The thing design school will never teach you is what to charge. Today’s conversation on The Interior Collective is all about pricing models as an interior designer with featured guest Lindsey Borchard of Lindsey Brooke Design.
Lindsey Borchard of Lindsey Brooke Design is my Design Camp co-founder, but she's also my forever business best friend. I've learned so much from Lindsey over the years, but most importantly, she's taught me how to safeguard your business model from leaving money on the table. In this episode, Lindsey and I cover different ways to charge as an interior designer, the pros and cons of each, and the unique formula she's found most successful. Lindsey holds nothing back in her straightforward advice and shares exactly what it takes to run a successful and lucrative interior design studio. Before we get into the conversation, let me formally introduce Lindsey a bit further:
Lindsey Borchard's work is ultimately inspired by her own life. As a mom to two boys, she deeply understands the impact that a well-designed home can have on your family. A born and bred Southern California girl, her work carries that same organic, natural beauty and distinctly relaxed feel of the California landscape. Put simply: a Lindsey Borchard space is an invitation to live a more beautiful life every day.
In this episode, Lindsey and I discuss:
Flat fee vs hourly pricing models
The overhead costs of running a design studio
How to respond when clients ask for discounts
Signs that it's time to increase your rates
Lindsey's unique three-step billing system
Steps to ensure there's never money left on the table
An excerpt of my conversation with Lindsey Borchard:
A huge part of knowing your worth and how much to bill is tied to overhead – how much it actually costs you to do business. What are some of the most forgotten overhead costs?
LB: When you look at pricing as a whole, you have to start with your overhead because you can talk to as many people as you want to talk to, but unless you have a good idea of what it costs you to run your business, you can't really figure out how you're going to charge your clients.
We have a lot of overhead and things like insurance, people might forget about. And things like the losses—there are always losses that we take on projects, right? It could be that a light fixture was damaged and we didn't claim it in time, and so now we're stuck with that light fixture. We always try to get those cost covered, but there are just always losses.
I think that marketing needs, for instance, we use you for marketing, that's a flat feed, so we go, okay, great. That's our flat fee. But then we still have to pay for photographers, and we still maybe will use a videographer. Maybe we're buying ads. I think that those things get overlooked, especially photographers when you maybe don't know how many projects you're going to shoot in the year.
Um, childcare is a big one. I know that some people will be like, oh, well that's a personal cost, but it is a business cost. I can't do my business unless my children are taken care of. And then just the little things like food. We provide lunch to our team, you know, once a week and if we're on installs. And so that has to get kind of counted for in our overhead, and gas mileage, things like that. So it's very easy to go, okay. I have rent, I have my utilities, I have like payroll, but it's all the little things that I think you really have to sit down and like list out.
"You have to set major,
major boundaries on what is included in that flat fee. And you have to stick to it."
- Lindsey Borchard
Can you explain some of the pros and cons to offering flat fee services?
LB: So the pro to flat fee is that it's all out on the table for everyone, right? The client can plan how much you're going to make on the project. A lot of pros (that designers think is a pro) is that they don't have to track their hours. Which, they should always track their hours, even if they are doing flat fee. You're going to know, okay, this is when you know I'm going to make and bring in that dollar amount.
I think it's just better for a client. I think honestly, if I'm being really candid, the only pros for flat fee are for the client and not for the designer. The cons are (this is just my opinion, so I'm not dogging on anyone who does flat fee), but the cons are you will lose money, you will lose money, you will lose money. 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 client.
Do you ever discount your services?
LB: No. In the beginning, I would say yes when I had emotions tied to everything. I don't want to sound like I'm like such a cold person. I'm a very emotional person, and I love my clients. Sometimes we will not charge for certain things. It's very minimal—when it is not the client's fault and when it is our fault. So I do take accountability for things that we do wrong.
But if I give someone a proposal and they come back and say, well, this is too much. I'm never going to say, okay, well I'll give you 10% off or, okay I'll make my hourly $25 less - I'm not going to do that. We will remove services. So it's a very fine dance.
