Gail Doby on Fees, Markups and More
Gail Doby offered up some interesting ideas recently about the “business of the business” – so interesting, in fact, that I want to share them with you.
Gail, a designer with more than 20 years experience and the Co-Founder of Design Success University, shared her perspectives in an excellent presentation in Denver entitled “How to Avoid Fee Fiascos…And Attract Your Ideal Client.”
I’ve listed below five of Gail’s key points – and her elaboration on them:
1/ A fixed-fee system is best, because it involves paying for an end result. An hourly fee involves only paying for a process.
Clients are more value conscious than ever and it is vital to adapt to market demands. Otherwise, you may find that prospects don’t choose you because they don’t accept the billing methods we’ve used in the past. More and more prospects are rejecting the hourly fee and mark-up method. They can purchase online, and that includes Trade Only products.
Our typical method forces the client to pay for a process, and that as we all know is very messy. 70% of all clients want to pay a fixed fee according to an ASID survey. How do you bill?
A fixed fee method can be computed a number of ways including a percentage of the budget, per square foot, per room, etc. It is better because the client has a clear expectation of costs.
However, that’s not the best method. A Value Based Fee method provides fees based on what clients really value – a result. The biggest differentiator between fixed fee and Value Based is connection with the emotional motivations of the prospect and the process required to “set up” the process to uncover the real buying criteria.
This is a 5-week course I teach, and it has transformed many of our student’s businesses. It removes them from the Interior Design Slave status and elevates them to a Strategic Interior Designer who is a trusted advisor.
2/ Don’t meet clients at their home before they sign a contract. Meet on neutral ground.
The temptation is too great to meet at the prospect’s home and “give away your best stuff.” It’s best to meet on neutral ground to establish rapport and credibility. If you’re finding it difficult to say “no,” try saying, “I’d love to meet with you to see if we’re a good fit before I come to your home. This will be a long-term relationship, and I would love to meet you for coffee to see if we will be comfortable working together. Would that be OK with you?”
3/ Don’t call it a “markup.” Use the phrase: Purchase Management Fee.”
Perception is important, and when you say that you charge a “mark-up,” the client sees it benefiting you. When they see how much you make, they get irritable. It’s not that they don’t want you to make money, it’s because it appears to be self-serving and excessive especially with high budget projects. A Purchase Management Fee is more palatable because it implies a benefit. You’re a manager of their project on their behalf. They are willing to pay for service especially when they understand why the service actually saves them time and money.
4/ Establish a “Pain in the Butt” Price, when necessary.
If you take difficult clients, charge a premium. You will lose money with them in some parts of the project, and quite frankly, you should earn more for the PIBs. They will cause you stress and frustration, and you may find yourself in difficult negotiations at one ore more points during the project. I’d prefer not to take these clients because their emotional immaturity is not enjoyable to me, and if I am supposed to work with them for months, I’d prefer to work with pleasant people.
5/ To keep clients interested in the days before design and delivery, give them a 3D rendering, or something else showing the end result
Our business involves a lot of details, coordination, management and lead times. Clients get uncomfortable when you have tens of thousands of dollars of their money. The majority of our work is intangible until the reveal or delivery of our products. If you can create tools of tangibility like renderings, it can reinforce their excitement and belief that the project will be all they dream.
Gail shares these and other tips in her webinar, “How to Avoid Fee Fiascos…And Attract Your Ideal Client.” To receive an invitation to this complimentary event, just click on this link to download her Interior Design Fee & Salary Survey eBook ($79 Value) – also complimentary. Her latest survey results will be available in a few weeks, and she’ll let you know how you can download them.
Fred Berns is a sales and marketing coach and trainer for interior design professionals and design industry partners worldwide.