How To Price Interior Design Services (In 5 Steps)

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How To Price Interior Design Services (In 5 Steps)

by Jo Chrobak

by Jo Chrobak

INTERIOR DESIGNER’S BUSINESS SCHOOL

by Jo Chrobak

by Jo Chrobak

INTERIOR DESIGNER’S BUSINESS SCHOOL

Table of Contents

Today’s post will cover how to price interior design services and projects in five easy steps. This is a topic close to my heart, mainly because it blows my mind how inaccurate the information out there is – and the information provided is based on guesses or copying other designers (hoping that those other designers know what they are doing) than factual industry information or the person teaching this has never run a successful interior design business themselves. Even the Interior Design and Architecture bodies undertaking annual pricing surveys about how real designers price their interior design projects only reveal figures rather than pricing methods which I find baffling.

Pricing projects and services is something we do almost every single day as business owners, and yet people need to learn how to do it in a way that is right for their business because there is no “one” right way that is right for everyone. So this is why, today, you will learn how to price interior design services in five easy steps, and you can finally get the answer you’re looking for from an accurate source, tested on hundreds if not thousands of design firms across many years.

However, there is one warning here; you will need to do some work to know how to price interior design services accurately. It’s not just a magic number that gets plucked from thin air. To make a profit, you need to know your figures. What is a profit for one person may not be for another, so you need to know the statistics of your own business (that’s why you can’t use someone else’s prices!)

Also, it is essential to note here that what we are learning how to price interior design services as in those that you undertake as a professional designer – not the physical construction and labour costs of the builder (if you’re a design and build or design and install company you will have additional material and other labour costs as you well know).

So here it is. It’s not magic or rocket science. This information spans far beyond my 20+ year career because I was taught by the best. The most fantastic architecture firms with the best names and others with skyrocketing profits. I’ve teamed that knowledge with my small start-up and coaching knowledge and am pleased to share it with you to demystify this topic:

STEP 1 | List Out The Services For The Project

Not all interior designers offer the same services! This means that not all interior designers will price the same way, which is why I karate chop my hands in the air every time I see someone posting online about what to charge as an interior designer! How do they know what services you’re offering? How do they know how long those services take? How do they know what your experience is worth? How do they know what your client niche will pay? How do they know your overheads? There is no “one way” to price your services. There is a perfect way to price for YOU and a perfect way to price for someone else.

When working this out, make sure to include every administration task, meeting, pencil drawing, print job – all of it. If you don’t already have the data saved in a template for yourself and you’re at the start of your business, it will take some time, but it is worth it (and yes, this is why people pay for interior design mentors because these figures and services can take years to refine). But everyone started in the same place as you, so don’t get disheartened.

The chances are that you’re starting with smaller projects anyway, so list out everything from meeting the client to taking the photos at the end on completion day. What you don’t list out now – you will likely either do for free or need to retrospectively ask your client to pay you later (which they never like, and this can make you look unprofessional because they will wonder why you didn’t price for it in the first place!)

What services you decide to provide to your client niche as an interior designer will be the most significant determining factor in deciding which pricing system is best for you. Covering all the services is not something we are going to go through in this post. Firstly because there are an endless number of services designers can provide, and secondly, it requires a lot of focused attention, analysis and assessment (which is what I do during my mentoring program). If you need some help understanding what services you should offer, have a read of this post and download the services list for yourself: What Do Interior Designers Really Do?

STEP 2 | Dedicate Time To Each Task

If you’re a start-up, you need to make educated guesses in areas where you’re thinking about how much time you spend on something. Many start-up designers will say, “I don’t know how long it will take me to complete the job” – even an experienced designer might not know the answer to that question. That’s why we = w.o.r.k i.t o.u.t, and all that requires is a little thought.

The worst thing you can do is skip this part. It is too hard for most people to think about how long a task might take. Don’t be that person. I promise you. This is the area where people make the most mistakes, and those who estimate a time after each task, in my experience, estimate 95% accuracy than those who don’t bother. An educated guess is better than nothing.

For more advanced offices, you will also want to dedicate the level of the experienced designer to that task. Is it a director attending the meeting and the assistant preparing the documents, or are there others involved, such as the project manager, architect, designer, line manager etc. This is important because they will be charged at different rates.

STEP 3 | Choose A Pricing System

The next step to price interior design services is to choose a pricing system for the project, as the system you choose to use might vary per project!

The main question I get around this topic is; how do you know which pricing system or strategy is right for you? In our previous post on interior design fee structures, we covered all the different ways you can price interior design and architecture projects, and I gave you some pros and cons of each. If you have yet to see that one, it’s best to start with that because you’ll get a good overview. You can find that post here Interior Design Fee Structures | Complete Guide

STEP 4 | Use The Correct Rate

Before you price your interior design services, you need to know the correct rate to use because no matter which system of pricing you use, per square foot, hourly, time boxing or even phasing, you need to know what your time is worth so that you don’t undercharge your projects. Even if you’re charging luxury prices, you need to know your rates to calculate if you’re making a profit. So if you still need to work out your rates (which includes working out all your overheads, taxes, profits, expenses and how much you want to get paid for your time).

Many designers have returned to working a job they hate because they under-priced their projects and made huge, crippling losses. Don’t be that person.