Mentioned in the episode:
LBD Studio Sip & Shop Events
Thanks for reading an excerpt of The Interior Collective Season 1, Episode 5: Pricing as an Interior Designer with Lindsey Borchard. You can listen to our episode on Spotify, Apple Podcasts, or access the full episode transcription below. You can follow Lindsey on Instagram and visit her portfolio of work at Lindsey Brooke Design.
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Hi, this is The Interior Collective, a podcast for the business of beautiful living presented by IDCO studio and I'm Anastasia Casey.
The thing design school will never teach you is what to charge. Today's episode of the Interior Collective is all about pricing as an interior designer–from different ways to charge, the pros and cons of each, and the formula we've found most successful. We are not holding anything back.
We talk a lot about pricing at Design Camp, which makes me particularly excited to welcome today's guest Lindsey Borchard of Lindsey Brooke Design, my Design Camp co-founder and forever business best friend. Lindsey is our oldest dearest client at IDCO Studio and we've walked hand in hand growing our businesses together over the last few years. One thing I've always admired most about Lindsey is her commitment to transparency in the industry. Lindsey truly leads her life, both personally and professionally from a place of honesty and integrity, constantly uplifting other designers and female business owners.
Lindsey Borchard's work is ultimately inspired by her own life. She's a mom of two boys and she deeply understands the impact that a well designed home can have on your family. A born and bred Southern California girl, her work carries that same organic natural beauty and distinctly relaxed feel of the California landscape. Put simply, a Lindsey Borchard space is an invitation to live a more beautiful life every day.
Welcome Lindsey! Thank you so much for squeezing us in. I know you have the busiest two weeks of your life right now, as we prepare for Design Camp. After we have recorded this and it actually goes live, we'll have already had Design Camp behind us and we'll be planning for our September event. Lindsey, thank you for joining.
Of course. I mean you ask and I am there.
<laugh> It was like, how do we make Lindsey a permanent fixture on the show? I'm like, I think Lindsey's gonna get a slot every season.
Thank you for being so candid and open at Camp. I'm really excited to be able to bring that conversation and that transparency through to the podcast, to our listeners. Pricing is a frustrating topic for a lot of people. Pricing is really hard. You can't Google it. If you don't have a great crew of design best friends, it can be hard to just ask someone what they charge. So we're really gonna break it down. I know you have worked through a lot of trial and error. Us at IDCO, we have a lot of information that we're really privileged to have from working with so many designers. So we kind of have this collective knowledge of what seems to work for people and what doesn't. Certainly there's no one size fits all, but let's break it down to the very beginning.
A huge part of knowing your worth and how much to bill is based on your overhead expenses–how much it actually costs to run your business. What are some of the most forgotten overhead costs you think people are skipping?
Yeah. I mean, I think that when you look at pricing as a whole, you have to start with your overhead because you can talk to as many people as you wanna talk to, but unless you have a good idea of what it costs you to run your business, you can't really figure out how you're gonna charge your clients. So there's a lot of overhead. I mean, we have a lot of overhead. Things like insurance, people might forget about. Things like, there's always losses that we take on projects, right? It could be that a light fixture was damaged and we didn't claim it in time and so now we're stuck with that light fixture. We always try to get those costs covered, but there's just always losses.
And I know that that's hard to account for, but you have to have an average number or a number that you can put up and go, ‘okay, every month we're gonna account for this many losses’ with whatever project. I think that marketing needs–people think that, for instance, we use you for marketing, that's a flat fee. So we go, ‘okay, great. That's our flat fee’. But then we still have to pay for photographers and we still maybe will use a videographer. Maybe we're buying ads. I think that those are the things that get overlooked–especially photography. When you maybe don't know how many projects you're gonna shoot in the year, we always in the beginning of the year, look at our roster of projects and go, okay, we know this many projects for sure are finishing, maybe we'll add on one or two. Then we'll figure out how much overall. We've worked with Amy [Bartlam] now so much I know how many photos I'll usually be taking and whatnot, so I can plan a little bit better–but marketing needs for sure.
