There’s been a lot of ongoing discussion within the interior design community around a seemingly straightforward question: what is the best pricing model? It’s a topic that we’ve covered on season one of The Interior Collective podcast and, of course, at each session of Design Camp. But as we’ve continued to hear a variety of perspectives, we’ve learned this question doesn’t come with a one-size-fits-all answer.
Until recently, we’ve been pretty strong advocates of designers charging an hourly rate for their projects, but there’s always room for reconsideration. Today, we’re going to specifically focus on flat fee design and unpack the pros and cons of this pricing structure to understand if it’s right for your business.
The most common pricing models used by interior design studios can be broken down into two main categories: hourly or flat fee. According to a recent survey* by Studio Designer, 85% of design and architecture studios charge using an hourly rate. That average hourly rate ranges from roughly $100-$200 dollars per hour, depending on the designer’s experience level. Following an initial consultation (which should always be billed time), clients are usually given a general estimate of hours before signing onto a project.
Flat fee (or fixed fee) pricing models differ by charging clients a flat, agreed-upon project rate, including the full scope of work. Unless otherwise stated in the service agreement, clients will not be charged based on how long the project takes, and conversely, designers won’t need to closely track their hours. Although, we’d argue that tracking hours on a project is always good information to have on hand.
*To learn more about the survey, we highly recommend the “How to Manage Your Business During Uncertain Times” webinar with Studio Designer CEO Keith Granet. Even though the event day and time have passed, you can still register and receive access to the recording.
How Flat Fee Pricing Models Benefit Design Studios?
We'll be the first to admit that we've been skeptical about the benefits of flat fee structures. Without careful planning, flat fees can only benefit the client but result in lost time and money for the designer. However, one strong argument for flat fee pricing came from Studio Designer CEO Keith Granet, that's really stuck with us.
"The problem with charging by the hour is that you only get paid for your time and not your value," he said. "For example, "If it took you years to come up with the design of a detail, and you can put it in the computer in an hour, is it only worth one hour of your time? In reality, it took the architect or designer years of practice to be able to get something done efficiently in an hour's time, so charging for that one hour does not seem justified."
In our bonus podcast episode, Financial Planning for Interior Designers with Brittney Vier, we heard a similar sentiment. "As you get better at your job, you become more efficient. So something you would have billed five hours for a year ago might just take you two, and you're losing out on three hours of billable income," she said. "How do we bridge that gap and figure out how to recover this revenue that we deserve because we worked for that?"
The key takeaway we've learned from designers who successfully price using a flat fee is clearly understanding how long it takes to complete each component of a project. This information is imperative for any designer, but even more so when trying to set a fixed rate accurately. Designers with years of experience and time-tracking data will benefit from this pricing model, but it can also be beneficial for new designers who are working on small, single-room projects. Another pro of this structure is offering clients a sense of transparency with a clear number set upfront. While a legal contract should clearly outline the exact terms of your service, it can be helpful for clients to see a fixed fee before officially signing on.
Understanding the Drawbacks of Flat Fee Design
On the flip side, there are many situations where flat fee pricing models are not in the best interest of a design studio. In episode 7 of the podcast, designer Lindsey Borchard of Lindsey Brooke Design shared her perspective on charging an hourly rate and why flat fee has not worked for her business in the past.
"From my experience, you have to set major, major boundaries on what is included in that flat fee, and you have to stick to it. You have to really have a good idea of how long it takes you to do something, and most of the time designers don't. Not because maybe they're not tracking their hours, but also because you have no idea how it is to work with that specific client."
After feeling burnt by flat fee design, Lindsey came up with a well-tuned, three-phase billing model that includes hourly design rates. Lindsey's caveat to the hourly rate pricing model is being diligent in raising those rates in conjunction with experience level. It often takes courage and confidence to increase hourly design rates at a frequent enough pace to match the knowledge and skills obtained from previous projects.
The Bottom Line
Finding the best pricing model for your design studio usually requires some trial and error. Sometimes it will depend on the project itself and of course, your unique business model. For example, are your projects residential or commercial? Do you typically design a single room or entire residence? Are you a large design firm with hourly employees or a solopreneur just getting your feet wet? Whether you choose a flat fee or hourly structure, it’s so important to always track how long a project takes and ensure you’re working in the best interest of your clients and your business.