Dear Sean,

I am a longtime reader of your BOH column and have even taken your workshop on pricing strategies. It is clear that you are not a fan of the hourly plus commission model that I and so many of my fellow designers employ. I understand why that approach is not ideal for those who do a lot of interior architecture and project management. But for designers like me, who do primarily design and furnishings work, can you explain why you feel this is the wrong way to go?

Still Unconvinced

Dear Still Unconvinced,

If you love spending time with your clients, and your designs evolve over many hours spent together gathering inspiration and finding the perfect solutions, then charging hourly plus a commission on goods is a wonderful model. This column is not for you.

If, however, you pride yourself on being able to arrive at a complete design relatively quickly, with ever more powerful presentations, then keep reading.

The stages of any project are: idea to design, design to production, and production to installation. If you get paid the same rate to do everything hourly, which hour is more important? And before you say they are all the same, they are not. If design takes three months and production takes six, then there are not enough hours to make design more valuable than production on an invoice, even though what is between your ears dwarfs what is between your hands.

Another way to think about it: Hourly appears rational, when it is anything but. Why your hourly rate? Why bill at the increments you do? Why discount some work, but not other tasks? It is all made up, but we speak as if it is calculated. It creates a scenario of believing in the emperor’s new clothes—something clients can smell (and question) a mile away.

The value of design is what you say it is, and requires only that you honor the value as being solely based on your talent, wisdom, experience and commitment to the process. Hourly just cannot come close to reflecting that reality.

As for commission, again, it is something you fudge based on prices and rates that were supposedly fungible pre-internet, but now are not at all. I have never understood the logic of relying on a made-up percentage that may or may not accurately capture the work done by a firm or the value of that work. A broken clock is right twice a day, but is that really how you want to run your business? Even as we stand on the shoulders of giants, we must acknowledge that those shoulders never experienced what today’s designers do—so we must question why we emulate our predecessors’ outdated processes.

On the other hand, when you can specifically tell a client the average monthly effort your firm will need to put forth to produce and install a project, the work will happen at the pace you set, and your firm will be paid consistently regardless of where in the process you are—a much fairer and more logical approach to charging.

Beyond all of these factors, there is a deeper reason why I hope the industry moves away from the hourly plus commission model, and it’s reflective of the reality we live in today: artificial intelligence. AI is neither artificial nor intelligent, but it is incredibly useful as a tool to educate yourself and improve your work. You can receive ideas and communicate them quickly and effectively—AI can write, draw, generate videos, even speak on your behalf.

If you pride yourself on having smart clients who give you and your firm permission to take them somewhere unprecedented with your design, then wouldn’t you want to get further faster so that you can see just how far you can go? Water at 210 degrees Fahrenheit makes a great cup of coffee, but water at 212 degrees creates steam and changes the world. AI will unquestionably help you get to 210 faster and better, meaning the value and certainty of achieving 212 is that much more within reach. But how, exactly, are you going to truly capitalize on the value of AI if you get paid by the hour? An hourly charging model incentivizes you to work more hours regardless of whether it creates a better result for your client. That approach shortchanges both of you.

And when it comes to commissions, why do you need to make money specifically on the production budget? Is the price of the sofa really that important? The thing about commissions is that they create perverse incentives at the margin. Getting the percentage on the way up is awesome, of course—it means so much extra money when you find your production budget exploding. But how is a client supposed to feel when they have to spend more money on your services if they choose more expensive furniture, especially if there is no additional work to be done by your firm when you’re specifying a $30,000 sofa versus a $10,000 one? With all of the project management software out there, and the ability to truly track most everything in real time, how is that random percentage justified?

The hourly plus commission model means that you’re motivated to play it safe and specify pricier goods to ensure that your client will purchase what is necessary for you to earn what you need to make. That stretch might just cost you the entire sale, as well as an enormous amount of revenue—not to mention that it is not the way to preserve your creative integrity, which hinges on selecting the best item for the space, not the most expensive one.

The goal of all designers has to be to push the boundaries of your current situation—in your design, but in your business too. When the ground shifts beneath your feet, think of high-jumping great Dick Fosbury, who jumped over the bar backward with his eyes closed. Hourly and commission just will not take you there, so it’s past time to let them go.

For more on Low’s preferred charging strategies, BOH Insiders have access to session recordings from his latest workshop here.

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Sean Low is 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.