Interior design is one of the most unregulated industries. With few standardized practices, it can be challenging to know how much to charge for your services and how to price items for resale. Unfortunately, there is no set formula for either.
Knowing how much to charge for your services largely depends on the skill set you offer, your experience in the industry, what your competitors are charging, and how long it will take you to complete a project. Some interior designers overcharge and underdeliver. It does not take long to find out that you are one of these designers, as you see demand for your services dwindle.
If your phone is ringing off the hook and you cannot possibly meet demand, you may be one of those interior designers who are not charging enough for what you are offering. More skills, more experience, and a better product should be rewarded.
If you are just starting out, work hard to deliver an excellent product and experience. Over time, better-paying jobs will come your way.
When it comes to pricing products for resale, there is no one-size-fits-all formula.
When using this strategy, it is important to charge for your time in the form of a design fee, whether that is billed hourly or by the square foot, to ensure your time is covered.
Trade discounts are offered to interior designers based on volume, or how much they purchase from each vendor, and range from 70% to 5% off retail.
Because every designer’s vendor discount varies, it is difficult to use set formulas that apply across the board.
That is why Four Stripes lets you assign vendor-specific pricing formulas, so your pricing remains accurate and consistent. To select the correct formula for each vendor, it is important to understand the cost columns in the Finish Schedule.
This is the base price the supplier quotes to the designer, typically excluding shipping. Freight will most likely be billed to the designer directly from the shipping company. Sometimes, the supplier will include a shipping fee with a cap in their cost, but many do not. Always confirm if freight is included in the vendor cost or not.
This is the total cost to you: freight, receiving, storage, delivery, and any management time required to oversee the item through installation. Make sure you are using a formula that covers all of these costs. This is where many designers unintentionally underprice and sabotage their profit margins.
The client cost is a set markup percentage above the designer cost agreed upon in the contract between the interior designer and the client. This markup, typically between 15 and 25%, becomes your profit margin. It must remain consistent as it is contractually required.
Retail cost is the highest price set for a member of the public to pay without a discount. Some vendors publish the retail price and others do not, leaving designers to grapple with what to charge or list for retail. A quick online search for the highest price of an item can provide you with a reasonable benchmark.
It is important to note that while some vendors sell at retail, this is not the final price the client will pay when buying at retail. Shipping is often not included until checkout, and you may pay anywhere from 25% to 50% or more for shipping.
If you want retail cost to reflect true final costs, including shipping, receiving, storage, and delivery, be sure to include those. Calculating true final cost is crucial if you are ordering from mail order companies that only offer interior designers a 15% to 20% discount. Since shipping can cost almost double your discount, your profit margins will be too slim and often in the red without assessing this cost to your client.
Understanding what the actual cost of acquiring an item is essential to doing business effectively and running it profitably.
When you add a vendor under Vendor Management in the Settings Dashboard, you can input:
You will need to know whether your pricing is based on MSRP (Manufacturer Suggested Retail Price), MAP (Minimum Advertised Price), or wholesale cost. Here is how to approach it.
Using Finest Furniture as an example: if they give you 40% off MSRP and cover all overhead like shipping, receiving, storage, and delivery fees:
If your discount improves to 47% off MSRP because of the volume of your purchases, just update the percentage and all project pricing will adjust accordingly.
In the Settings Dashboard, open Vendor Management, search for Finest Furniture, and update the discount percentage to 47.
Some companies include shipping in their cost to you, like our example above. Others do not. Always confirm exactly what is included in your price with each vendor.
Let us say Finest Furniture no longer covers the shipping, receiving, storage, and delivery fees. Those now become overhead expenses that you must cover.
Keep good records to determine your actual costs for these services. Many designers either bill overhead to clients at the end of a project or monthly, while others assess a set percentage (typically 8–35% depending on the vendor).
You might purchase accessories from a mail-order company that only gives a 15% discount. Their shipping fees are very high at 35%, so when you reach checkout, you realize the item’s total cost is actually higher than retail — and you still have to mark it up to the client.
You also need to factor in the cost of receiving the item at your warehouse, storing it for months, and paying for delivery to the client.
In this case, use the MSRP + % formula for that vendor to ensure that you cover all overhead expenses and avoid paying more than the client will pay.
Some companies list a Minimum Advertised Price (MAP), which can be a useful baseline for both designer cost and client cost.
Let’s say you want to sell the item to the client at MAP. Your overhead costs fluctuate and you are never sure how much those are going to cost, but your contract states that you will mark up 20% from your designer cost.
In this case, use the MAP / Multiplier formula:
A quick way to calculate the multiplier: 1% markup = 0.06.
This ensures your client gets a discount off retail, your contract markup is reflected, and your overhead costs are covered.
As always, double-check your math to ensure your calculations achieve your intended pricing and margins.
If a vendor offers listed wholesale pricing, simply take that vendor cost and add your average overhead cost percentage for shipping, receiving, storage, and delivery. This total becomes your designer cost.
In this case, use the Vendor Cost + % formula. For example, if your overhead costs were 26%, enter 26 as the percentage value.
Client cost formulas typically go hand in hand with the formulas you use to calculate designer cost, but you will need to apply some logic when selecting the right one.
For example, if you selected MSRP as your designer cost, you should probably choose Designer Cost + Markup % for client cost. This ensures you make money on what you purchased. You will not want to select MSRP for both design cost and client cost, as this would mean you are selling at cost, and you may have additional overhead expenses that could put your finances in the red.
It is important to note that you cannot fill in your markup % in Vendor Management. This percentage is determined when you add or edit a project. To enter this number, you will create a project or edit a current project. In the project settings, you will see a Cost Markup % field where you can enter the percentage you have contracted with the client for markups.
Sometimes the vendor lists the retail cost (MSRP) on their website. In that case, you can select MSRP and enter that value when adding an item to the Finish Schedule.
If you know both the MSRP and your discount, you could instead use MSRP - % or MSRP + % for designer cost depending on your specific terms with the vendor.
Sometimes you will want your retail cost in Four Stripes to reflect all overhead expenses, not just the vendor’s price. This number tells your client what the actual cost of the item is with shipping, receiving, storage, and delivery services included.
This is especially important if you are purchasing from a mail-order company where the client can easily see retail pricing online. Including overhead in retail costs helps clients understand that your price covers costs they won’t see until after checkout.
For example, you might use MSRP + 35% as your retail cost formula to cover these additional expenses.
If a vendor publishes a MAP but not MSRP, use MAP + %. Run a quick calculation to determine the percentage that will bring MAP in line with approximate retail pricing that you see online. That way, Four Stripes will calculate your retail cost for you every time, no more scouring the internet for the highest price.
Some vendors determine MSRP by multiplying their cost by a set factor (for example, 2.5x or 2.1x). In these cases, select Vendor Cost x Multiplier as the retail cost formula. Four Stripes will then calculate retail cost automatically based on the vendor cost you enter when you add an item in the Finish Schedule.
There may be times that you need to show retail cost as exactly double your designer cost. For that, use Designer Cost x Multiplier as the formula for retail cost.
There may be times that you need to show retail cost as exactly double your designer cost. For that, use Designer Cost x Multiplier as the formula for retail cost.
Once you have your formulas worked out for each individual vendor, the hard part is over. Four Stripes will do the calculations for you so you can focus on the design and not the math.
Sit back, relax, and let our processes work for you.
