This post on commissions elicited a big response on the blog. Here’s one that really got me thinking…
From: EM
The Befuddled Future Client is still confused. One one hand, I have a published designer with 27 years of experience, an office, and a staff that requires things like payroll taxes. On the other, I have a designer with 1 year of experience with (in all likelihood) no staff or additional NYC rents. So why is the 35% markup the same?
Vicente Responds:
I’ve always wanted to make my work accessible to most, but I do wonder, do you charge a lot and get a few or do you charge slightly less and catch more with your net?
On what I charge I find business to be profitable. When times are good I am able to take care of my staff, my lifestyle, my travel and live a very good life. Do I want three times as much money? Of course, but my shrink said to me that you can’t be looking at what other people are making as they may need more to lead their lives. I earn what I need and am comfortable.
Someone’s who’s been in business for two years and earns the same as me, maybe their clients feel that it’s worth paying for their style, even at a lesser level of experience. Consider the art market – artists in their ’20s charge thousands for their work. It’s what people are willing to pay for it.
To me it’s a better perceived value, but we’re not talking here about buying tomatoes. We’re talking about a point of view, a style that people are hiring, so it’s not just about how much somebody charges, it’s about what product and service and perception they’re putting out in the market. And I think a high percentage of prospective clients don’t really research, trying to find what is available design-wise in the marketplace. A lot of it is through social connections and word of mouth. I don’t think most people looking for a designer do their due diligence in finding the best possible match for themselves – style, experience and talent-wise.
But what makes good taste? Why pay $30 for a pair of jeans at Gap compared to a $1,000 at Versace? It’s what you think is worth spending your money on. That’s the marketplace. Why do you pay more for tomatoes in Wholefoods compared to the same stuff you can get at Gristedes? It’s perceived value and what makes you feel good about yourself.
Hey EM, you got me thinking…maybe I should be charging more.
Have you researched how your income balances out the cost of running your business? Let’s talk about it.
Crossing Boundaries
Learning to See
Lifting the Curtain on Design
God's Love We Deliver
Publicolor
Remember Haiti
Facebook
Twitter
VW Home by Vicente Wolf
www.vicentewolf.com
#1 by Karena on July 6, 2010 - 1:45 pm
Interesting thoughts Vicente. I do believe you have to value your services and find a good middle ground on what people are willing to pay. Many do perceive that paying more for someone who is a known designer, artist, etc is well worth it.
Karena
Art by Karena
#2 by katiedid on July 6, 2010 - 5:19 pm
I would think that the mark up on product would cover the cost of acquisition no matter how much experience a person has. The designer is responsible for damages, freight, delivery and installation in either case. Design fees are a different matter, and I agree, that is all about perceived value as you have said.
#3 by Gary Nelling on July 6, 2010 - 5:26 pm
EM – I think many good points have been made here. I would add these:
All design businesses are high risk with a failure rate like restaurants. Vicente raises interesting points with his analogies of the price of design services to tomatoes, art and blue jeans. Our government has subsidized farmers in droughts and bought their excess in good years because this business provides necessities and has enough large farms to have a good lobby. Since designers and architects are small businesses who in part provide luxuries, we bare our own risk and have to charge enough in good times to survive prolonged recessions. My point is that design professionals must gather their crops in while they may! (For the record, I like farmers and don’t think the government should favor one business over another.)
Design professionals seem to be in a uniquely defensive position, perhaps because we have one foot in the professional world and one in the artistic world. I don’t think that most individuals negotiate fees aggressively with their doctors, attorneys and accountants (some of whom do better in a recession!). And has anyone every asked an artist to reduce the cost of a painting based on how many hours it took to paint? What attitude leads a person pay the full retail $1000 for Versace jeans and then ask Vicente for a discount on similarly priced home accessories?
