Let’s face it: Billing strategy is one of the design industry’s most critical, yet often most uncomfortable, conversations. While many successful architects and designers remain understandably guarded about the specific blend of retainers, fees, and markups that sustain their firms, getting a handle on these numbers is the key to keeping your business healthy for the long haul. AD PRO consulted dozens of industry advisors and practitioners to deconstruct how—and why—they charge.
Our reporting reveals that while flat fees, hourly rates, and cost-plus models are staples, the hybrid approach has emerged as the industry standard. Finding the best billing approach for your firm is really about making sure your pricing matches the unique way you work. Here’s how to evaluate which model best secures your firm’s success.
Billing Basics
Determining Your Rate
Sean Low, founder and president of The Business of Being Creative, a strategic consultancy for professionals in creative fields, recommends a goal-first approach to pricing. Instead of starting with your hourly rate or commission, Low advises defining your income goals and desired workload first, then basing your fee structure on those considerations.
“The first thing you have to do is figure out how much you want to earn,” Low says. “Finding the right price for a project is easy because it’s based on what you need. But can you get it? The price today, more than ever, has to reflect the differences in value that you’re offering.”
A designer who knows they can wrap a project in four months might charge a flat design fee and a markup on product used. Another designer who spends months working with the client closely might prefer to charge for their time by the hour.
Before starting any job, designers should issue their clients a contract with a clear scope of work (SOW), which defines the deliverables of their design fee and the number of allotted revisions. The contract acts as a guardrail around a designer’s rates and time.
The flat-fee model
Supporters of the flat-fee billing strategy appreciate the transparency it offers clients from the onset of a project. Homeowners appreciate that there are no surprises when it comes to payment after the project is wrapped. If you’re using a flat-fee model, you need to clearly define your scope of work (SOW) right from the start. The SOW must account for all your possible work, including revisions and delays. Otherwise, your time can be wasted on tasks that weren’t initially discussed.
Directory designer Vicente Wolf says he prefers a simple, straightforward way of billing. “Ninety percent of the time we charge a flat design fee when we start a job, which is worked out according to budget and the scale. Then we charge 35% commission on the wholesale price on all products,” he explains. Wolf believes that if he charged by time, “clients would think I’m overcharging them.”
The equation for determining your flat fee can take a top down approach, as previously shared from Low, or can come from the percentage of the overall project budget, much like a contractor’s rate. That said, more designers are shifting away from this method.
