When you first begin charging for design, the fee is often seen as more of a client's commitment than a profit maker. “When you look at your efficiency in doing the design and moving the client through effectively,” says Mark Richard-son of Case Design Build, Bethesda, Md., “that's an indicator that you can start to look at the design fee more in terms of its profitability.”
Although the 15-year-old Associates in Building & Design has always been design/ build, it took seven years “before we realized we had a good profit center,” says Bob Peter-son, who co-owns the Fort Collins, Colo., firm with his wife, Rita Peterson, an interior designer. Total company revenue in 2004 was $2.7 million, of which design accounted for $700,000.
With five designers on staff, including one licensed architect, ABD takes clients from creating plans to making specifications and selections. The design contract covers everything from concept drawings to construction. Clients may terminate after concept drawings, in which case they pay for ABD's time (ABD “keeps its ideas”) or by purchasing detailed drawings. This sets ABD apart from the many design/build firms that keep their drawings. ABD charges for design in one of three ways:
- Flat fee. Used for small projects. Clients can make two revisions.
- By the square foot. Used for new construction or whole house remodels, the company charges between $2 and $5 per square foot depending on project size and scope.
- Hourly basis. ABD tracks seven revenue streams through its profit and loss statement, including construction, new construction, design, handyman services, and retail.
Peterson credits ABD's success to Rita, he says, who always insisted “on being paid for her services, which in turn created a mentality at ABD that we're professionals and we need to get paid.”