Let’s face it: Billing strategy is one of the design industry’s most critical, yet often most uncomfortable, conversations. While many successful architects and designers remain understandably guarded about the specific blend of retainers, fees, and markups that sustain their firms, getting a handle on these numbers is the key to keeping your business healthy for the long haul. AD PRO consulted dozens of industry advisors and practitioners to deconstruct how—and why—they charge.
Our reporting reveals that while flat fees, hourly rates, and cost-plus models are staples, the hybrid approach has emerged as the industry standard. Finding the best billing approach for your firm is really about making sure your pricing matches the unique way you work. Here’s how to evaluate which model best secures your firm’s success.
Billing Basics
| Flat Fee | A pricing structure where the client pays a fixed, predetermined total for a specific scope of work, regardless of time invested. |
|---|---|
| Hourly | A pricing structure where the designer is compensated based on the actual time spent on project tasks. |
| Hybrid | A pricing structure that combines elements of other models—typically a base fee plus variable costs—to offer greater versatility. |
| Cost-plus | A pricing layer typically applied to procurement, where a percentage is added to the wholesale cost of goods to determine the final price; this is often used alongside other billing models rather than as a standalone strategy. |
Determining Your Rate
Sean Low, founder and president of The Business of Being Creative, a strategic consultancy for professionals in creative fields, recommends a goal-first approach to pricing. Instead of starting with your hourly rate or commission, Low advises defining your income goals and desired workload first, then basing your fee structure on those considerations.
“The first thing you have to do is figure out how much you want to earn,” Low says. “Finding the right price for a project is easy because it’s based on what you need. But can you get it? The price today, more than ever, has to reflect the differences in value that you’re offering.”
A designer who knows they can wrap a project in four months might charge a flat design fee and a markup on product used. Another designer who spends months working with the client closely might prefer to charge for their time by the hour.
Before starting any job, designers should issue their clients a contract with a clear scope of work (SOW), which defines the deliverables of their design fee and the number of allotted revisions. The contract acts as a guardrail around a designer’s rates and time.
The flat-fee model
Supporters of the flat-fee billing strategy appreciate the transparency it offers clients from the onset of a project. Homeowners appreciate that there are no surprises when it comes to payment after the project is wrapped. If you’re using a flat-fee model, you need to clearly define your scope of work (SOW) right from the start. The SOW must account for all your possible work, including revisions and delays. Otherwise, your time can be wasted on tasks that weren’t initially discussed.
Directory designer Vicente Wolf says he prefers a simple, straightforward way of billing. “Ninety percent of the time we charge a flat design fee when we start a job, which is worked out according to budget and the scale. Then we charge 35% commission on the wholesale price on all products,” he explains. Wolf believes that if he charged by time, “clients would think I’m overcharging them.”
The equation for determining your flat fee can take a top-down approach, as previously shared from Low, or can come from the percentage of the overall project budget, much like a contractor’s rate. That said, more designers are shifting away from this method.
Seth Kaplowitz, founding partner of Kaplowitz Strachan, a leading law and advisory firm specializing in the design industry, advises against using a flat-fee-based contract, as it “tends to have a lot of limitations and restrictions that can turn off potential clients.” (See his AD PRO story, “How to Price Your Interior Design Services.”) For example, a flat fee contract often lists services where additional fees apply, which “can introduce friction and ultimately prevent a client from signing and moving forward,” says Kaplowitz, who also argues that unless a designer’s flat fee is stratospheric, they will probably make more money billing hourly (that is, if they’re diligent about tracking their time).
Hourly-rate pricing
AD PRO Directory designer Christie Leu says she prefers hourly-rate fees for the latitude they provide her Washington, D.C.-based firm, especially since clients often adjust the scope of their projects mid-process. This is a shift from her earlier days, when she experimented with a flat-fee strategy but found it flawed. “It was difficult to judge whether homeowners would be decisive,” she says. “I used to take a gamble by charging a higher flat fee to accommodate the least efficient customers.” Now, Leu offers “a combination of hourly fees and cost-plus on merchandise,” which she describes as “the only way to operate in the black.” It’s worked for her ever since.
