Theo Stephan Williams - The Interior Designers Guide to Pricing, Estimating, and Budgeting

The
Interior
Designers
Guide
to
PRICING,
ESTIMATING,
and
BUDGETING

SECOND EDITION

Theo Stephan Williams

2010 Theo Stephan Williams

All rights reserved. Copyright under Berne Copyright Convention, Universal Copyright Convention, and Pan-American Copyright Convention. No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior permission of the publisher.

14 13 12 11 10 5 4 3 2 1

Published by Allworth Press

An imprint of Allworth Communications

10 East 23rd Street, New York, NY 10010

Cover design by Kristina Critchlow

Page composition/typography by SR Desktop Services, Ridge, NY

ISBN: 978-1-58115-718-5

eBook ISBN: 978-1-58115-769-7

Library of Congress Cataloging-in-Publication Data
Williams,Theo Stephan, 1960

The interior designers guide to pricing, estimating, and budgeting /
Theo Stephan Williams.Rev. ed.

p. cm.

Includes bibliographical references and index.

ISBN 978-1-58115-718-5 (pbk. : alk. paper)

1. Interior decorationPracticeEconomic aspectsHandbooks, manuals, etc. 2. Interior decoration firmsManagement Handbooks, manuals, etc. 3. Interior decorationMarketing Handbooks, manuals, etc. I. Title.

NK2116.2.W55 2010

747.0681dc22

2010012928

Printed in Canada

Contents

CHAPTER 1
Why Me?

CHAPTER 2
How to Determine Your Hourly Rate

CHAPTER 3
Compare and Contrast

CHAPTER 4
The Clients Budget

CHAPTER 5
More on Value Rating

CHAPTER 6
Fatal Errors

CHAPTER 7
Pricing Options

CHAPTER 8
The Details on Estimates

CHAPTER 9
Proposals

CHAPTER 10
Troubleshooting Estimates and Proposals

CHAPTER 11
Successfully Establishing and Managing Budgets

CHAPTER 12
Negotiating

CHAPTER 13
Positioning Your Firm

Acknowledgments

T his book is dedicated to my dad, whose spirited love for his own work and entrepreneurshiplong before anyone knew what that meantpaved the way for my own independence.

My mothers endless supply of hugs and her constant reminder to me as a young girl that I could do anything I put my mind to are two of my greatest rewards.

A special thanks to Tad Crawford, who believed that I would one day finish the manuscript for this bookand I finally did!

1 Why Me?

Y oure probably wondering why you picked up this book in the first place. In our industry, pricing, estimating, budgeting, and everything that revolves around those three things, are more than a royal painand everyone knows it.

Youve had the highs of that corporate client who had to get it done and never balked once at your pricing. You didnt even give him a written estimate. He begged you to just give it to him over the phone. The day of your presentation, he got so excited, he called some of his colleagues in to show off your ideas. You even got paid two weeks after you submitted your invoice. Now, isnt this how every interior design project turns out? Wrong.

Sure, it might happen every once in a while. But, realistically, this isnt going to be the norm, even if you are one of those design-firm names seen in every awards annual, industry magazine, and big trade show. Even the award winners and big-name designers have to get down to basicspricing, estimating, and budgeting.

When I started my own design business in 1983, I truly expected the worst. I sold my car so that I wouldnt have car payments. I paid off all of my credit cards before quitting my job in anticipation of not being able to make minimum monthly payments. I even went so far as to lie to my parents, telling them that I had gotten laid off so they would feel sorry for me and lend me money if I couldnt scrape up enough work to feed myself. I moved a twin bed into my bedroom to allow room for a desk, drafting table (this was in the prehistoric pre-computer days), and supplies; a two-bedroom apartment would have been too expensive.

Well, doomsday never arrived. In fact, business was so good that after two short months of paying towing bills due to my new used cars constant breakdowns, I bought a new car. My zero-balance credit cards were once again activated, to the delight of my wardrobe. Exactly one year after breaking free from the entanglements of the corporate ball-and-chain, I bought my own home and created a comfortable studio space to welcome clients and vendors. And I did it all with profit. You can profit too, by establishing guidelines and simple disciplines for yourself that will soon begin ticking like clockwork.

Profityouve got to have it to survive. Sure, you can get by for a while breaking even on jobs. But it wont be long before you burn out, shrivel up, and change careers. Interior design can and should be a lucrative industry. Just how profitable you are depends on the basics: What are your rates? Are your estimates comprehensive yet concise? Do you have an efficient method of project management? This book will help you answer these questions and give you ways to accomplish the feat of profitability.

Profiting from your interior design business is essential not only for you but also for the entire industry. There are three reasons your business can fail: 1) You dont have enough sales, 2) You are not charging enough for your services, or 3) You are mismanaging budgets. You are doing a great disservice not only to yourself but also to your colleagues across the nation by not charging your clients enough money for your work in order to be profitable.

Why you? Because you love being an interior designer, you want to be successful, and you know that to achieve the ultimate successes of it all, youve got to be a savvy businessperson. And if youre not the master of the issues detailed in this book, you can forget any business dreams in interior design... I hear theres a burger joint down the street looking for a few good flippers!

The Quintessential Rose-Colored Glasses

I can promise you that the three hardest things youll ever do in the business of interior design is figure out how much to charge for your services, how to do an estimate, and how to manage project budgets completely and efficiently. We designers tend to walk around wearing rose-colored glasses, sporting the latest in designer frames, and never even thinking about how much we should charge for our work. Why should we? Our work is cool, and getting into colors and textures is so much funsomeone will pay for it.

There is a stigma in the design world surrounding money issues. Having to deal with them can seem worse than anything you have ever imagined for yourself. But wait! Its not so badreally! You can even delegate a lot of it. The truth of the matter is that once you find out how to successfully perform the tasks of pricing, estimating, and managing budgets, youll probably want to perform them yourself. There is no greater feeling than taking complete ownership of a projectand that means administratively as well as creatively.