Charging for Design Work

A shop owner spends many hours designing a proposal, then loses the job. Now he asks: how can I make sure I get paid for my time, next time? September 27, 2012

What do you do when you spend 80 hours drawing and designing and pricing a million dollar home, have numerous meetings with the homeowner and try to get them to commit, only to have them take your ideas and creativity to the competition to be undercut and the job stolen away. What do you have to do to protect yourself but not lose the sale?

Forum Responses
(Business and Management Forum)
From contributor G:
Qualify them. If they are qualified spend as little time bidding as possible and close. In this case ask them why they went to the other shop.

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From contributor L:
What you were doing was working for them and not estimating. If you want to estimate for them they tell you what they want and you come up with a price. You don't spend countless hours designing and getting approval so you can price something out. As soon as they mention that you need to design something for them you write up a contract for an amount that is comfortable for your company. Otherwise you will work long and hard for your payment of nothing.

From contributor K:

I am curious as to why you waited 80 hours before asking for a dime? At the very least, if you don't charge for drawings, once you past a certain point early in the stage, you should have switched to an hourly rate for additional revisions and designs. That is a lot of resources down the drain and I would be back at them asking for a design fee. Send them a detailed invoice for a design and drawings fee. If they balk, inform them that you provided the drawings on the expectation of securing the business. Drawings are copyright protected. Worst case, they say pound salt, best case, you recoup some of your costs.

From the original questioner:
Contributor L - I agree with that scenario; how do you implement it? I have a great idea but I can't show it to you until you sign? Here is an average design, but the great design costs xyz? See what I mean?

Contributor K - sorry 80 may be overestimated, didn't track the design/estimate time but I think between that and the meetings it was way too much. How do you show the wow designs and close the deal without pushing the client away? We don't give dimensional drawings unless they sign, but itís not too hard to draw with a 3-D and room dims. I would like to come up with a formula; one room free design, rest of house with contract? I don't think you can accurately price one of a kind without putting in the work.

From contributor L:
It's easy, you are a businessman and this is what you do for a living. Before you even say you have some ideas you can talk to them about the ideas. After they decide that they like what you are explaining to them they might ask for some drawing, rendering or whatever. You just need to tell them what your design fees are and go from there.

From contributor B:
I just had this issue with a previous client. After putting in a number of hours of design work on a job I was confident I was getting the client decided it was too expensive. In this case the client was someone I was comfortable would move forward with the work and therefore didn't charge a design fee. End result I got stiffed. It's partially my fault and partially the clients for taking advantage of our previous relationship.

I think it's easy for everyone on the sidelines to automatically say you should charge a design fee for any work you do but in reality I bet almost none of them do it regularly. I do it on large jobs without hesitation but not so frequently on smaller jobs, I just try to limit the time I spend on design work before I get a deposit. Ater many years and lots of marginal clients using my drawings to have someone less expensive build the job I very rarely give any drawings before a deposit. At most it would be a quick 3-D sketch to show the concept with enough details to secure the project.

I have to agree that 80 hours of your time is way, way too much without some money already in hand. For a project this size the design fee shouldn't be a problem. If it is then the client is probably not interested in you doing the work. You can always note that the design fee comes out of the job cost so they don't think they are paying extra just for the design.

From contributor W:
Set desires, set space and volume parameters, and set a budget in the first meeting. Set a base contract, and provide editable initial drawings with the design deposit paid in the second meeting. More than three edits and I start thinking to get out of the deal.

From contributor O:
Most of our homeowner customers are emotional children. How they got 5 million to build a house, I'll never know. They would not last one week in our jobs. They are incapable of making decisions, see all tradesmen as thieves, and are determined to get work for less, if not for free. Oh yeah, all a designer or architect or other design professional will do is raise the cost of the project 10% or more, and take it over budget. The woodworker is supposed to design all the cabinetry and trim details for free.

So, this is the climate today. Understand that first. Then learn to play to those emotions and insecurities. Convince them you understand that those tradesmen are less than trustworthy; that you are both on the same side, trying to get the best for the least. Satisfy their insecurities (the stupid questions) with good reasonable information. Tell them they are asking great questions and few people grasp the situation like they do.

From contributor I:
At the first meeting, toss out a figure for "pre-construction services" (if you call it design, you may run afoul of local architectural/engineering laws), and explain that any money paid for the preconstruction services will be credited to the cost of the project. Make sure you include the preconstruction services cost in your overhead. If they bail after the preconstruction point, you're covered - if they stay on, you're covered. The best news about this approach is that it will identify the lame clients from the sane clients. You really don't want to work for someone who isn't willing to pay for your time. If they balk at the beginning, just think what it's going to be like when the project really gets started. Unless, that is, you don't mind working for free.

From contributor Z:
I agree with Contributor I. We only do design work upon deposit of 25% or a predetermined fee that applies to job if they go with us, otherwise walk away. My plumber or electrician won't cross my doorstep without an estimation fee. Why should you give your time away?

From contributor S:
Every job we estimate includes a full blown design effort. We have a very high close rate. Designing the job gives us a lot of advantages over the other bidders. They only get to differentiate themselves with their price. We stand out with our ideas. We don't get every job but we get enough of them to pay for the ones we lose. We are also able to steer the outcome on the projects we do get and this makes for more profitable jobs.

This process also allows us to have a few interactions with the customer before we agree to work for them. About one out of ten is a true wacko and this process allows us to figure out who the whack jobs are before we commit to budget or building.

We don't charge for this initial design service and the customers are free to keep the drawings. I am certain that from time to time these drawings help my competition but the cost to generate them is already water under the bridge. The economy is probably going to get tougher over time and having more arrows in your quiver is usually better than fewer. If drawings are expensive to produce then get better at drawing.

From contributor M:
You certainly don't spend 80 hours to produce initial design. This may be a quick sketch by hand or something very conceptual drawn in Sketchup in few minutes. There are lots of "tire kickers" out there. If we are to spend something close to 80 hours for every job we bid, we would not be in business.

From contributor V:
Unfortunately, you cannot assume that people will treat you fairly, whatever that means. I'm sure in their mind they never specifically gave you the job so it's just business, not personal. After getting burned a few times, a little alarm now goes off in my head when I sense that I'm extending my time or efforts for someone who has yet to reciprocate. You just have to nip it in the bud. In my experience, you'll rarely hurt anyone's feelings or kill a legitimate deal.

From the original questioner:
Eighty is too much I agree, realistically 25-30, which is still too much. When a client asks for specific items that you have no idea how to price, you have to research as well. The 25-30 is divided between two people but still excessive.