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Rebuttal: When do you disclose design fees?

May 5, 2014 -  By

Editor’s Note: Mark Carlson offers this rebuttal to Jody’s Shilan’s March 2014 Profiting from Design column: “When do you disclose design fees?”

I agree with Shilan’s general sequence of steps toward meeting with a prospective customer, but I don’t agree with how limited this approach is when it comes to charging a fee for services.

First, I believe that as professional designers, we need to charge for our services. (I’ve written about this topic before here.) This includes our initial consultation time at the beginning of any work. My first point of rebuttal with Shilan is in the following statement: “…we should provide qualified clients with complimentary one-hour meetings at their homes with no strings attached.”

The primary reason I disagree is because you (the designer) are effectively losing money. I realize his line of thought is to be “in front of the customer” to sell yourself, but the fact remains that this time is an expense. For example, let’s say you have a billable rate of $65 per hour. The job site or client meeting is 10 miles from your office. Traffic conditions are moderate, so it takes you 15 minutes to get to the site. You have a truck that gets 20 mpg. Gasoline is $3.75 per gallon. Let’s look at the realities of this:

Meeting time on site = 1 hour = $65.00

Travel time = half hour = $32.50

Truck use (gas only, no other expenses associated with it) = $3.75 (round trip for 20 miles)

Total basic costs for that “free” meeting = $101.25

Now, let’s expand this out over the year and assume you go on only 50 calls per year. That’s approximately $5,000 per year in complimentary expenses. Let’s say you generate $100,000 per year in annual sales. That equates to about 5 percent of your revenue. Can you afford to throw this away?

If this concept of doing business (complimentary meetings) is part of your sales strategy and you can recover this loss, that’s a different story. Although, if you are recovering these expenses through indirect charges or hiding these costs in other services, then are you really offering “complimentary” services to begin with?

My point is twofold: 1. Your time and your materials cost you money, and 2. We all have to do a better job at running our businesses effectively. I’ve seen too many contractor-designer businesses not operating in a professional business manner, and that’s why so many are struggling to survive these days.

The screening process

The second point of my contention is the screening process. Shilan presents a case that many of us worry about—the prospects hanging up and not allowing us the opportunity to meet with them. This concern is understandable, but I find failure in this approach. In my opinion, too little time has been spent to prequalify this person over the phone. Beyond these questions, you should identify your expectations to perform this work. Additionally, the prospect needs to understand your costs for these services. I’ve found that if you spend the time to calmly explain why services cost money, then most prospects grasp why there are costs associated with your travels and time.

I believe, as designers, we need to first determine the legitimacy of our market. What niche are we going after? What type of customer do we really want? If we don’t explore these traits, then we’re still addressing the screening process from a shotgun approach. Shilan advocates only identifying the type of work being performed in his questioning. I don’t think this alone will make them a “qualified” prospect.

In my business, I charge an upfront design fee. It also serves as a prequalifier. If the client cannot afford this small fee or they’re overwhelmed by it, I know they’re the wrong customer. For example, my design deposit fee is typically $500. This fee allows clients a one-hour meeting with me and includes a preliminary site analysis workup, depending on the size of the project. Will this practice scare away some prospects? Sure it will, but they are the wrong customers for my business.

Let’s now reverse the role in this example.What if you asked your prospect to come to your home to sell you his or her services? Would he or she do so for “free?” Would he come out in the evening or over a weekend, and leave his family behind? Most likely the answer is no. Why should professional designers and contractors operate this way? I believe this is why so many in our trades are struggling.

It’s important to understand your customer base. If it’s your goal to sell to those who can’t afford quality services, then maybe these complimentary meetings are good for you. However, if you’re an experienced professional and have a credible reputation, then you should be selective by charging for your time.

I believe there’s a huge disconnect between the public and the trades. Many consumers have unrealistic expectations of service providers. Over the past couple decades, we’ve allowed ourselves to be taken advantage of and we have not stood up for what’s right or expected for our professions. It’s time to raise the bar for everyone so that we’re not viewed as the typical handyman service. It’s time to act professional and demand professional respect.

Image: / Rf Vectorscom

About the Author:

Carlson is onwer of Avalon Lighting Design in Roseville, Calif. He has served the landscape lighting industry for more than 15 years.

1 Comment on "Rebuttal: When do you disclose design fees?"

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  1. Jody Shilan says:

    Mark, while I appreciate you taking the time to respond to my column you clearly don’t understand the value of my process and why it not only promotes professionalism but also provides the contractor with a successful system for profitably selling both design and installation services instead of getting trapped in the bidding process.

    I understand your argument against providing a complimentary one hour consultation to a qualified client but your discussion is flawed because you do not account for the higher success rate of selling design and installation work by meeting face to face with a client and educating them as to why they should work with you. I will argue that I could sell 200K or 300K worth of work for your $101.25 cost for a one hour meeting. Based on 50 calls that brings the investment of meeting clients down to 1.75% – 2.5% of gross sales as opposed to your 5% on 100K. I will also argue that you do not factor in all of the people that will not meet with you because you discuss design fees over the phone. These are all lost sales opportunities because your professionalism ego gets in the way of business sensibilities.

    Would I like to get paid for every initial consultation I give? Do I think I deserve it? Absolutely! WIll I sell more work by offering to meet with a client at their home at no cost to them? Most definitely! So if my goal is to sell design and installation services do I stand on ceremony or make the sale?

    Another common argument is that plumbers and electricians, as well as doctors and lawyers, all get paid for initial consultations. This is not true either. In the case of plumbers and electricians, if they make a service call to your home for a repair they will charge you for the service call and the work they perform. Most service work in these cases are for leaky pipes or an electrical short that needs immediate attention and can usually be repaired while the plumber or electrician are at your home. However, if you need an estimate for electrical work or plumbing work because you are adding a bathroom, both of these trades will meet with you for free and provide an estimate for free. The same thing goes for doctors and lawyers. If you just moved to and are looking for an obstetrician or pediatrician they will certainly meet with you for a free consultation. Lawyers too. If you had an accident and are considering a lawsuit attorneys will meet with you for free to discuss your options and try to gain your business. It’s not until your doctor does a check up or your attorney takes your case are you obligated to pay.

    The truth of the matter is that there are many different ways to approach the design/build sales process and ultimately the right one is the one that works best for you. The main goal should be to get a commitment and deposit from a client as quickly as possible and not get caught in the trap of providing one free service after another. This is really where most contractors get hurt.