Mark Richardson of Case Design/Remodeling says Case has, over a 30-year period, evolved a process for charging for design — preliminary design, for which the client is charged .5% to 2%; detailed planning, which is 6% to 8%; and construction. But Case didn't start out that way.
At first, preliminary design and detailed planning were credited to construction. “When you have the competence, you can move from retainer to profit center,” says Richardson. “Until then, look at your design fee as a client's commitment to move toward a remodeling project.”
That's what George Dahl, owner of Cook-Dahl, does. He collects a check before prospects sign a contract but only cashes the check (and keeps the drawings) if they decide not to use his company. If they sign, which most do, he returns the check.
“[Charging for design] is more to see if people are sincere,” says Dahl, whose company is in Brockport, in western New York. But he doesn't forego payment; the 1% to 1.5% fee is tucked into construction and plans and permits.
Case, located in the Washington, DC, metro area, is in a sophisticated market of professionals accustomed to billable hours. This isn't the case for most remodelers. Think about what your market will bear when figuring what and how to charge. You may have to use a smaller design fee and credit it to construction.
Wayne Booze of DesignLine Remodelers in Richmond charges 4% of the overall cost of the project. He collects the fee the day clients sign a design contract. Ben Morey of Morey Construction in Los Angeles County also charges 4%, which is “pretty close to what we're looking at for costs if we were to isolate the design portion.”