business advice | Jun 27, 2023 |
My hourly billing structure needs an overhaul. What should I change?

Dear Sean,

I’ve been in the business for almost 20 years, and I am still questioning my pricing structure. I’ve read so many articles about flat-fee pricing, getting 70 percent upfront, asking for three times your hourly rate for consultations—the list goes on and on. Historically, I have billed hourly, but it’s a bear to keep up with. Looking for guidance: What do you think works best today?

Charging Challenges

Dear Charging Challenges,

Let us start with the end. You bill hourly, but it is a bear to keep up with. Well, what if it were not? Would you like hourly then? I am sure, like most designers, you provide clients with invoices featuring detailed descriptions of how you and your team spend your time. Imagine what life would be like if instead you simply add up your time and send your bill as a straightforward line item naming the team member, time spent, hourly rate and amount. Invoicing goes from taking hours to minutes. Would that solve your problem?

Remember: If a client does not trust you to be accurate with time billing, they are not your client. And let’s be honest, please—your time descriptions are an exercise in creative writing anyway.

But my guess is that for many, something deeper lurks beneath this gripe than the difficulty of keeping up with time billing. I have spoken many times for BOH about the impact of each pricing model, and how your pricing model should fit with how you like to create and produce, not the other way around. Today, I would like to challenge the notion that you are in the same business as when you started almost 20 years ago.

Two decades ago, none of the following existed: the iPhone, digital photography, Facebook, Instagram—not even Gmail existed. (Neither did BOH!) What you provide naturally by way of vision, procurement and installation has exploded as time has gone by, and technology has developed. And yet your business model presumes that your value has remained the same.

Charging by the hour denotes the absolute value of spending time with a client to assist them in understanding what you envision as well as what’s available to make it come to life. Not only have your skills improved through your acquired experience and knowledge, but your ability to implement your vision has also improved by way of the tools available today (from 3D renderings to video consultations and overnight white-glove shipping) that make the design experience ever more profound for your clients.

So the real question is: What business are you actually in today, and how can you best capture and deliver that value to and from your clients? If the power of design relies on guidance, perhaps hourly still works for you—though at twice the rate of procurement and installation. If your presentation skills have exploded, then maybe you can rely on the decisions made at those presentations and a flat design fee with a significant portion (or all) of the fee paid in advance.

The point is that it is fruitless to follow the shiny-penny pricing model without first asking what business you are in today. “Same old, same old” never applied. Your promise to your clients is how you will be better tomorrow, which, of course, requires letting go of yesterday. No better place to start than to question why you charge what you do.

Homepage image: ©Yellow_man/Adobe Stock


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.

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