Dear Sean,

I recently took part in your Launch workshop on pricing strategy, and while I know you have not really ever been a fan of product commissions, it seems you are now really against them. I have been charging commissions on products for my entire career, and as much as I love the idea of following your advice and getting rid of this pricing structure, it is a huge source of revenue for my business. I cannot imagine losing it. Can you explain your reasoning a bit more in order to help me take the leap?

Commission Conundrum

Dear Commission Conundrum,

In theory, an interior designer’s commission on purchases for a project represents what it takes to procure, store and ultimately install said purchases. Let us call it production. Production is time- and labor-intensive, to say the least. It goes on for months and months. While I appreciate that the revenue number attached to these commissions is likely the biggest part of a designer’s fee, it is not all that profitable. Fantastic production margins would be 35 percent, but in reality, they’re usually around 25 to 30 percent—much like what a restaurant makes on its food (as opposed to alcohol).

In a previous time, when the cost of items was not all that transparent, and the industry was pretty fluid on commissions, getting the commission on purchases covered a lot of sins—not least of which was the universal reality of being vastly underpaid for design. Fast-forward to today’s world, in which anyone can easily find product pricing and alternatives, and the many flaws of the commission system come to light.

So why have I always disliked the system, even before it became as irrelevant as it is now? Three reasons: A commission dismisses the expertise on offer; it subordinates great design; and it creates extraordinary risk for designers who have reached the level to which they aspire.

The first is the worst. The argument goes: “I will use my trade discount to buy for you, so my commission means you are paying a little over retail for all of my expertise.” Basically, a designer’s value is to buy for less, and a client would only have to pay a little more than they would if they bought it themselves for all of the expertise a designer might offer. That’s awful in every way. Instead of celebrating the expertise on offer, charging commissions is a way to hide the value provided to a client in order to make it as palatable (i.e., as cheap) as possible. And since interior design is an industry with so many women and gay men at the helm, you can see how it rankles me that to receive value, you have to hide that value.

Second, commissions turn the designer into a salesperson and ultimately forces them to shave off the edge or risk the sale. If showing the risky purple sofa might turn off a client to the whole design, you are incentivized not to take that risk. Instead, you make sure that what gets shown is digestible. Of course, there are outlier clients who are willing to push boundaries; mostly not, though. And do not get me started on having to redesign and do so around line-item prices. Making your creative vision dependent on purchases, when choice is ubiquitous as it is today, is a landmine of an endeavor, and it is only going to get worse.

Third, commissions have an outsize and increasingly illogical impact on your business as it grows, and your margins are at the mercy of this irrational system. On the way up, commissions may seem awesome. Thirty percent of a six-figure budget versus of a lower five-figure budget really helps a firm grow. However, when you reach the level of project that defines your firm—say, a million-dollar project—commissions no longer make sense, and actually create perverse effects. Say a project’s production budget is $500,000. If the budget increases by $100,000, what extra effort did your firm undertake to justify the increased commission? What if it was just that prices went up? And if the budget goes down by $100,000, you are literally paying to do the additional work of redesigning. How does that sit with you?

Clarity, as always, is the alternative. It takes what it takes to do production. You know (or certainly should know) what that number is on an average monthly basis. I do not care how you calculate it, whether by average hours, a percentage of expected firm revenue, or even as a hidden percentage of production used to generate a monthly number. The result is a straightforward conversation in which you explain to clients, “For our firm to manifest the amazing design we have created for you and your family, we will need this much per month for at least this many months or until the project is finished, whichever is longer.” In other words, you charge what you charge, and they buy what they buy—the two numbers are not inextricably or dynamically linked.

It is beyond time for designers to stop using commissions as a crutch, or worse, a place to hide. Instead, simply appreciate that your expertise as you choose to provide it deserves to be recognized and compensated for as just that—expertise. Celebrate the gift each designer has—to see what clients cannot: the beauty to which they can only aspire but you are destined to achieve for them. And make no mistake, the ability to manifest beauty in the world will always be indelible. Live there without compromise, and the rest takes care of itself.

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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.