Childcare is a big one. I know that some people will be like, oh, well that's a personal cost, but it is a business cost–I can't do my business unless my children are taken care of. And then just the little things like food, we provide lunch to our team once a week and if we're on installs. And so that has to get counted for in our overhead. Gas mileage–things like that. So it's, it's very easy to go, ‘okay. I have rent, I have my utilities, I have payroll’ but it's all the little things that I think you really have to sit down and list out.
Yeah, definitely. And those things add up and they add up fast.
Yes. Add up quickly.
How often do you think you should evaluate your overhead costs and is annually enough to do that?
No. I mean, it's great if you are doing it annually over nothing. We do it quarterly with our CPA. So we will go over our P&Ls every quarter and then I go over it monthly. So, I use Studio Designer for our invoicing, for our clients, for our products, everything. So their report system is amazing. I can run reports and compare where we're at and make sure that we're being profitable. I think it helps having those quarterly meetings with my CPA so I know at that point we're looking at, ‘okay, where do we wanna be?’ And she's helping me go, ‘Okay. If you want to, invest money in, let's say, expanding our retail or expanding the collection or whatever you have to make X, Y, and Z on this. And then you can do that’. I like to look at it monthly–sometimes it's more often. Sometimes it's weekly. I really try to be in that, and I think that's really important. I think money scares a lot of people and it's not an easy subject to talk about, to figure out. But the more and more that I've done it now, it's become easier.
So I think the more often, the better.
I think that's such a good point, especially in this industry–since the pandemic and everybody's booming or many people are booming–businesses are just changing really fast right now. And like to say I was only going to look at those margins, or those overhead expenses, once a year? At least at IDCO, things change way faster than that. So to definitely be looking at that normally. We'll circle back around later to how often we should be increasing our pricing, but I wanna touch back ‘cause I know everybody listening is going to ask, would you be willing to share what that buffer for losses you set aside a month is whether it's a percentage or a general estimate of how much that we're gonna end up pining this.
So we do it by project. It's hard because our projects can take like two years, you know? So we look at it like, ‘okay, here's how many project’s–and this is the stuff that I do in the beginning of the year–so every year at the beginning of the year I'm looking at what I think my expenses are gonna be for that year and then every month when I'm going back to it, I'm adjusting it where it needs to be adjusted, right? I kind of account for, depending on the project size, anywhere from $2,000 to $5,000, that's just based on our past losses. So I don't really know how to like help someone who maybe doesn't have that yet.
Maybe do a flat percentage or a flat number? We kind of know what categories we might have losses in more, like lighting's a big one. Because what can happen is our receiver can open up the lighting and everything looks great. Then that lighting is sitting at the receiver for six months. Then when they go to install it, it's not working–there's something wrong with the electrical. More than not, sometimes that vendor will replace it. But it's been now so long that it doesn't, so we have to take some of those losses. Same thing with rugs. With our other receiving warehouse, they wouldn't roll out the rugs. They would just go, ‘okay, we have it’. Now our new receiving warehouse does. But we would roll out the rug at install and there would be a tear or a rip or some discoloration and we wouldn't be able to use that. So we look at those losses as within a project. So I guess you have to look at it and go, ‘okay, how much?’. Maybe let's just use furniture since it's easier–it's just a furnishing job, it's a whole house though. I would say at least a couple thousand, you know, and if you don't have those losses then great. But plan for them.
Thank you for sharing that, Lindsey. I know you held off on getting a studio office space outside of your house for years. We had this convo a lot while you were just starting out and you were keeping that overhead really low. Then you got one, you got your keys and the next week COVID hit <laugh> and your team worked from home for almost a year before really being able to even utilize the space. How did the studio affect your pricing, even during that time you weren't using it? As you made that jump, how much did that get incorporated into your rates?
Well, I had saved for that studio space for at least a year.I knew at some point that I was not gonna be able to grow much more in my own house. And for me, I like to take risks, but I also like to be careful and plan for those risks. I had money saved up, so when we bought the studio I knew I had a year's worth of rent. So when COVID hit, I wasn't as stressed because I knew I had that money. The timing was just right–we got the keys in December, I usually raise my rates at the beginning of the year. So I knew we had already raised our rates based off of how much that studio was gonna cost us. So all of our new projects going into that year was already covering the studio.