The main thing to note is that your hourly rate is not one figure. So make sure to use the correct figure or rate to price this specific project type.

STEP 5 | Systemise Your Pricing

Systemising saves you time once you know how to price interior design services. You don’t want to spend three days pricing a project that takes five days of work! The first time you work it out might take three days, and that’s ok because there are a lot of things you need to do to get the figures right such as work out your rates, learn about pricing structures and figure out your services. But after that, you want to systemise it, create some templates, and package things up (maybe create a small fixed-price project service) so that you get more efficient and faster every time.

This is especially important if you are in the start-up phase of business and are working on smaller projects (as a rule of thumb, earning anything under $10K as your fee per project is small) and don’t yet have all of your systems in place because your margins are likely to be much smaller and taking longer to do specific tasks.

BONUS STEP 6 | Cross-Check Your Price Using Another System

I added this in because it’s something I do, but you don’t have to. The last step to how to price interior design services is to cross-check the price using another pricing system. To sell higher-priced projects, I typically provide my client with an alternative pricing method so they can choose which method suits them best. I do this only as a safety measure, but getting the price as accurate as possible is essential for almost everyone. Suppose I’ve priced “right” for my project type and situation. In that case, the figures will come out similarly using another method, so I can easily cross-check if something is incorrect.

EXAMPLE | How To Price Interior Design Services

When I teach pricing to my mentees, we speed it up by using all my templates (that took me years to create and perfect, so don’t worry, you’re not alone), but the first time still takes time. I find that everyone focuses on getting their pricing “right”, but that is different depending on how much you need or want to earn as well as what service you’re providing and what transformation you’re selling to your niche/client. So what is right for one designer will always be different from another because each recipe is different. (That’s why I keep repeating you can’t copy someone else’s prices).

Here are two real examples from the beginning of my own business. I am (or was) both Jo and Tim.

Two Real Examples Of How To Price Interior Design Services

We have two designers, Jo and Tim. Jo is an experienced designer who works on complex commercial design projects for entrepreneurial clients worldwide. Tim is just starting his business and focuses more on fast turn-around and low-cost E-Design projects.

They have a monthly income requirement of $5K ($60K/year). Jo prices her projects by phase because they typically take around 12 months to complete, but Tim packages his E-Designs into a set fee because the services and the length of time they take are always the same; they take around ten days to complete.

So how do they price their interior design projects to achieve a $5K/month? Firstly, as I mentioned, they need to determine what services they will offer and then dedicate time to those tasks. After that, they choose a system to price.

As they have the same monthly target, their rates are the same as each other in this example (even if their outgoings and overheads are different). Let’s assume the following:

Let's assume the following:

Jo prices a typical project at around $60K, knowing that the scope of work on these projects that she has agreed on will require around 20 hours per week for approximately 45 weeks. So one project takes approximately 900 hours of Jo’s time spread across a year, and two projects a year are the maximum she can fit without hiring staff.

Jo prices using a package rate (which simply means that it’s a lower rate than her premium rate because the client is buying more time with her), so she knows that if she charges $35.13/hr of 900 hours, she requires two projects to reach her target each year. That’s ($35.15 x 900 hours = $31,617) x 2 = $63,234. Jo prices per phase with monthly payments so that she gets payments regularly.

On the other hand, Tim prices a typical project at $1670 because he sells three E-Design projects per month (that’s around 36 projects a year). He completes one E-Design project every ten days, which takes him approximately 47.5 hours spread across that time. He gets paid upfront before he starts each project. Tim uses a package rate to work out a “lump sum” fee for his E-Design projects, which works out to be ($35.13 x 47.5 hours = $1669.68) x 36 projects = $60, 072.30 (or $60,120 if you use the rounded up figure of $1670).

So although both our designers earn almost the same amount each year, what they charge and what services they offer vary significantly and this is why it is really dangerous comparing your prices to another designer or trying to see what another designer charges because you don’t know the details of the service or whether their projects are profitable in the first place.

Learning how to price interior design services requires slightly more effort than copying another designer, but as you see, it is worth it!

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Conclusion

Now you know how to price interior design services using these 5 (or 6) steps! The most challenging part is taking the time to do it. Learning how to price interior design services doesn’t have to be complicated, and you are unlikely to make crippling mistakes if you follow this system. Before I created templates and pricing systems for myself, a large, two-year project would take about three days to price. That is a long time, and although I wouldn’t say I liked doing it, I knew that if I worked it out properly, it would be as accurate as it gets without being clairvoyant. I’d almost always make a significant profit, and my client always said yes!

These days I have templates that I share with my mentees. It can take me under an hour to price a complex project and prepare my fee proposal (because I’ve got my trusty systems and templates for E.V.E.R.Y.T.H.I.N.G), so if you want to save years of creating interior design pricing templates, then check out our mentorship program here: Online Interior Design Course

Jo Chrobak

Jo Chrobak
Jo Chrobak is an architectural and interior designer and mentor at the Interior Designer’s Business School that trains interior designers to set up professional and successful interior design businesses and gain experience working on real projects. She is trained in architecture, interiors, business and life coaching and runs her architectural and interior design studio just outside of London in the UK.

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