A few days ago I received a text message from my assistant Katie telling me we had received a bad review on yelp. I had absolutely no idea what she was talking about. I googled this so called website and found that a page had in fact been created, and we did in fact have a bad review. I was completely perplexed. We had no idea who this person was, nor did their review make any sense. We went back through three years worth of records and could not find this client. Finally, after hours of racking our brains it came to us, this was the husband of a client we worked with four years ago…. Yes, four years ago. His exact review:
“Worked with her and had a very poor experience. Proposed design ideas weren’t in line with what we wanted and she was somewhat defensive when we asked for a change. First estimate was 50% over budget. Always felt like we were being double charged since we got an hourly charge when she looked for the furniture and then she made profit when she sold the furniture to us. Clearly in business to get the most money out of the customer possible. Buyer beware.”
As with anything there are three sides to every story: His, mine, and the truth. Shame on me for not catching this review sooner (he left it over a year ago) but,…….experience is all about perception. My firm and I were not hired by him but rather his wife, while he was still in Japan wrapping loose ends. (where they had been living for four years) She hired me to help transform the entire first level of their new home. Her proposed budget to me: $100K. This was to cover all furnishings and decoration for the dining room, living room, family room, kitchen, kitchen nook, master bedroom and powder room.
I was so excited to find out that the husband would be home in time for the presentation and I was $2K under the proposed budget, which typically makes husbands very happy! Instead, he was pissed. Turns out the husband wanted to spend $50K, not $100K…..but he wanted me to do the design I proposed for the lesser price.
Problem number one. (This is also where “poor experience” comes in for him in the above review because he loved the design, but didn’t want to pay full price for it, and “defensive” for me because I don’t have a magic wand.) I cannot change the cost of items. Things cost what things cost, period. Ask West elm if you can have $100K worth of furniture for $50K and see what happens…..
Problem number two, clients always feel like designers, or any service provider for that matter, is double-dipping if they charge an hourly and a so called ‘mark-up’ on goods. I don’t ‘mark-up’ furniture and it states this in my contract (the one he got a copy of). I charge a project management fee.
What the heck is that you ask, and how is it different? Let’s look at an example of a recent job I did using The Container Store. The items I spec’d only took one hour to source, however, for every one hour I take to “source” a product it takes an average of 3.2 hours of admin and management to get that product to you, the client.
To place one order my staff and I do the following:
- Handle pricing requests, discounts and price checks
- Create accurate proposals
- Draw up purchase orders
- Submit orders to the manufacturer
- Order any necessary samples for dye lot
- Review acknowledgments of placed orders
- Weekly order follow-up through phone and email
- Weekly updates to clients, average 15 min calls
- Handling logistics of delivery to third-party warehouse
- Inspection of items (40% of all orders come in damaged)
- Disposal of trash
- Bookkeeping admin of all placed orders
- Logistic management to home – setting up installations, meeting with installers
- Handling damages
- General Admin – phone calls, emails, faxes, postage, running errands
The Container Store client purchased $62 worth of their products. My management fee was $20, for a total of $82 to the client. The items took three weeks to arrive and the entire box was crushed, including it’s contents.
We reordered the items and it required, in addition to the original list of 15 items above, over an hour in phone calls to The Container Store’s customer service department, emails to the management department, 2 sets of photos and time to repackage the product and drive it to the post office to send it back. And in this case, the nominal project management fee for this item didn’t come close to covering the time my staff and I invested into fixing the issue….or as the reviewer above calls, “double-dipping.”
So while one hour to “source” a product seems like more than enough, it takes my staff and I at least two plus hours to handle admin, management and the logistics of that one product once it has been ordered; costs that one hour of ‘sourcing’ simply won’t cover if a business is to make profit.
In my early years of business I often did all management for free, using my “sourcing” time and paying for staff out of my pocket. That was until my accountant brought it to my attention that 60% of my time was going into the management phase; and my hourly fee was turning into roughly $5.27 after I paid my staff, my subs and the rest of my overhead. For three years I made no profit. We were slammed and working seven days a week, and yet always in the red. I was exhausted and demanded more from my staff because I couldn’t get ahead, no matter how much I worked.
I now teach this in one of my decorating classes, Design Strategies 101, How to build a realistic budget, at the library. It not only shows how to build a realistic budget (no fuzzy math) but how to weigh the pros and cons of doing it yourself vs having the ease and no stress of someone else handling it for you at a nominal fee.
In order to run a successful business it must make a profit, however, many consumers have been clouded with perceptions that profit is a dirty word. And with good reason! With stories like this podiatrist charging exorbitant fees, Jordan Belfort, or even Bernie Madoff; it’s obvious where the fear comes from. But before you jump to conclusions and start pointing fingers that all business is dirty business, try to get a better understanding of the “why”. When you go to the movies you know that popcorn and a coke are going to cost you $30, a six time mark-up by the way….but 75% of ticket sales go to the distributor of the film, so in order for that theater to stay in business and give you an excellent movie watching experience, they need to make profit in other ways to stay alive. They make profit, you get a night out on the town to be entertained.