Are You About to Give Away Next Year’s Profit With This Year’s Pricing?

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You can have a packed project calendar, a busy team, and plenty of invoices going out and STILL not make as much money as you thought you were making. While issues can certainly arise DURING a project, this gap probably started way back when you originally priced out your projects. There are a lot of factors that go into the cost of a project beyond procurement and design schemas.

Maybe your senior designer got a raise but her billing rate never changed. Maybe the projects you’re taking now involve more construction coordination than the ones you were doing two years ago. Maybe your team spends hours every month on client revisions, reselections, vendor problems, and all those “quick” questions.

October is a great month to start figuring this out. You still have time to change what you charge on 2027 proposals before you commit yourself to another year of rates that were based on a very different version of your business.

Time billing can help you eliminate a lot of this uncertainty, but even if you NEVER plan to bill hourly, you need to know how much work your projects actually require before you can know whether you’re charging enough for them.

Five Things to Review Before You Price Another Project

#1 Compare What You Thought a Project Would Take With What It Actually Took

Pull up a few projects you completed or made significant progress on this year. Start with the projects that resemble the work you want to book in 2027, then compare the amount of time you expected to spend with the amount of time your team actually logged.

You might find that your original estimate was pretty close on design but WAY off on construction administration. Or maybe sourcing went exactly as expected until the client wanted another round of options in half the rooms. Procurement could be eating up way more staff time now that your projects are greater in scope or larger in size. Even meetings can change your math if you planned for one presentation but a client needed four.

LUDC uses previous projects to make those decisions with actual information instead of somebody’s best guess.

You don’t have to track time forever just because you track it for a few months. If you charge flat fees, time records can still tell you whether those fees make any sense. A $30,000 design fee looks quite different when one project requires 140 hours and another requires 275.

And don’t only look at total hours. Look at WHERE those hours went. That’s where you’ll find the part of your pricing that needs attention.

#2 Make Sure an Employee’s Billing Rate Still Works After a Raise

You might miss this one because a salary increase and a client billing rate can happen at completely different times. They’re usually out of step with projects starting and wrapping up.

Maybe you gave your senior designer a well-deserved raise in March. Great. Did her client billing rate change too? If it didn’t, your firm absorbed that entire increase. Do that across several employees and you can have a much more expensive team without changing what you charge for the work they produce.

LUDC calculates how much an employee costs, how many hours that person can reasonably bill, and how much revenue those hours need to generate. That also helps Laura and Melissa answer a question firm owners ask ALL THE TIME. Can I actually afford to hire this person? 

Their 52 percent target isn’t some universal number every design firm should copy. The important part is that they HAVE a number. They know what the employee costs and what the firm needs to earn from that work.

Take each billable person on your team and do the same exercise before you decide that 2026 rates are good enough for another year. Include salary, payroll costs, and whatever other direct employee expenses make sense for your business. Then compare that with what clients are paying for that person’s time.

If the margin makes you wince a little, you’ve found something to work on.

#3 Account for the Client Who Needs Three Times More From Your Team

No client is the same as the next, even if they book the same services and have the same size house. Projects that can look almost identical at the beginning but need dramatically different amounts of time by the end. Two 5,000-square-foot homes can have similar scopes while one requires 100 hours and the other requires 300 because of the client, the builder, changes during the project, or any number of other variables. 

You’ve probably met both clients.

One approves the sofa and moves on with her life. Another wants four additional options, revisits the original sofa two weeks later, sends you a completely unrelated sofa from Instagram at 10:47 p.m., and then asks whether you can just “quickly” mock up the room with all six. None of this means you need to punish clients for asking questions or changing their minds, but your pricing has to accommodate the ways in which your clients ACTUALLY use your firm.

Christine Markatos Lowe, founder and principal of Christine Markatos Design, told Business of Home’s Aidan Taylor that her firm reviews pricing every year rather than waiting for a break-down. Her reasoning is that the costs around their work keep changing, whether that means labor, materials, or the day-to-day expense of running the firm.

When you review your fees, include project behavior too. How many revisions are typical now? How many meetings? How much builder coordination? How many hours does your team spend answering client questions between formal presentations?

If the projects you completed this year required more of your team than the projects you priced two or three years ago, that difference needs to go somewhere.

#4 Decide Which Extra Work You’re Willing to Absorb

Every firm has work it chooses not to bill.

If your team orders the wrong finish and spends two hours correcting the mistake, billing the client for those two hours would be quite a bold choice. LUDC doesn’t charge for that kind of backtracking. But Laura and Melissa draw a very different line when the team needs to redo work because something was discontinued, the client changed direction, or another normal project issue required additional design time.

Go through a few invoices from this year and think about what DIDN’T make it onto them. Were you correcting your own mistake? Fine. Were you spending another three hours sourcing because the client changed her mind? Different story.

This can be especially expensive when several people on your team are making these little judgment calls independently. Fifteen minutes here and forty-five minutes there might not seem worth worrying about, but multiplied across several projects and an entire year, you can give away a surprising amount of work.

If you intentionally want to include some of that time as part of a high-touch client experience, that’s great, but your pricing should reflect that.

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#5 Review Your Entire Fee Structure, Not Just Your Hourly Rate

Changing your pricing doesn’t automatically mean raising your hourly rate.

Your minimum could be too low. Your flat fee could need another phase added to it. Your procurement compensation might no longer cover the amount of staff time involved. You could need a clearer revision policy, a larger retainer, or a different way of accounting for projects with unusually complicated construction coordination.

When Architectural Digest’s Clara Haneberg asked designers how they decide whether it’s time to raise their rates, Tobi Fairley pointed to the numbers behind each service. If you don’t know what a service costs you to provide, how much overhead it has to support, and what profit you actually want from it, changing the price is basically guesswork.

There are also costs you might decide are completely worth paying. LUDC pays transaction fees when clients pay through its invoicing platform, and Melissa is fine with that expense because clients pay faster and the firm has access to the cash sooner.

Go through every way your firm makes money from a project and ask a very basic question. Is this fee paying for the work attached to it?

Look at hourly design fees, flat fees, project minimums, procurement compensation, retainers, and anything else clients pay your firm. You might decide several numbers are perfectly fine. You might also discover that one service has been subsidizing another for a LONG time.

Your 2027 Pricing Should Come From Your 2026 Projects

By October, you have nearly a year’s worth of information sitting right in front of you. Use it.

Look at a project that went off without a hitch and one that absolutely exhausted everybody. Compare your original proposals with the hours your team actually spent. Look at the employees who received raises, the services that required more time, the extra work you absorbed, and the fees that produced less profit than you expected.

Then decide what needs to change before sending your next proposal.

Maybe that means increasing one of your hourly rates. Maybe you need a higher project minimum, more room in your flat fees, or a procurement structure that accounts for the amount of work your team now puts into purchasing. You could also decide that a particular service simply isn’t worth continuing at its current price.

You already did the work needed to learn all of this. Please don’t throw away the information and price another year of projects exactly the same way.

Written by the DesignDash Editorial Team
Our contributors include experienced designers, firm owners, design writers, and other industry professionals. If you’re interested in submitting your work or collaborating, please reach out to our Editor-in-Chief at editor@designdash.com.