Now what we didn't know… What we wanted the studio for partially, was to do these sip-and-shops and that we could not do for a year. I ended up still going into the studio and working from the studio by myself. So it's still paid for what we needed it to accomplish. It got us those bigger clients, and we had a space to meet with them in a very safe environment. So it kind of did what it was supposed to do in that way, but we were really wanting to have these monthly or quarterly slip-and-shops to really pay for the studio. We didn't really make money on the studio the first year but we didn't lose it if that Makes sense.
Yeah, definitely. At IDCO we've had the privilege to access a lot of proprietary information from interior designer’s processes and while we never share any specific info from that, we definitely have compiled data as a whole on how the industry charges and it primarily breaks into two categories. There's flat fee, or there's an hourly rate. Can you explain some of the pros and cons to offering–let's start with flat fee services first?
Okay. So, I feel like I've priced every which way. Flat fee–what's funny is that when you really think of every way to price, it comes down to hourly. If you are really pricing your flat fee correctly, like to where you wouldn't be losing money, you are basing it off of how many hours and your hourly rate. So the pro to flat fee is that it's all out on the table for everyone, right? The client can plan, you know how much you're gonna make on the project. A lot of pros that designers think is a pro, is that they don't have to track their hours, which they should always track their hours, even if they are doing flat fee. But I guess for designers, a pro could be that and you're gonna know if you're doing it correct.
You're gonna know this is when I'm gonna make and bring in that dollar amount, right? I think it's really nice… I think it's just better for a client. I think honestly, if I'm being really candid, I think that the only pros for flat fee are for the client and not for the designer.
The cons <laugh> the cons are, this is just my opinion, so I'm not dogging on anyone who does flat fee, but the cons are like, you will lose money, you will lose money, you will lose money. In my opinion. 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, really have a good idea of how long it takes you to do something. And most of the time designers don't, and not because maybe they're not tracking their hours, but also because you have no idea how it is to work with that client, that client can say, they make fast decisions that they want X, Y, and Z, and you go, ‘okay, based on the five minutes that I have in their consultation, I'm gonna make this proposal’. But most of the time when people tell me they make quick decisions, they don't make quick decisions.
So I think there's more cons–but that's just my opinion.
Definitely. I think that even when you set flat fee, you need to be tracking your hours because you are still likely paying someone else on your team an hourly rate. So to come up with a flat fee and say that we're gonna estimate it's this much. And if you do do flat fee, always build in a 20% cushion on top of that, cuz that will get used. But you have to remember unless you are a one person show, you are still paying someone else out at an hourly rate, even if they are a salaried employee, like they're still being used for that time. So you need to be considering that.
So I did wanna touch on something–Lindsey and I talk about this a lot at Camp and I just stress it so, so, so much–as we start getting into hourly specifically. Lindsey will break down how she bills in different processes.
She bills in three different phases, but the first phase being an hourly rate, the problem I see with hourly is that designers do not increase their rates frequently enough to compensate for the knowledge that they have obtained. When you take a step back and look at it, I charge hourly, but I'm now really good at my job. So this job is gonna take me less hours and therefore I'm gonna be paid less money because I am better at my job. And that is the fundamental problem that I have with hourly, because I don't think people find the courage or the confidence to increase their rates at a frequent enough pace to match the knowledge and the skills that you're obtaining even on just one past job.
So, Lindsey, I know you've been burned by flat fee in the past <laugh> and because you never know how a client's gonna work, but you have a really interesting way of breaking down your process and your billing for what feels fair to a client and what makes sure that you are never losing money on a project that you can prevent. Can you talk us through your three billing phases and how they break down?
Yes. To your point, Anastasia, I agree with that. If you're hourly, you're only gonna make money, regardless on hourly or flat fee, if you raise your rate. So even with flat fee, if you are still not raising your rate, you're still basing that flat fee on your hours and your hourly rate. Like, unless you're just making up numbers, which is bad–you really shouldn't be doing that–you're still basing it on an hourly rate. So even if you decide to do flat fee, I would say (and I agree with you) the major part about pricing is feeling confident enough to raise it, to charge what you're worth. I know we’’ll get into that later. But for us, when I started I started with flat feet because I just thought like, ‘oh, this is easier. I don't really know what I'm doing’. And I just like came up with numbers and of course I lost money on that, right?