Like Leu, other adherents of the hourly-rate model argue that flat fees fail to account for indecisive clients, timeline delays, and other unpredictable variables. “Hourly is best unless you have an ironclad contract on the amount of changes the client can make that includes an additional charge for delays by the client or other involved parties,” says Meredith Xavier, principal and founder The Ligné Group, an LA-based business advisory firm. “Hourly plus a markup on products and services is the charging structure I tend to recommend most.”
Adam Littmann, cofounder and managing director of Directory firm Neighbor Interiors, also moved away from a fixed flat fee model. He and cofounder April Littmann felt that a rigid number didn’t leave room for the realities of construction timelines. “We offer an hourly model paired with a detailed upfront estimate,” Littmann says. “This gives clients a clear number to plan around, but it stays honest to the actual work as scope evolves.”
The Hybrid Model
A hybrid model means that a designer will combine different billing strategies to create a new payment package. They can also keep these packages adaptable—meaning the charging scheme can vary, depending on each project. Taking this client-first approach to billing resonates heavily with the designers we consulted—and on the other side of the billing scheme, clients prefer the flexibility to choose the billing method that works best for them.
New York City-based Directory designer Andrew Suvalsky says his pricing strategy came from listening to what his clients wanted, which was “flexibility, paired with clearly defined parameters,” he says. He offers two methods of pricing for his services. “The first is an initial design fee that covers creating the design presentation, plus a percentage markup on the entire project cost summary, inclusive of the general contract fees,” he explains. Since there’s no hourly billing in this model, his percentage markup runs higher. Suvalsky’s second plan also involves an initial design fee for the presentation, plus hourly billing for project management and execution, as well as a smaller percentage of the full project cost summary. “I also mark up certain custom-designed pieces. That’s spelled out in my contract, though I don’t commit to a fixed markup amount,” he adds.
For the design phase, Los Angeles-based Directory member Linette Dai also uses a flat fee. “Rather than putting us under pressure to find the perfect lamp in under 15 minutes, or having clients second-guess every internal meeting, a flat fee allows us to focus on solving problems creatively,” says Dai. “It also motivates us to become more efficient.” For construction, project management, or any requests beyond the design phase, Dai bills hourly. “One refinement we’ve recently adopted is hourly billing with a monthly maximum cap, which gives clients predictability while still paying only for the time used,” she notes. And for select large-scale new builds—those where her team has a good sense of how the project will unfold—Dai offers a flat-fee implementation addendum once construction begins.
Directory design firm Dunham Robinson also employs a hybrid strategy, utilizing a combination of flat fees and hourly billing, but with no charging a percentage of construction costs. “Over the years, we’ve adjusted the specifics from project to project,” Robinson says. “But the underlying philosophy—a defined scope paired with flexibility for change—has remained consistent.”
When to Reevaluate Your Billing Strategy
To Robinson’s point, a design studio’s charging structure needs to be flexible to achieve what’s best for both clients and designers. Adaptable billing schemes encourage both a rolodex of repeat clientele and consistent fair compensation. “We intentionally offer flexibility to suit our clients’ individual needs,” says Aaron Leshtz, cofounder of Los Angeles AD PRO Directory firm AAHA Studio. “When our structure matches the client’s comfort level, it establishes trust from day one.” Since no two jobs are alike in terms of labor, cost, and client expectation, adjusting your strategy based on ongoing client feedback and the realities of a given project ensures that you’ll be fairly compensated.
AAHA originally bundled their architecture and interior design services under a single fixed fee for an entire project. But since not every client needs both services, they decided to adapt their charging scheme. “Our model relies on either a fixed fee or an hourly rate, and then we pass on trade discounts directly through to the client rather than charging a product markup,” says Harper Halprin, cofounder of AAHA.
“There is no magic bullet in design billing, and there is no single right answer,” continues Leshtz. “It’s about making sure the client feels taken care of, avoiding overcharging, and keeping your business healthy and functional.”
