Psst. Do you want to hear the biggest trade secret of all time? You can't share it with anyone. If I tell you, you are sworn to secrecy. Other designers will ask. Don't tell them. This is just for you. I'm going to give you the Super Secret Magic Pricing Model. MPM for short.
I'm sure you know the Magic Pricing Model I'm talking about. The one where clients readily accept your fees and buy all the product you select without question. It is the one where your bills and invoices are always paid on time. The one where you make a ton of money easily. It is the one that is so easy you never have to have an uncomfortable conversation about money with clients. The MPM is the one that you make the most amount of money with the least amount of effort. I know you want it. Everyone wants it.
Pricing is the hottest topic in running a design business and in my coaching sessions. So here is the secret of the Super Secret Magic Pricing Model: it doesn't exist. Every designer, really every designer, deals with clients questioning pricing and fees. Every designer has past-due invoices and uncomfortable conversations about money at some time.
Here is why I know that there is no magic pricing model. I've talked to hundreds of designers, I've researched celebrity designers, and been to many talks given by big designers (where inevitably someone searching for MPM asks how they charge). The one thing that the successful designers have in common, is not a MPM, it is confidence in their pricing, even an unapologetic: I'm worth it. This is how I charge, take it or leave it. It's also about working with your ideal clients, but that's another post.
Okay, so now that we've learned that there is no magic pricing model, let's talk about pricing mistakes you may be doing right now.
1. Thinking that MPM exists.
Searching for the Super Secret Magic Pricing Model is taking focus and effort away from you finding your own magic pricing model. All that time you're looking for the MPM you could be investing in creating and honing your own model that works for your unique business and clients.
2. Lacking Confidence.
It's scary running your own business. Starting something new can be intimidating. You're not alone. I regularly hear from participants of The Golden Blueprint that they're surprised that their struggles are the same struggles as other designers. Every successful designer has been there and they didn't get there by hemming and hawing about every business decision, about their pricing model, and about if they were doing it right. No, successful designers realize that they are the CEO of their business and run their business with confidence (or at least faked it until they made it). If you're not confident in your business, your clients won't be either. Read 5 Habits of Successful Interior Designers.
3. Giving Discounts
Discounts undervalue your service. Discounts set a precedent for future lower prices. Discounts show you have a lack of confidence in your service. Whether you agree at the beginning to lower your markup or charge less per hour or if during the project you don't charge for all those hours you spend on the project, you are losing money. If you don't charge for 1 hour a week, you could miss out on $5000 a year (charging $100/hr). Not charging for 1 hour a day and you could be missing out on $25,000 a year! Read the entire article on Why Discounts are Hurting Business.
4. Hiding your pricing.
Secrecy hurts the design business. Designers already have a reputation for deception and with our complicated pricing models the only way to overcome this is by radical transparency. I believe that you should let your client's know what you pay. This isn't a popular practice in the interior design industry (yet), but check it out and see if it doesn't feel as if a weight has been lifted once you're transparent about your pricing.
5. Not knowing your numbers.
It is important when you are running a business to know your bottom line. I mean that you know the minimum that you need to make to survive and how much you need to work to get there. If your business overhead and salary need to be at $100,000 and you need to do 10 projects each with $10,000 design fees. Or you need to charge $120/hr and work 834 billable hours a year which amounts to about 17 billable hours a week. That seems doable, right? Other important numbers to know are how many hours you are not billing, billable hours, accounts billable, accounts receivable, monthly/yearly overhead, net income, total revenue, sales. Most of these numbers can be found on your balance sheet & income statement. Which means that you need a proper accounting program.