MODULE 1: WHAT IS A VALUE BASED FEE?

Most designers begin by charging an hourly fee. A value based fee is a fancy way to say a “lump sum” or “flat fee”.

MODULE 2: BENEFITS OF A VALUE BASED FEE?

How did you do? If you’re like most designers I’ve spoken with, you inherently know that hourly fees are a nuisance to track, you never charge for all of the time put into the project, and that sending the invoice when you DO charge for your time can cause some serious anxiety.

So what are the benefits of a flat fee?

1. Repeatable Formula
2. Eases Client Concern
3. Cash Flow -
4. Provides Guidelines for Productivity
5. Profitability

MODULE 3: HOW TO CALCULATE YOUR VALUE BASED FEE?

This is the fun part. Calculating the fees . 

THINGS TO CONSIDER: 

• Your market
• Your experience
• The experience level you provide your client...you’re not just selling a “service”.

MODULE 4: STEP 1: PULLING DATA FROM PREVIOUS PROJECTS

Pull data from previous projects:

• The number of hours it took you from start to finish.
• The square footage of the project.
• The total amount paid for your design services.

Note - Don’t have previous experience? No problem! Make up the numbers and edit them as you work through the exercises.

MODULE 5: STEP 2: HOURLY CALCULATIONS

Divide your total service fee by the number of hours it took. This is your hourly rate. Obviously, if you’ve been charging by the hour, you know this! But if not, are you okay with this rate? Are you SURE you billed for every moment working on the project?

MODULE 6: STEP 3: SQUARE FOOT CALCULATIONS

Divide your total service fee by the number of square footage of the project. This is your “per square foot” rate. The skill set required and the amount of “layers” or detail that goes into the type of design will also direct the numbers. For example, a kitchen renovation has more detail in it than decorating a guest bedroom. So your per square foot number will vary.

MODULE 7: STEP 4: DETERMINE YOUR FEE

Run scenarios using your ideal project size & scope and calculate with your per square foot price as a value based design fee. Cross reference this total fee with your acceptable hourly rate and ensure it falls within a profitable range. If not - increase your numbers. Keep in mind all of the hours you may not have billed for, and factor that into your calculations. This helps increase your profitability because your fee will include every minute you’re working on a project.

MODULE 8: RECAP

Knowing how much your services will cost (not including purchases or construction!) will take the fear out of the unknown expenses and get more clients to say “yes” to hiring you. Having an easily explained and repeatable pricing system allows you to spend more time designing and less time tracking billing by the hour.

MODULE 9: WRAP UP

Do you still need to track your hours? Yes. You just won’t be billing by the hour. Your revenue is no longer limited by time and you will no longer need to justify your hourly rate.  At the end of each project, run the numbers and adjust (increase) your pricing model accordingly. . 

Celebrate when clients accept your fee. Celebrate when clients do NOT accept your fee. You do not want to be the most affordable designer. If everyone is accepting your design fees, it’s time to increase your rates.

Review your pricing annually. 

Give yourself a raise.