52% of all interior designers need more business, and external pressures are greater than ever:
•    Consumers shop you on the Internet and lose trust once they find something that looks similar for much less money
•    Consumers’ emotional attachment to their money is greater than ever because they must make decisions not to invest in a car, a vacation or even a child’s education to make improvements on their home
•    Budgets are smaller because consumers homes are worth less, and they don’t want to over-invest
•    Funds for projects come from savings, and because the stock markets and real estate values are down, consumers don’t have the excess cash they used to have
Is it all bad news?  No.
It just means that you need to adjust your thinking to offer your services in ways that consumers want.
Our survey also showed that almost 80% of all consumers want a fixed or Value Based Fee.  Do you only offer hourly fees + a mark-up?  If so, you need to learn how to serve your clients the way they want to be served.
We created a financial model that shows you can actually earn more money and work less hours when you work with Value Based Fees.  I myself stopped selling products five years ago because I evaluated the true profit contribution of product sales versus fees.  60% of our time was devoted to expediting, problem resolution, paperwork, accounting fees, etc. and it didn’t result in significant profit.
What really matters is not how much you sell, but how much you keep from the work that you do.
Right?
I shared an example during a recent talk in Las Vegas:
•    Say you work 40 hours a week x 50 weeks = 2,000 hours per year
•    Your gross sales including products and services = $200,000
•    Your effective rate is $200,000 ÷ 2,000 = $100 per hour…or is it?
•    Your bottom line profit is 10% – it that means you earn $20,000 after paying for goods, services and overhead:
•    $20,000 profit ÷ 2,000 hours = $10 per hour
•    You paid yourself $40,000 in a draw or salary ÷ 2,000 = $20 per hour
•    $20 + $10 = $30…your true effective rate per hour
Shocking, isn’t it?
Let’s look at what’s even more likely today. Many designers work at least 50 hours per week.
•    $20,000 profit ÷ 2,500 hours = $8 per hour
•    You paid yourself $40,000 in a draw or salary ÷ 2,000 = $20 per hour
•    $20 + $10 = $28…your true effective rate per hour
Another shocking statistic?
Most owners of companies bill less than 50% of their time, and if you don’t charge for shopping and the purchasing management process in addition to your mark-up, then you’re working many hours for little money.
Say you have 6 projects and all you provide is design, drawings and specifications.  You don’t do purchasing.
•    6 projects x 100 hours = 600 hours
•    Project fees = $10,000 x 6 projects = $60,000
•    Since you don’t do purchasing,  many of the costs associated with the projects such as overhead for accounting, etc. are not necessary
•    You make the same bottom line, and though you still have some accounting to do, it is simple, and you don’t have the other issues to manage.  Now you work a total of 1,000 hours per year
•    $60,000 ÷ 1,000 hours = $60 per hour effective rate
•    You’ve doubled your effective rate and worked half of the time you did last year.
•    You have more time for marketing, improving your skills and even spending time with family and friends…or to take care of yourself
Which would you prefer?
Your clients shop you anyway, so why lose credibility, trust and referrals?
About Gail Doby, ASID – Gail is Co-Founder and Chief Vision Officer of Design Success University, your online shortcut to a more profitable and passion-filled interior design business.  Gail has a BSBA in Finance & Banking and an interior design degree. She built her firm to almost $900,000 in revenue in the year 2000 with a team of 8.  She now mentors and coaches over 10,000 interior designers globally.  Download your complimentary copy of DSU’s 2012 Interior Design Fee & Salary Survey eBook.  $179 Value.