Bill everything you earn
Tuesday, May 01, 2018
One of the challenges for any kind of service provider, professional or non-professional, is finding the proper balance between delivering excellent service and being appropriately compensated for one’s time and talents.
Being generous with your time and going above and beyond what clients expect is one way to ingratiate yourself with them and garner future referrals. Unchecked, however, it can slowly erode your business’ profitability.
Your standard contract or letter of agreement should spell out clearly and precisely the services for which you charge, how you charge (e.g., hourly or flat fee), and the rate for each service. It should also list any additional charges, such as travel time, meeting time, shopping time (if not included in markup), and expenses that will be billed to the client.
To avoid any confusion, I recommend including any items for which you do not bill. These can be presented as "free" or "complimentary" services, but of course you will have already factored them into your fee structure.
If all this sounds rather obvious and routine, that’s good, because it should be. It’s how any well-managed interior design business should be run.
Where many designers get into trouble is in not keeping proper accounts of how they are spending their time. They get busy or tell themselves that it’s not worth bothering with keeping track of every phone call or trip to the showroom. As a consequence, they end up leaving money on the table they should be collecting from their clients.
Over the length of a project, those little segments of time can add up to a substantial amount. Even if you don’t bill a current client for additional time, the information you collect is critical to future pricing so that you can factually represent how long something similar will take to do. Data is powerful!
When working with interior design firms to help them improve their revenue and profitability, I often am amazed at how lax and unstructured keeping of time is in many firms. If you don’t have a clear understanding of how much time you and your team are spending on each project as well as on each activity within a project, you are shooting in the dark when it comes to figuring your profitability.
This is particularly important if you are offering fee-based or value-based billing. You can quickly lose sight of your actual labor costs.
There is no excuse for not keeping track of the time you spend on your business, both billable and non-billable. Just use a method that works for you that is simple and convenient.
In the old days, I used to recommend that designers keep a pen and paper time log, preferably in a portable format, such as a notepad or pocket calendar, to have with them at all time. These days, however, every designer I know has a smart phone, and there are many time tracking, task management, and time management apps you can install on your phone, your tablet and computer, and then sync together, so you always have access to your time log. Plus, many of these will tally your time for you.
If you’re not comfortable using apps, or don’t want to have to deal with yet another piece of software, then I suggest employing a tool that you are already using — your mobile calendar.
Chances are you already use Outlook, Google Calendar, Apple iCal, or something similar to schedule and keep track of tasks and appointments. The idea is that you log your time in the block or notes sections for each activity on the calendar. Put an extra block of time on the calendar each day to account for time spent on other billable tasks that were not previously scheduled, such a phone calls or unscheduled meetings.
At the end of each week, you, your administrative assistant or office manager can pull the information from your calendar and those of the others on your team, compile the time, and input that information into your design management or time billing software.
You can enhance this system further, if you wish, by including a block each day for time spent on non-billable activities. With most calendar programs, you can also employ color codes to indicate how much time you spend on various activities. Together, that additional information will give you further insights later on when you are looking for ways to better manage your firm and maximize your profitability.
Regardless of what clients may believe, your time is not free, and you deserve to be paid for all the time you earn on a project, not just some of it. That should be clear before any work is done on the project.
Because clients may sometimes balk when they receive an invoice, it is even more important to keep thorough and accurate records of how you spend your time. There are other ways you can provide excellent service and be generous with your clients without taking a pay cut.
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