I think it’s important to note that the finished construction cost alone of an apartment for sale in NYC, which can be $1000-1400/SF, is 4 times what one would pay for a home in St. Louis MO, at $250-350/SF. So the same percentage fee or commission would be 4 times less in STL than NYC. Therefore, location makes a great difference in the absolute dollars you would expend for design. I think in a free market there is a great range of design talent, skill and service cost. So I would heed the words of my mama, who told me you better shop around! – Gary
#4 by Pangaea on July 8, 2010 - 12:49 am
It is interesting how people seem to begrudge a decent living to designers and always want to question our value. Yet they eat up HGTV and are endlessly fascinated with the work done by us.
With the market and clients changing so much in the past few years due to the economy and also the ease of shopping online, I am beginning to shift my practice to flat fee services, rather than hourly. I find many of my clients willing to do the purchasing themselves, so unless I am custom designing something or buying from to-the-trade sources, I’m rarely getting any mark up.
In our profession, experience and style is important – but our personality is also very important. We end up being pretty closely involved with our clients. So, I do think that clients are making decisions on who they feel comfortable with — not just years in the business. This may be why they don’t research as much. Although, I do think that most people who have called me for work have interviewed a few designers.
I think we’re all just trying to do our best – don’t you?
#5 by EM on July 8, 2010 - 10:39 am
EM here. I sent two emails to Mr. Wolf but did not get a reply, and wasn’t sure if he received them. So, I am posting a clarification here (for the 3 people maybe still reading.)
My post was in response to Mr. Wolf’s answer on why he charges a 35% commission. The original question was from a decorator with only a few years’ experience who worked out of her home, charged a 20% commission, and felt that she was doing fine. I’ll admit, I was flabbergasted that the blog host told her, unilaterally, that she wasn’t charging enough. Here is why:
Mr. Wolf does not take home 35% from each job. Vicente Wolf’s company charges a 35% markup, from which they pay their NYC rent, utilities, fees, travel, employees, taxes, Mr. Wolf’s salary, and then, presumably, plows the remainder back into the business. Should a client hire a firm like Mr. Wolf’s, they can be assured of having the benefits of that firm, such as someone to see to it they are billed properly, and mostly importantly, a firm to manage the execution of a job, which is at best stressful, and at worst, disastrous. If a single person, with no overhead, employees, and minimal experience charged the same markup as a full-service firm, I would think that they are so overpriced they had their heads in the clouds. A markup should not be a business’s goal. The more important number is cash-flow, and the markup is merely the number to get you there.
Now, whether or not whatever percentage or fee I think a designer is worth is the matter for another post. I will say, however, that I studied architecture in Italy, and finally saw the difference between a window and a hole in the wall. There is no question in my mind that truly wonderful spaces require a professional.
#6 by The Countrypolitan on July 8, 2010 - 6:29 pm
To EM… I think the error in your comparing an independent designer charging the same fee as that of a firm with several employees is this:
When you are getting the same end results regardless of who is assigned to the tasks… an individual or a team, it requires the same amount of work steps to get to that point… . So just because an independent designer does not have all the “mouths to feed” as a larger firm, that designer is wearing many hats and doing the same amount of work to produce the same results.
#7 by The Countrypolitan on July 8, 2010 - 6:34 pm
Additionally, a firm with several employees will be able to take on a greater number of projects than a single individual… therefore, the volume of work to income produced is proportionate at the same fee scale when comparing an individual to a company with several employees.
#8 by TDUB on July 13, 2010 - 8:31 pm
I don’t think mark up should vary between 20% and 35%. Also, this assumes the 20% and 35% designers are paying the same amount for the product. if we are buying at true wholesale, than it hurts our profession to have this much differential in designer pricing. However, my 35% mark up is probably less cost overall to the client than the 20% they pay with the young designer who’s simply getting 15% retail from some other source as opposed to wholesale pricing. Standard Mark up should be between 30% and 40%, not to exceed retail, with a variation on design fee. If the young designer isn’t paying wholesale, they can’t charge 35%. Also, for large, luxury, high-end whole house projects, it can be a case by case basis. That scope is typically non-standard and exceptions have to be made when client’s purchase a few extraordinarily expensive items.