So then, based on what we were doing and the feedback that I was getting from clients early on, it made sense for me to split up every phase and to price it in a way that felt good for the client and myself. So when I was coming up with this kind of system, it was more so on what would be the best client experience for my client. Not so much of like, what's gonna be easier for me and my business, because I knew that my business at this point, it was still only me and Katie. So Katie was doing procurement and I was doing design. So even though I had an employee, I was still doing all the design work. I knew things were gonna change because I knew early on that I was gonna have employees and other designers.
So, I break down our phases from design, procurement, and install. And so everything with design is an hourly rate. That is everything from sourcing product, doing drawings, doing elevations, searching for samples and going out in the field, site visits, team meetings, client meetings, anything that is part of the design is an hourly rate. Do you wanna break down like each phase really? Or do you want me to go…
We'll start with that. Let's start with phase one, design. So that's everything during the phase. This is everything that a client thinks that an interior designer does is really this phase. Cuz they forget about all of phase two and phase three, or they don't know about it.
So in phase one, how do you provide yourself enough cushion to cover the hours spent during this phase when you're preparing that initial proposal? I know that people get really nervous about the proposals and unless you've carefully logged your hours of past projects, you aren't necessarily coming up with a number based on data, you're making up a number. So talk to us about how you come up with this number.
So we've come up with this number from, just like you said, from past experience–from how long it typically takes us to do revisions. And I will be honest, when I first started, I didn't even account for revisions. So when I was doing proposals, I wasn't thinking about revisions. And then as I started adding it–yeah, I did make up the number because I didn't have that data.
Once you have enough projects under your belt and you can look back on those, and you are tracking your hours you can go, ‘okay, I spend around this amount of hours on revisions’ then you can add that into your proposal. For us, we do about one to two rounds of revisions per project, per phase. So let's say for example, space planning, then we go into construction design, let's say it's like a full, full project.
Space planning usually gets one or two revisions.
Then construction design gets one or two revisions.
Then furniture gets one or two revisions.
And I break down my proposal by those phases and then by rooms too. So it's a very detailed proposal, but one to two revisions can take one to two days worth of work.
And to clarify, when you say one to two revisions, you mean round of revisions, like there might technically be three things that are changing in that revision, correct? You mean rounds? Yeah.
Not just like one item.
So when we do revisions and we're getting feedback for space planning, for example we'll give them options and they might say, we want kitchen option one and bathroom option two. And we wanna change a little bit of the laundry room and whatever. Typically it's about five items in the first round of a revision. And then if we do a second round it gets lower and lower. I look at that and go, okay, how long is that gonna take us? It usually takes us about a day or two worth of work, like hours in a day. So I always cushion for two days of revisions for each of those phases. And then the most important thing is to include that in your proposal.
So, we need to write that, that you are not just like, ‘oh, this proposal includes revisions’. We need to write this proposal includes two rounds of revisions, equals two days of work, this many hours. So that if they are on revision three and four–which typically doesn't happen but sometimes it does–we can say your estimate didn't include this many revisions. So sometimes that helps them make those decisions quicker because they're like, okay, time is money and now I'm racking up the money. That's typically how we do it.
I think it's really important to, again, understand on average how many revisions you're doing, and how many items are in those revisions, to include that in the proposal–and if you don't come up with that average number, then again give yourself a cushion for it.
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So in this phase, you're billing hourly, you've estimated hourly, you have your total number of hours you're thinking. You've said that this typically includes two rounds of revisions. If it gets beyond that, then you'll say, ‘Hey, you've exceeded what was in the estimate. Totally happy to make these revisions, but those will be added on which will exceed your total’.
Does everyone on your team bill at the same hourly, at this rate? Is it always just like Lindsey Brook Design bills at X dollars per hour? Or do you have a tiered system amongst your designers?
