[Video] Calculating Your Design Fee
Today I want to share with you the question I am most asked, and that is,
“How do you figure out a design fee?” It’s not that hard to do, and I will explain it here.
First, I want to start with what you should not do. Do not just make something up. It won’t work, and you will end up paying a high price in time spent for that, so don’t go there.
The other strategy that I see that doesn’t work is coming up with a number you think the client will agree to. You are likely “shrinking to fit,” and that’s not a good idea either.
So, here’s what to do instead. There are two strategies to calculate your design fee, and both are easy to do.
Strategy #1: Get a Budget
Getting a budget does not mean directly asking the client what their budget is. It’s my experience that when you ask that, the client only hears, “How much money do you have?” And that’s when the client backs off, and you’ve lost your moment.
What this does mean is that you actually need to get into exactly what the client wants and what all the product that goes with it is going to cost.
You collect it piece by piece, and within ten minutes, you can come up with a budget that they have actually agreed to.
Then, you decide if you can do the job for that much money.
If it looks good to you, then you make an offer for the fee.
Your fee is 15%, but that’s not what you share with the client. You can actually figure it out in your head and state the amount.
If your budget is $30,000, your fee is $4,500, or at least something in that ballpark. It’s enough time and money to get the job done well, and it makes sense in terms of what the budget is.
Strategy #2: Fees Based on Meetings
This strategy is what you would use if you’re not going to have a budget. So, it’s ideal if you’re doing specifications for a new build or making selections for a light commercial job. These situations won’t have a budget number that you can use, but you, of course, will need to charge for your time.
You will want to figure out how many meetings it will take for you to do the job.
For instance, the first meeting will always be programming. We’ll figure in three hours for that meeting so that you can also allow for drive time. After that meeting, and before the next meeting, you will have to come up with a concept, color scheme, a couple of basic pieces, and possibly a space plan.
Whatever that opening piece is, you will need to include your time for that. In our scenario, we would add another three hours to get that piece done. Then, you’ll go to the second meeting.
This is your schematic meeting, where you’ll present everything and make sure you’re on the right track. And you’ll add another three hours.
Now, you have to find all the pieces and build everything out. For that, we can add four hours.
Next, you will have your design development meeting, where you’ll present about 80% of the project.
It’s close to being all together, but you might be missing a few pieces, but it’s just about done. You want to present it and make any necessary adjustments or reselects, and you’ll add another three hours.
Then, you will go back and do the reselects and pricing, put it all into a proposal, get those new pieces in, and present it at your purchasing meeting.
And that’s another three hours.
It’s just a sequential order where you divide the project into chunks so that it’s easier to swallow and figure out, and that’s how you come up with your fee.
However many hours you come up with for the project, you will multiply that amount by your hourly fee to get to your design fee.
In my world, it always seems like things can get done faster than they really do. That’s why I include an additional 20% to account for any discrepancies with calculating time.
Watch the video above where I go into detail about the second strategy and how you can calculate fees when the project won’t have a budget.
Sometimes you may want to do both strategies for a client. Generally, when you’ve got it right, these two methods will mesh. They will line up together, and you’ll know you’re in good shape.
If you are interested in learning how to implement design fees into your business, our education and coaching programs might be just what you need. Now is a great time to schedule a free, no-obligation clarity call with one of our coaches.
Until next time, design something beautiful and get paid what you’re worth.