OVERVIEW LEADS TO PROFIT
Designers talk endlessly about how to manage product sales and ensure that sales flow through their business. Social media forums, seminars, and market discussions are rife with the angst and relentless stress this topic causes for designers, whether new or experienced. This has been particularly vexing over the past two years, between the pandemic and the supply chain disasters.
More often than not, the argument is made to “charge your worth” in fees and forget about selling products. This is great for small operations, but if you aspire to grow and hire a team or already have one, you’ll find it difficult to sustain and grow your business on fee alone, despite what you have. may have already heard.
Is there a business model to secure product spend, project revenue for a growth-minded business, and be able to sleep at night? Yes there is. However, you must be prepared to take the time to learn how to project income and why it is important.
Cultivating the big picture with your customers, yourself and your team is critical to your success. Otherwise, it is much more difficult to be profitable.
Let’s talk fixed costs
The key to making a block fee structure work is the ability to create a clear and compelling scope of work, detailing key objectives that you carefully extract from the client. You also need a detailed set of deliverables that your company is responsible for executing. It takes work to craft a good scope of work and that’s the challenge many never learn to accomplish if they charge by the hour. Becoming the best business owner you can be requires mastering specific skills, and this one is important.
Hourly billing is acceptable when the scope is not measurable and cannot be detailed. This should be rare, however, because it’s critical that in order to deliver your best to clients, you need a clear scope of work as well as contingencies for out-of-scope additions. For example, managing a project interfacing with contractors and contractors are tasks that are not always predictable within the scope of a job. These tasks fall under hourly project management fees.
Set these fixed costs
Approach consulting fees as you would when developing a “product” to sell. This means determining what the attributes of the product are, the time spent developing the product, the unique selling points of the product, and what it will take for you to deliver that product to market. Combining all of this with your historical data will determine the “price” you should set for your product.
Revenue projection is not limited to fees. Designers generally want to sell the products they specify. And rightly so. The problem I see all too often is designers focusing on products in a way that makes it seem like you’re nothing more than a personal shopper or picking service “choosing” items for a project. “Picking” is reserved for blueberries, and is not a way of characterizing your services.
Ouch! I know this may sting, but hear me out. When you focus on the parts and not the entire creative vision, you’ll have customers who, well, dissect parts and parts looking for a better deal.
Why is anyone surprised by this? After all, you invited this scrutiny!
The importance of minimum expenses
Each subsequent specification and contract we develop also includes a dollar investment that quantifies the tangible element of our involvement in a project. Items that can be included in these expenses are items that the client would purchase for this project. These expenses can encompass everything from furniture to area rugs, custom window treatments and bedding, lighting, accents and artwork for a home. In some projects, this may include elements in a kitchen or bathroom or other new construction elements.
We simply ask that the client invest these funds in our business so that we can help facilitate the project seamlessly and make it worthwhile for us to partner in the successful realization of the space.
There’s a lot of structure and detail in this concept, and it’s not a slam dunk to implement. Again, work must be done to understand the key logistics and how best to communicate the benefits and position the “win/win” to your customers for optimal success. Mastering this business model will take any design business to the next level. Next month, we’ll dive into some of the parameters that involve scope of work and how to communicate your fee structure to clients.