A few months ago, I had done a Q&A on my Instagram stories asking what content you would like me to share tips on, and many asked about pricing services. In this article, Planning for Profitability, I share three objectives all architecture and interior design studios’ so should have defined. So let’s get into it!
Know what to charge to make a profit.
It is vital to your business to know how much to charge clients to satisfy your business expenses and make a profit. As a business owner, your goal should be to have a practice that is in the black versus the red. So it is essential to know what it cost to run your business? Time in the design business is a significant service cost as we are primarily selling time. So, setting your billable rate should be a priority. Determining all incurred business operating expenses is one of the initial steps in planning profitability. Identifying these expenses helps better understand the importance of choosing a financially appropriate charging method for your services.
Selecting the most profitable fee structure.
After determining your business expenses, the next step is to understand all the different charging methods for your services. As a designer, you should understand how project attributes can and should inform the best fee method. Most designers select one approach for charging clients that they think is most suitable for their projects while earning a profit. However, the chosen method may not be the most profitable. Knowing the different ways available to determine service fees offers designers the opportunity to select the most profitable fee structure according to the project type. After determining the expenses and the most profitable service fee structure, you have to evaluate a project’s potential for earning your business a profit. The expense obligations that need to be satisfied before any profit can be realized and what characteristics of different project types could limit or even eliminate any possible profits.
Master the challenges of collecting payments.
Receiving payments is even more critical than selecting the appropriate fee structure. Receiving payments on time is crucial to your business and the project’s progression sequence. Specifying appropriate times for payment of fees and understanding the options available to designers with late-paying clients are essential aspects of charging for your services. Set in place processes to master the challenges of collecting payments. For example, when you start a project with a new client, immediately invoice the client for a few dollars so you can walk through with your client your invoicing method.
Understanding the relationship among these essential considerations is necessary before selecting and applying a particular charging client method for your services.