For some remodeling clients, the concept of a volume discount extends to remodeling projects. They argue that there are efficiencies of scale or that expensive finishes don't increase a remodeler's risk proportionately. Faced with a design/build remodeling project estimated in the million-dollar range, should you reduce your design fees?
Most design/build remodelers will caution against it. For one thing, there's a lot of hand-holding with large projects. “It takes so much time just to come up with a $1 million job — preparing the interior colors, finishes, architectural drawings, landscape planning,” says Anthony Wilder, of Anthony Wilder Design/Build, Bethesda, Md., who charges 12% regardless of project size. “We use that money with integrity; we do way above and beyond what a client expects, and it comes back tenfold.”
For others, it's not so black-and-white. “You could rationalize lowering your margins if you could do a large project quickly and [the fee] meets your goals,” says Jonas Carnemark, of Carnemark Systems + Design, Bethesda. If you foresee earning a $200,000 gross profit in six months as opposed to one year, it makes a difference. The point is moot for Carnemark, however, because he charges by the hour, which he calculates to be approximately 8% to 12% in design fees. “Clients who are efficient use the incentive of a low design fee to make decisions quickly,” he says.
Design/build firm Benvenuti & Stein, Evanston, Ill., uses tiered pricing for its construction documents. B&S charges 12% for projects under $50,000; 11% on jobs $50,000 to $100,000; and 10% on anything higher.
“That doesn't include special services like site engineering, structural, mechanical, soil, special model making,” owner Geno Benvenuto says. B&S knows what its clients will bear, tracks jobs closely, and isn't leaving money on the table. “The fee is within our clients' comfort zone and less than the 12% or 15% that many architecture-only firms may charge,” says Benvenuto.
At bottom, high-end clients will pay a seemingly high fee if they get the service. “They don't expect you to lower your costs,” says Halsey Platt, of Walter H B Platt Architects, Remodelers, & Cabinetmakers, in Groton, Mass., “but they do expect you to deliver. And there's hell to pay if you don't.”
Stacey Freed is a senior editor for REMODELING.