s really important that the new employee already have the hard skills and past experience to jump in and contribute right away as much as possible. With an experienced employee, fewer mistakes are made, too, which saves money. This may not be so easy to adopt, since finding the right employee isn’t always easy. But taking some time in the first place to find a skilled employee, at whatever level is required, is always better than hiring the wrong employee and hoping it’ll work out.
How can designers better calculate fees? Do you have a simple formula?
There really isn’t a one-size-fits-all way to determine fees. Each market is a bit different; designers in New York charge differently than those in San Francisco or in Greenwich, Connecticut. And it depends on the types of clients with whom a designer works and their budgets. There are designers who cater to a more middle market and those who work with ultra-high-end clients. The fees would be different depending on all of these factors.
How can designers avoid having their time “hijacked”? Any tips for dealing with clients who try to monopolize a designer’s time?
There are ways to craft a client agreement that incorporate boundaries around the designer’s time. And many of those include charging the client. Once the client is aware that they will pay for this time, it becomes self-limiting on their part. In addition, it’s important to be responsive to clients—interior design and decoration is a hybrid service and sales business.