Interior Design Advice for Tuesday

Question:

How do interior designers make their profit?  Will I pay the massive fees to use them, then high prices for the furniture they select?  I can't afford that kind of service!

Answer:

Different types of interior designers choose to make money in different ways.  There are mainly three ways an interior designer can make a profit (and a living!).  Each way has a different benefit for the designer and for the client.

Service Fees
The first way an interior designer can make a profit is by charging directly for her services.  She can charge upfront to assist with color section, furniture selection, and even drawing a floor plan.  This is often the most clear-cut way to charge in that both the interior designer and the client understand the cost involved.  Due to the profit being determined ahead of time, this can be a huge benefit for the client.  The interior designer is not trying to sell her own furniture and decor at a mark up and she will be more than happy to align to the client’s budget.  In addition, some designers have connections.  For the interior designer who does consultations and provides a buying service, that designer can actually purchase goods at cost and pass the savings to the client.  However, some interior designers do not charge for their services, but instead sell the client on their furniture and goods.

Mark-Up
An interior designer has the opportunity to develop accounts with furniture and home decor companies.  While this has a huge cost upfront, the interior designer who has already set up these accounts can make her money through selling these goods at a mark-up.  Instead of charging for her services, she will work with a client to develop their needs and then sell the client furniture and home decor from the companies with which she has accounts.  This can save the client from an upfront service fee, but the client is now unaware the interior designer's profit.  Most interior designers mark-up goods at least double if not triple the wholesale cost.  However, many designers sell specialty items not available in furniture and home decor stores.  Even with the mark-up, some interior designers are able to keep their products at a lower cost than retail stores.  In this way, a client benefits from the unique furniture and home decor and still saves money, while the interior designer makes a profit by cutting out the middle man.  Depending on the integrity of your interior designer, this can be a win-win situation.

Commission
Not all interior designers are fortunate enough to operate independently.  Many designers are employed by furniture companies, home decor stores, and even in specialty stores that sell one genre of product.  These interior designers are often extremely knowledgeable regarding the company for which they work.  If an interior designer is working at Bassett Furniture that interior designer is your best asset for finding what you need at that store.  However, most furniture stores also employ sales personnel who are not interior designers and they may or may not have the experience you need.  So be aware of the credentials of the sales person who is helping you at these furniture stores.

Interior designers make a profit through commission when working in a retail setting.  Each interior designer will have a different motivation when helping a client.  Some may really love doing design and will help a client find the home decor items that fulfill the client's needs.  However, in commission situations, many designers and sales people are less concerned with the clients needs and more interested in the bottom line, their commission.  The customer is in a very hard situation when working with an interior designer who works through commission.  The client must constantly gauge how much advice is to better the client's life and how much of the advice is meant to increase the dollar value of the purchase.  If caution is used, an interior designer working on commission can still be a wonderful asset when purchasing furniture and home decor in a retail setting.

The best method is not always apparent when choosing an interior designer.  The client must decide the pros and cons for his or her particular situation, budget, and needs.  Below, I will include three charts listing the pros and cons of service fees, mark-ups, and commissions.

Service Fees
Pros	Cons
Upfront	Cost is evident and at times expensive
Not selling products	May only work through consultation
Goal is to provide service to client
May sell products at cost to client

Mark-Up
Pros	Cons
Possible savings from retail	True cost of service hidden
Unique furniture and decor	Selling to make money
Goal is to provide furniture and decor to client	Goal is to provide furniture and decor to client

Commission
Pros	Cons
Knowledge of specific products	Selling to make money
Often free	True cost of service hidden
Goal is to make commission by helping client	Goal is to make commission by helping client

While these are the three main ways that interior designers make their profits, I must warn you that some are not so honest.  Be aware that some designers are more than happy to combine the three main ways in order to heighten their profit at the client’s expense.  For instance, a designer could charge a set service fee and offer to purchase the client’s furniture and home decor.  If the designer has wholesale accounts with home decor companies, the designer has two choices.  He can extend much of his wholesale benefit to the client, or he can mark the decor up to retail cost.  If the designer chooses to fully mark-up the decor that he gets at wholesale and he charges a service fee, then he is actually double charging his client.  Unfortunately, many designers have no qualms about this practice.

Saving Money

The interior designer who only does consultations and does not have wholesale accounts is able to offer their services at a lower price than those who hold wholesale accounts and operate as an intermediary between the client and other professionals such as painters, upholsterers, drapery specialists, and contractors.  The client who seeks the services of an interior designer has to decide how much they want the interior designer to do and how much they can do themselves.  The designer who consults is able to give information to the clients and provide knowledgeable advice, but the clients must hire the professionals needed to complete tasks or actually do the work themselves.  If a client hires a full service interior designer that designer can often do everything or bring in those who can.

Hopefully this allows you, the client, into the world of the interior designer and allows you to make a more informed decision.  You know your budget and your needs, and now you can understand how an interior designer can fit into your budget and provide for your home decor needs.

Next week’s Ask the Interior Designer question is still open!  Feel free to post a question through this blog, the Designing Life Facebook, or through e-mail.