In this third and final installment of the 2021 Guide to Pricing Interior Design Services, we will address all the pros and cons of the cost plus pricing model, including how to be creative with your offerings, such as bundling services with other pros, and other ways you can keep clients happy.
Cost Plus Model
Cost plus model is a simple way to outline your design services prices, especially when communicating them to clients. Cost plus outlines the net value of any materials, products and furnishings, as well as any subcontractor fees, and adds an agreed-upon percentage of the net value to that, which effectively becomes your profit. The cost plus formula may look something like this: (products) + (subcontractors) + (agreed %) = total cost.
Some professionals opt for this approach if they feel clients are unaware of the prices of things these days. Others find it works best for construction projects.
- Informs clients of the true cost of products and services
- Simple formula that’s easy for clients to understand
- Provides cost transparency to the client
- Clients may try to negotiate paying a lower profit margin to you
- Doesn’t offer clients transparency on how much time you put in behind the scenes
Jeannine Burnett of Access Design + Build charges by the hour on the front end, but she also incorporates the cost-plus approach as part of her hybrid model. “On top of my hourly fee for my design, I charge cost plus for services and products,” she says. Burnett doesn’t like the flat-fee method because she feels it’s “too absolute” and doesn’t account for unexpected change orders as much as cost plus does. “Take the act of stripping wallpaper, for example. If the house is really old, it could lead to a chunk in the wall coming out,” Burnett says. “That’s where it’s important you warn your clients beforehand if you can, using your expertise. During the consultation, I might say, ‘Oh, I see a bubble in that wallpaper. I know we’re going to have a problem behind that,’ and make sure they’re aware of the potential unexpected costs and delays upfront.”