As the leading provider of bookkeeping and expediting services to interior designers in the United States, we have seen first-hand how the interior design industry has been changed dramatically over the past 20 years.  No change in the industry has impacted design businesses more than the way designers charge fees for their services.

Pre-1990, the interior design business model was originally designed to build in all or most of a designers’ fees directly into the price of the product.   This technique, called “charging retail” allowed interior designers to receive a “built in” 40% profit margin (which also equates to a 67% “markup” on the designer net price).   For example, if a designer were to sell a sofa to a client with a $10,000 suggested retail price, they would achieve a profit of $4,000 because their net designer price would typically be 40% “off retail” or $6,000.  This “built in” profit margin of 40% was precisely what a design business needs to achieve a reasonable bottom line.

This “retail” model was quickly blown up by the internet when consumers for the first time had gained transparency into designers’ profit margins.   Consumers were quick to condemn this model because they could not imagine how and why a design business would need to make some much money on product to sustain their businesses.  Consequently, designers were forced over to reduce their markups on product from 67% down to 35-40% despite the fact that the cost to run their businesses had not changed and if anything went up.  Given the financial reality that a design business cannot run their businesses on simply a 35% markup, designers slowly over time began charging hourly for their time.

The evolution of the time billing model for interior designers has overall been a positive change for the industry but it is a model that has some challenges that must be overcome for a designer to achieve a healthy profit margin.   Based upon our years of experience and research, the following is a list of the top 5 challenges that designers are currently facing with time billing along with our recommendation for how to solve them:


Keep Description of Time on Invoice Short

It is very common for interior designers to use very lengthy descriptions of their work in their time billing invoices with the intention of “answering all of the clients questions up front”.  Our experience has shown us that lengthy descriptions make the billing process far more tedious and cumbersome and though not intuitive, it actually results in more client grumbling, not less.  We recommend that you group and present your time in general categories such as:  sourcing, client communication, vendor communication, on site meetings, project management, project administration, travel and construction management.   This approach will speed up the time billing editing process and reduce the amount of painful client feedback.


Negative Client Feedback

It is very common for interior designers to receive negative feedback from their clients about their time billing invoices because clients do not have a clear understanding of how much time and effort is required behind the scenes to bring a design to reality.  This negative feedback can significantly impair a designer’s confidence and consequently cause them to invoice far less time than what their contractual arrangement allows.  We recommend that you carefully consider what type of client is giving you negative feedback before making any changes to your time billing process.   We recommend that you classify each of your clients as either A, B or C.   A & B clients are reasonable people that value what you do for them and they are interested in you making a profit on your work.  C clients do not value your time or your design, regardless of their net worth, and therefore you should not take their criticisms to heart because they are not reasonable in nature.


Find the Right Time Tracking System

There are countless systems currently being used by interior designers to track and invoice time (ie. Microsoft Excel, Google docs, Quickbooks, Studiodesigner, Harvest and   Finding the right system for your firm can be challenging due prodigious number of options.   We recommend that you try and use the same system for both of your time billing and accounting – so if you use Quickbooks for accounting, it is best to use Quickbooks for your time billing (the same holds true for Studiodesigner).   Our experience shows that Harvest and are the most user friendly and popular time billing software other than Quickbooks and Studiodesigner.


Managing Client Expectations

Due to the tremendous amount of time that goes into a design project, it is imperative to manage the clients’ expectations of your time billing from the very beginning of a project.  Although it must be explained to the client that it is impossible to give them an exact estimate of your time before the project starts, you can tell them that time billing usually represents 20-30% of the total project spend (which includes the sum of hourly billings, cost of product of labor and markup).  You can also explain that where they fall in that range will depend on how custom and how decisive they are during the sourcing process.


Are Your Billing Rates in Line with the Market?

Interior designers generally do not have access to the time billing rates of other firms in their region so it is a very common problem for firms to be charging far less for their time (or more) than the market rates.  We recommend that you try to join a network of designers in your area that are comfortable in exchanging information about their own firms in a “non-threatening” way.  These designer groups are growing in popularity and likely to present in your city.