One of the most commonly talked about topics in the design industry, well probably any industry let’s be honest, is how to make money. Actually, it’s how to make more money. And well, understandably so. You’re in the business of, being in business. You’re not running a non-for-profit. You’re running a machine that is set out and set up to make money, to make a profit, for yourself, for your firm, and for your employees. So, you charge accordingly.
But the problem with that often is, the people that you work with, work for actually, your clients, well, surprise, surprise, they’re in it to save money. And herein lies the problem. Your business is completely designed around the fact that the people who make your business possible, are completely at odds with what you need and want. And you’re completely at odds with what they want and need. And you know what makes that problem even bigger? Unfortunately, markup. Yep that’s right, markup.
Designers Were Cut Out of Their Own Fee Structure
Now I know that many people make their profits on markup as that’s the way the things had been done in the industry for a very long time. However, the industry has obviously changed. In the past markup used to work because clients were not only paying for the product, but also the access. Clients weren’t able to access these products in any other way, but through someone in the trade.
But, life changed, the internet started, the internet grew, and so did how businesses sell their products. They started giving more clients, more access, and designers were well, kind of cut out of the game a bit without even being told why. But really, why was that? Why were designers being cut out of this entire industry that had previously revolved heavily around them? Well, because these businesses also needed to make money and needed to stay alive. So, they did what they had to do to keep themselves afloat.
Unfortunately though, the design industry didn’t exactly change with it. The design industry kept keeping on, like nothing had happened. Well, actually, the design industry kept keeping on, while also needing to argue with clients why things needed to remain the same. They had to start explaining why clients still needed to pay the same way as they had in the past, even though the deal for why products could be marked up, no public access, was taken away. And so the disagreements began, and continue to this day.
Are You a Store? Or Something So Much More?
But really, whose right? And what’s fair? What makes sense? That the client continues to pay markup, or that designers change the way they charge? Well, let’s refer to an often seen, often used comparison in the design industry, the store price comparison. Let’s talk about the whole “You don’t go into Macy’s and ask the sales person, how much did these heels cost YOU? So why should they ask me how much this sofa cost me?” comparison that’s so often heard.
And let’s dive deeper by realizing first that well, unfortunately, this really isn’t a comparable at all. You aren’t an impersonal store. You aren’t a faceless corporation. You are a person to the client. To your client, you’re often not even a business. You’re a person that’s helping them. You’re a person that they’re paying to come in and fix their problems. You, are a person that they’re hoping to trust, that they’re wanting to trust, that they’re seeing if they can trust. But when you have the whole markup thing going on? Well, then the trust can start to be chipped away at.
When using markup, you’re inherently going to be at odds with one another. You’re trying to work against each other when all you need to do is work with each other in order to achieve the design perfection that you’re both working towards. And the odds that you’re at are – you don’t want the client shopping you so that you very understandably can make a profit; and the client doesn’t want to pay any more for a product than they absolutely have to.
Unfortunately though, what the client is doing, is well, kind of understandable. I mean, aren’t we all trying to find the best deal possible on almost everything we buy these days, even for high quality products? Yep, we sure are. We wait for sales. We search for promo codes. We google for the best deal. So when this is the life the client regularly leads in almost every other single aspect of their life, it’s very difficult for them to just, stop, even if they like and respect you. They’re just used to searching for the best deal, especially if they have a bit of time on their hands.
So how do you solve this problem where you and your client are working towards the same goal but taking two different roads to get there, sometimes two different roads that at times cause you to crash into one another? Well, you choose a different path, a different road, and that road is, a different way to charge.
Allow Yourself to Be 100% on the Same Side as the Client
Now I know a lot of people hesitate to change how they charge as that’s a confusing and scary thing to do. I TOTALLY get it. You’ve been working one way for a long time and you’re comfortable with that, but unfortunately the nature of business, any business, is that they have to adapt with the times in order to stay alive. And one way that businesses are having to adapt, is changing the way that they charge, and what they charge for, including the design industry.
What’s the result though? What’s the result of moving away from markup and moving towards another type of fee? Well, you spend less time explaining to clients what your pricing is, explaining to them why it’s fair, explaining to them why they shouldn’t shop you, then still having to switch the names of products in your presentation so that it’s generic and less “shoppable,” and then of course, just worrying about being shopped. That’s a lot of work to do just so you can markup, work and energy that could be much more beneficial elsewhere.
And from the clients end? What’s their benefit? Well, they get to see you fully as a trusted resource, a trusted guide, a trusted advisor who is benefitting not from the sale of a product, but benefitting from giving you great recommendations. They see you as they want to see you now, as a person who is helping them, rather than as a store that they’re trying to get the lowest price from.
Your Value is In Your Services & Your Service, Not Your Product
And you don’t want to be a store. You don’t want to be Macy’s or Pottery Barn. They charge a mark up for their products, and their design services are free. That means, the value is in their products, not their services or service.
For you, it’s the opposite. Your value, your real value, is in your service, not your products. Any one can press a “buy” button. Very few can truly offer the service of designing a home to suit a person’s very specific needs according to a very specific space, and deliver on it. That’s why you have the career you do, because you have that special skill. You’re not a buyer. You’re a designer. What you charge for is your ability to design using products, not for your ability to buy and access product.
Really, the products are just a tool. In the right hands, in capable hands, the tools are used to create incredible, life changing spaces. In incapable hands, the tools are used to just well, fill a space. No matter how gorgeous and amazing the tools are, if they’re not used in the right way, the finished product will still be completely off. Give marble and a chisel to you or I, we’re still not going to be able to create the David statue. Give marble and a chisel to Michelango however, and he does. The tools aren’t what make the design, the designer is.
Maybe Next Year Means More Change, but Change You Can Control
So as we end this year and begin the next, maybe think about how you might want to adapt how you charge. Consider flipping your business model on its head to get yourself out of that strange and uncomfortable loop of hiding how you make money, and what the client is really paying for.
Be transparent with what you charge and how you charge, so that the client can truly feel comfortable trusting you, and you can feel truly comfortable asking for that trust. Design is hard enough already, there’s no need to make it even more challenging by having to put a wedge between you and the client in order for you to keep your business alive. That’s not comforting for anyone.
So consider the alternatives of getting out of markup and into flat fee, per square foot, percent of budget, or charging per phase – design then project management. The transition may not be quick, and it certainly won’t be easy, as you figure out how to still make money with this approach, but it just might be oh so worth it.
As in the end, knowing exactly what a client is paying, and exactly what you’re charging, is a heck of a lot easier, than fighting clients on how you’re charging, what you’re charging for, how much this really costs, where else we can really find it for cheaper, etc. That headache, well that headache costs you both a lot. And well, I’m guessing you don’t need anymore of those.
So maybe, just maybe, when it comes to payment, it’s time to consider moving your chair from opposite your client, to right next to your client, ensuring that you both get what you both ultimately want, a jaw dropping, life changing space.
Let me know in the comments below, have you moved away from markup and towards a different structure? If so, how did it go? I’d love to know!
And if you’re for looking for more ways to serve your clients exceptionally well, then take a look at what we’ve got for you here!