We do not have a tiered system. That is another decision that I made internally that is typically not done in the industry. I did that for a couple of reasons. One, it is very confusing for clients. When they see a bill and our design teams have at least two people, so it's a senior and a junior, sometimes they share a design assistant. So certain projects might have that design assistant. And then there's myself. Just one day of work can be like four different line items at four different prices. And I wanted to keep it really simple for the client. Money for the client is a very black and white thing–this is how much they have, and this is what they can spend.
And they take that proposal. Even though it's a proposal and we say, ‘this is an estimate. It can change’, they're looking at it like it's not changing. We all know this <laugh> So that's why I have to spend so much time on proposals and really get it right. Because I know at the end of the day most of the clients are gonna hold you to that proposal, even though technically they can't. But they're planning for that number. They're looking at you as the professional to give you that accurate number. So when we decided to keep it a flat rate, I also decided to only charge one time, no matter how many people were working on that project. So, if the senior and the junior designer and myself have an internal design meeting, there's three of us working on that project for an hour. We're only charging our client one hourly rate, not that hourly rate three times.
So it balances itself out because one, when our designers are working on the projects, they're typically not working on the projects at the same time unless we're all together doing an internal meeting or they're going to source something or they're looking through materials. And so we're actually making more money on that. But then when we are all together during those site visits or during internal meetings, the client is saving money. It works itself out, but we end up making more money that way. I also don't feel comfortable putting a value on my employees, that's just an internal thing. I don't wanna say, ‘my senior designer means more, they are gonna bring more money into the project’ when the junior designer is doing just as much detailed work and good work. And it just doesn't feel right for me.
Mm-hmm <affirmative> Definitely. Can you share how, and when you collect the payments for this design phase?
So we collect it once a month and it's on the 15th of every month. So that gives us time to make those invoices and look over things and make sure we're on track and then provide it to our clients. We bill them once a month on the 15th and we collect that, not from the retainer. So a lot of times people are having questions–designers are asking like, ‘oh, then you use a retainer for your design fees?’. No, we collect this on top of that retainer.
Got it, because in your process that design retainer is held throughout the entire project and then that gets applied to accessories at install. And then if there's anything left over, that would technically be refunded back to the client, but there typically isn't.
Yeah, it goes towards the outstanding balances of shipping, maybe installs, accessories, things like that.
Yeah. Got it. What happens or how do you handle, if you're approaching the estimated amount of design hours you had proposed to a client and you know you're gonna exceed that estimate. Can you walk us through how you make it feel approachable and helpful, like you're on your client's team, while still standing firm and saying I need to be paid for these hours.
Yes. So the first thing always is during the consultation… I mean, I'm constantly having conversations around money with our clients. I think that it's really important to set that tone in the very beginning. So during the consultation, even the phone consultation, we're asking them about their budgets and then in the in person we’re asking them about their budgets again. And we kind of get it outta the way and just say like, ‘Hey, we have a lot of conversations about money and we don't wanna make it awkward but we wanna make sure that we stay on track. I value your budget–I wanna spend your money like it's my own money’. And we wanna get to know where they like to spend their money, where they don't like to spend their money. And that is all conversations about money.
So our operation manager does all of our client billing and invoicing. And so once she has that invoice, she compares our past invoices. So let's say maybe they've had two additional months of design fees. She's gonna look at those past invoices and see where we are at total for them. And then she's gonna compare them to the proposal. And then she'll kind of let me know, like, ‘Hey, project X, Y, and Z is getting close to their lower amount on the proposal’. ‘Cause in the proposal we give a range, a high to a low range of hours. And so we start having conversations with our client once we're halfway to the lower end of the proposal, once we hit that lower end, then once we get halfway through that, and then once we get to the higher end and then when we reach the higher end we let our clients know, ‘Hey, this is where we're at. This is how much, you know, more time that we need, this is how much more we have to do’.
So we really outlined it and at this point they've had now three or four warnings that they've gotten to this space. So it's not like all of a sudden we're like, ‘Hey, you're at the high end now’. So having those constant conversations are just gonna help your overall client experience. I go ba