How to Make Sure You Cover All Your Costs
Interior design coach Beth Whitlinger discusses how to create a realistic estimate when scoping a new project
Beth Whitlinger has been in the design business for nearly 40 years. When she’s not guiding interior designers of all experience levels through her coaching and mentoring business, The Interior Design Coach, she’s the principal designer at Beth Whitlinger Interior Design in Southern California. Here she outlines several ways designers scoping a new project can account for the variety of costs that may come up.
Beth Whitlinger
Q. How can I make sure I cover all my costs?
A. I get this question all the time in my consulting business. It’s an issue I’ve struggled with in my design business as well, but over the years I’ve found some tried-and-true ways to ensure my costs are covered.
Q. How can I make sure I cover all my costs?
A. I get this question all the time in my consulting business. It’s an issue I’ve struggled with in my design business as well, but over the years I’ve found some tried-and-true ways to ensure my costs are covered.
Get It in Writing
First, make sure you have a contract. One of the biggest mistakes designers make is not treating their client relationship as a business transaction. Many designers are afraid to show their client the total number. Others don’t like the paperwork. Whatever your reason, it’s such an important aspect of our business that you need to get over the hesitation. Approaching this relationship as a professional will only help you in the long run.
First, make sure you have a contract. One of the biggest mistakes designers make is not treating their client relationship as a business transaction. Many designers are afraid to show their client the total number. Others don’t like the paperwork. Whatever your reason, it’s such an important aspect of our business that you need to get over the hesitation. Approaching this relationship as a professional will only help you in the long run.
Consider Billing a Flat Fee
Most clients hate the hourly model because it is so open-ended. Will it be $10,000 or $100,000? They have no way of knowing. With a flat fee, your client knows what to expect and when they need to make the payments. Calculate the hours you spend in the first week or two before presenting your concept to the client and collect that amount as your initial contract payment.
Most clients hate the hourly model because it is so open-ended. Will it be $10,000 or $100,000? They have no way of knowing. With a flat fee, your client knows what to expect and when they need to make the payments. Calculate the hours you spend in the first week or two before presenting your concept to the client and collect that amount as your initial contract payment.
Think Through the Details
Designers often underestimate the real time it takes to complete a project. Did you remember to factor in all meetings? How about travel time? Reselections? Phone calls to contractors and vendors? Don’t put yourself in the position that so many designers do where you’re essentially working for minimum wage, or worse yet, losing money on the project and paying for the “privilege” of completing it.
A good way to establish a realistic figure is to keep a detailed log of every task performed on a current project, then apply that as a guideline to your future business. Consider buying a project estimator. This type of document lists absolutely every task in a typical project, allowing you to enter your estimated time and assign a dollar value to each item. The best ones calculate your final design fee, making it easy to come up with an appropriate amount. It’s also useful in making sure you don’t forget to monetize all the little details of a project that we often neglect.
Designers often underestimate the real time it takes to complete a project. Did you remember to factor in all meetings? How about travel time? Reselections? Phone calls to contractors and vendors? Don’t put yourself in the position that so many designers do where you’re essentially working for minimum wage, or worse yet, losing money on the project and paying for the “privilege” of completing it.
A good way to establish a realistic figure is to keep a detailed log of every task performed on a current project, then apply that as a guideline to your future business. Consider buying a project estimator. This type of document lists absolutely every task in a typical project, allowing you to enter your estimated time and assign a dollar value to each item. The best ones calculate your final design fee, making it easy to come up with an appropriate amount. It’s also useful in making sure you don’t forget to monetize all the little details of a project that we often neglect.
Plan for the Unexpected
Include a provision in your contract that mentions your “reasonable estimation of hours for the scope of work presented by the client.” Make sure to spell out the quantity of hours that are included in that SOW, as well as the tasks you will be including. This way, if you exceed those hours the project will be considered “out of scope,” allowing you to bill hourly for your time outside the contract.
With this situation, be sure to send a letter to the client when you’re creeping up on that hourly cap. Remind them of the contract provision and advise them you will now be billing hourly for the remainder of the project. Don’t wait to take this step; time is of the essence.
It can be awkward the first few times you do this, but being upfront with the client is always the best policy. With all projects, communication is essential. If you’re talking about these issues all along, these changes won’t be a surprise and your client will understand why you need to charge the additional fees.
Include a provision in your contract that mentions your “reasonable estimation of hours for the scope of work presented by the client.” Make sure to spell out the quantity of hours that are included in that SOW, as well as the tasks you will be including. This way, if you exceed those hours the project will be considered “out of scope,” allowing you to bill hourly for your time outside the contract.
With this situation, be sure to send a letter to the client when you’re creeping up on that hourly cap. Remind them of the contract provision and advise them you will now be billing hourly for the remainder of the project. Don’t wait to take this step; time is of the essence.
It can be awkward the first few times you do this, but being upfront with the client is always the best policy. With all projects, communication is essential. If you’re talking about these issues all along, these changes won’t be a surprise and your client will understand why you need to charge the additional fees.
Don’t Forget About the Contractors
Are you responsible for construction specifications and detailed drawings? If so, make sure your contract includes a “construction review fee” for all the extra details the contractors will likely need, revisions that are made over and over, and the myriad trips you make to the site that you really have no way of anticipating. This amount is typically a percentage of the overall construction costs. Most often it’s billed when the client receives their Certificate of Occupancy from the local building department.
Are you responsible for construction specifications and detailed drawings? If so, make sure your contract includes a “construction review fee” for all the extra details the contractors will likely need, revisions that are made over and over, and the myriad trips you make to the site that you really have no way of anticipating. This amount is typically a percentage of the overall construction costs. Most often it’s billed when the client receives their Certificate of Occupancy from the local building department.
Pull It All Together
Evaluate all your projects when you finish them. Calculate all expenses (products, taxes, freight) and the time you and your staff spent on the project, against all funds received from the client.
Today’s software options for designers allow you to instantly see if you’ve made a profit on the job, much more easily than by calculating it manually. Platforms such as Ivy allow you to do “check-ins” at any time, helping you keep on top of all your projects. Making sure you get this number right means you have to enter every minute you spend on the project and every associated expense. It can be quite an eye-opener!
Have a question for Beth? Email it to editor@houzz.com, Attention: Beth Whitlinger, or post your question in the Comments. It could be featured in a future column.
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Join the Houzz Trade Program
Evaluate all your projects when you finish them. Calculate all expenses (products, taxes, freight) and the time you and your staff spent on the project, against all funds received from the client.
Today’s software options for designers allow you to instantly see if you’ve made a profit on the job, much more easily than by calculating it manually. Platforms such as Ivy allow you to do “check-ins” at any time, helping you keep on top of all your projects. Making sure you get this number right means you have to enter every minute you spend on the project and every associated expense. It can be quite an eye-opener!
Have a question for Beth? Email it to editor@houzz.com, Attention: Beth Whitlinger, or post your question in the Comments. It could be featured in a future column.
More for Pros on Houzz
How to Avoid Client Choice Overload
How Can I Add Income Streams?
Join the Houzz Trade Program
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