Demystifying Designers: How do designers and decorators make money?

Recently, Maria at Colour Me Happy Blog (here) wrote a post that I found very interesting. It began by discussing the importance of atmosphere in a well designed room, and then went on to discuss the value that designers bring to a project. In the comments, a few potential design clients expressed their frustration over their own lack of knowledge about the design business and the nuts and bolts of how it works. (original post here.)
So, I've decided to do a series of posts about how designers (and decorators) go about their business. First I'd like to give you some information on my design background. I have a degree in interior design from an accredited four year college. I spent the first 3 years out of collage working for a small high-end design firm. I then moved to New Orleans where I worked briefly as a design consultant at a high end furniture store, then spent 5 years as display director and an assistant buyer. Since 2006, I've worked for myself as a decorative painter and decorator and sometimes colloborate with another local designer. Over this period, I've worked on all types of projects: million dollar residential projects, model homes, show houses, hospitality design, design for a medical clinic, etc. In other words, I've seen the business from many different angles, from $1,000,000 budets to $100 ones. The first topic I want to tackle is "How do designers charge? (Note, we will discuss the difference between an interior designer and an interior decorator in another post. For ease, I will just use the word designer in this post; however, this information also applies to decorators.)

1. Flat Fee. Some designers, including myself, charge a flat fee for a project. This can be the easiest for both designer and client when you're doing smallish projects, such as cosmetic makeovers of kitchen or bath (cosmetic makeover means that there are no major changes done to the room--the makeover usually consists of things like changing paint color, selecting new furnishings and accessories, etc.) The pro for the client is knowing exactly how much the designer is planning to charge from the beginning. One word of caution; however, the client needs to make sure they understand exactly what the designer is including for this flat fee. This should be in writing. Make sure to ask if the designer is planning to charge for any expenses, such as travel, parking, etc. Another thing to make clear in the beginning is how additions to the job will be handled. For example, the new dining room wallpaper looks so great, the paint in the adjoining foyer looks tired: moving into the foyer is a new, previously undiscussed project--Ask the designer directly if there will be an additonal charge for increasing the scope of the project. And before you start thinking, "They're already at the house, how hard would it be to pick a paint color? I'm already paying them a forturne," think about how you would feel if your boss came to you and said, "Since you're already here at work, I want you to take on this new project for another department--it's really simple. Bonus? But you're already being paid!"

2. Hourly rate. Some designers charge by the hour. Depending on their clientele, experience, and location, the rate can vary from $50-$500 (or more!). A few things to talk about initally would be asking for an estimate of the amount of time the designer thinks it will take. Most experienced designers should be able to give a rough estimate. Be aware however, especially in the case of a renovation, unforseeable problems and issues can arise that impact the amount of time given. Also be aware that indecision on the client's part can really drive up fees (you will be charged for each trip back to the antique store for just "one" more look at that secretary before you buy it.) You might also inquire about special rates for shopping trips: some designers will have a flat fee (usually less than their hourly rate) for extended shopping trips. Again, you should ask about how the designer charges for travel expenses, parking, etc. You should also ask for periodic billing statements so you can keep track of how many hours you have already been charged for. You also need to find out if the designer bills for the time spent on the phone with clients, as well as whether or not hours are pro rated. If the designer does not bill for phone call, please do not abuse their generousity. It is one thing to call for a quick answer to a painter's question. It's quite another to try to discuss as many issues on the phone as possible in order to avoid paying for the designer's time. Again, the hourly rate, billing schedule etc. should be given to you in writing.

3. Mark up. Some designers have storefronts, showroom, boutiques. Other designers may not have an offical store, but do have the ability to order furtiture, accessories, fabric etc. from wholesalers. These are the designers who use "to the trade only" sources. In some cases, the designers do not charge for consultations, furniture plans, etc., in exchange for the client purchasing goods from them. The industry standard markup for an individual designer is usually 30% above cost on wallpaper, fabric, furniture, and 100% above costs on accessories. The markup percentage may vary. Obviously, not everthing a designer presents to a client will result in a sale, but please don't abuse designers who work this way. True, after they have found the perfect fabric you might could find it cheaper; however, remember, it was their eye that uncovered it, and that experience and talent should be rewarded

4. Percentage of Cost. Some high end designers, especially on large projects, such as a major renovation may charge a fee that is a percent of total cost, much like contractors and architects. It is usually 10 to 20% of total cost. In addition, they may also charge markups on to the trade items purchased through them. Again, it is important to get the cost percentage in writing, as well as how over runs and increases in initial budget will be handled.

5. Commission. Designers in furniture stores make money on commission. In fact, their compensation may be entirely commission. If you decided to do a project using a store's design consultant (who can often help with paint and finish selections, draperies, and soft furnishings), that is why it's crucial to establish a loyal relationship with one designer at the store. You're loyalty will be rewarded. In addition, independent designers often receive either a commission or a discount from art galleries, rug, and furniture stores. It ranges from 10 to 20%, and in the form of a discount, may be passed on to clients. However, remember in order to get this discount, they must register with the store, usually including applying for a resale license or tax ID number, as well as developing a good relationship with a store. And stores prefer to honor the discount when the designer is physically at the store, or at least heavily involved in helping the client with the purchasing decision. Therefore it's annoying when a non-current client wants to "use" your discount on a project you're not working on.

6. Combination. Some designers may use a combination of methods. For example, they may charge an hourly rate during the building process when you are selecting finishes and materials, and then move to a flat fee after construction is finished and it's time to complete individual rooms. Again, the key is to get the fee structure and plan in writing.

7. Payment. Usually designers require an initial deposit (This may or may not be returnable. This information whould be in writing, either in the form of a contract (best method), proposal, or some other form.) The remainder is usually due upon installation of the project. When ordering things from a designer, an additional deposit for those items is also standard, with the balance being due upon installation. As for hourly charges, the designer should put the billing schedule in writing. For small consultations, such as a color consultation, the designer may present the bill then for immediate payment. For long term projects, the billing may be weekly, bi weekly, monthly, etc. These hourly fees are usually asked to paid upon the client's receipt of the bill. Beware of any designer that asks for complete payment up front--this is not standard practice.