When Clients Want to Buy Retail

When Clients Want to Buy Retail

When you buy retail, you buy at an inflated price.  Yet, more and more clients want to buy retail.  They want their furniture quick and easy.  Not to mention cheap.  But what they (and you) may not realize is that you're likely paying a much bigger "markup" on retail compared to the quality that you get than to-the-trade sources.  

Usually when buying to-the-trade the cost to quality ratio is much better.  Clients get more for their money.  They'll be paying a smaller markup to the designer rather than a large markup to the retailer.  

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Why Discounts Are Hurting Business

Why Discounts Are Hurting Business

When you discount your services, you are undercutting the value of the entire industry.  Ever bought a Groupon for a discounted exercise class, but then never went again for full price?  If you pay less for something it is really hard to fork over more money later.  When you lower the price of something, it sets a precedent and people don't want to pay more for it.  The perceived value goes down.  This may not matter when you are first starting or if you are in a slump and need whatever clients you can get, but it will matter when you are wanting to get paid more for your services or want to work on higher budgets.  It also matters to all the other designers out there working their butts off and growing their businesses.  

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BUSINESS OF DESIGN: BEST PRACTICES

Business of Design best practices on capella Kincheloe Interior Design phoenix
Business of Design best practices on capella Kincheloe Interior Design phoenix

Back for another installment of the Business of Design, where I share with the interiors designers out there (and curious clients) about running an interior design business.I've been in interior design for about 10 years now.  In that time I've made mistakes, I've had great successes, I've seen others designers flounder and flail, and others have wonderful victories.  There are a few things that help things run smoothly.  It's incredibly important to have your systems in place for clients.  These are non-negotiable ways that you run your business.   They are your business decisions, you know that without them, your business could turn into a hot mess.

PLACE ORDERS AFTER CLIENT PAYMENT

Always have the client pay you before you pay the vendor.  You could go a step further and require the proposal to be signed as well.  This is the approval of the item (sofa, lamp, tile, fabric) and it protects you from client indecision or changed minds.  If you order 120 yards of fabric and then your client changes his mind before he has paid you, there is no way to make him pay.  You're not a bank, don't give your clients loans.

100% DEPOSIT

This builds on the first practice, but for the same reasons you should get 100% deposit.  If your client changes his mind and doesn't want to pay the balance, or if the check doesn't arrive in a timely manner, then you could be stuck with the balance.  Again, you're not a bank and unlike a manufacturer you can't resell the item as easily.

HAVE A CLEAR PRICING STRUCTURE

This is such a hot topic in interior design and fellow members of the industry love to know how you price.  People ask me all the time about my structure.  It's what works for me right now and I tell them that it doesn't matter what pricing structure you decide on as long as your are completely transparent and honest with your clients.  Make it clear & easy.  I've done a breakdown of the different pricing structures in this post.  If you are confident in your services and what you charge for them, the client will also have confidence.  If they balk or try to negotiate a pricing structure that you are not familiar with or are uncomfortable with, they are not the right client for your business.

PAY ATTENTION TO HOURS

You are in business and depending on what pricing structure you have worked into your business, you should keep track of your hours.  This is especially important for those of us that run small design firms, you need to know whether your spending you time wisely, and if not, what you can trim out.  If you divide your yearly profit by your yearly hours, how much are you making an hour?  With the overhead and sales taken out of the equation, your $200 per hour charge may dwindle to $20 per hour.  This helps you figure if you are billing enough, if your design fees should increase, or if you are fine working for that hourly rate.  Knowledge is power.

USE STUDIO DESIGNER

This is the number one tool for keeping my business running smoothly, looking professional, and keeping me organized.  It is an accounting & project management platform for interior designers.  It keeps orders tidy, you can track hours, pay sales tax, send proposals, purchase orders, requests for quotes, specifications.  Its wonderful.  You're business is at a disadvantage without this program.

Now it's your turn, share your best practices in the comments below.

Looking for more interior design business advice?  Check out my online course, The Golden Blueprint!

THE BUSINESS OF DESIGN: HOW I SET MY FEES

10 things interior designers won't tell you - how I set my fees Start with Part 1 to learn about the article I am breaking down in this 10 part series.

YOU'D SAVE A BUNDLE IF YOU KNEW HOW I SET MY FEES

Designers use a hodgepodge of methods to determine their fees. The traditional method of choice, called cost-plus, lets designers buy furniture, fabrics and accessories at a "trade" discount of 20% to 40%, then mark the item back up to around the retail cost, using the markup as a design fee. Another alternative is to charge clients a commission -- usually about 25% to 30% -- on items purchased. These days, however, designers increasingly bill either at an hourly rate or a flat fee; sometimes, they also charge cost-plus or a commission for items they buy for you.

The problem is, your designer's chosen method might not be the best deal for you. If all you want are curtains and carpets for your living room, an hourly rate makes sense. If you're building and decorating a house from scratch, you're better off with a flat fee. And if you just want your designer to purchase furniture, it may make the most sense to go with cost-plus -- as long as you keep an eye on how much "plus" is being tacked on. Sometimes the difference between what your designer pays and what he charges you is huge. Let's say a designer buys an Empire chest of drawers for $1,000, but it is really worth $2,500. "There is nothing wrong with marking it up to that price," maintains Jean Michel Quincey, a New York interior designer. "Why shouldn't he? Particularly if he's spent the weekend looking for it."

As a consumer, you may feel differently. In your initial interview with a prospective designer, make sure he tells you how he charges and whether he'll consider another option. When push comes to shove, most will.

As a client, your designer should be able to explain to you how they set their fees and what they are charging.  If it's not clear and you think they may be doing something shady then step away.

There is no universal way that commissions or fees are set - different from architects or the 6% real estate agents get.  I've done an entire article about the different structures of interior design pricing for you to read up on here.

It is true that you may be able to discuss a different pricing structure depending on your project, don't be surprised if the designer declines.  Designer's are running a business like any other and have processes in place that work out best everyone when they are followed.  You can read more about negotiating design fees here.

My invoices always have the price that I pay for the item when I am getting a discount.  So if I purchased that Empire chest mentioned above for $1000, but I spent 10 hours shopping for it, you would see I paid $1000 for it and then be charged my hourly rate for those 10 hours.  Finding a good deal takes time and may end up costing you the same amount in the end.

It comes down to educating yourself and making sure that you understand how you are being charged.

read the entire series:

1. SHOP IN THE RIGHT STORE AND YOU MAY NOT EVEN NEED ME 2. MY TITLE DOESN’T MEAN VERY MUCH 3. YOU MIGHT AS WELL USE MY ESTIMATE AS WALLPAPER 4. YOU’D SAVE A BUNDLE IF YOU KNEW HOW I SET MY FEES 5. MY BILLS ARE LADEN WITH HIDDEN COSTS 6. IT’S NOT IN MY INTEREST TO HUNT FOR BARGAINS 7. YOU DON’T NEED ME TO GET BIG DISCOUNTS FROM SHOWROOMS 8. I PREFER BIG PROJECTS, BUT I’LL TAKE WHATEVER I CAN GET 9. YOU HAVE LITTLE OR NO RECOURSE IF I SCREW UP 10. MY WORK IN ARCHITECTURAL DIGEST IS A MIRAGE