Looking for feedback on industry design fees. I know it might be a touchy subject, similar to the installer salary quest many of the members have been on - but is there a general design fee rule, like a % of a job (which would be difficult to quote up front for a design unless you ballpark it before the design) or a flat fee per system, based on the type of system?

We don't have a set rule at this point, but we're looking at putting one together to help sales & design recoupe time from walkaways, especially those who want to shop out a design.

this should be discussed on IP's verified section, not an open forum.

www.integrationpros.com

Why?

ANyway, We generally charge about $500 flat design and consultaion fee for new clients...... THe fee is usually automatically waived for clients that were referred, but it is always the discresion of the salesman too..... THe entire depsoit gets credited to the job if they do go with us though.

We provide a LOT for the fee though..... Full Color Proposal, Wiring diagrams, Spec sheets, all bound and hand delivered. Our average proposla is about 30-50 Pages, and about 8-10 hours of work.

You type mighty fast! :-)

Because the worlds going to com to an end ;-). Save the children.

Braivhart,

There are so many ways to handle it. Impaqt's store has a $500 fee. Sounds fine but I assume/hope there is some clause that states how much time that includes. In my opinion any fixed bid design agreement must clearly spell out when design "ends" OR design must be performed at an hourly rate.

In other words, let's say you charge a fixed fee of $500. That may cover your time with one client but there WILL be clients that want you to go back and change your design 4 or 5 times. Unless you specifie at the beginning when the design fee is "used up" you will run into problems.

A fixed design fee of $500 could also cause problems if the project is large. It's not difficult to sink 40+ hours into the initial design for a large project. I'd be curious to know if that would also be covered by Impaqt's stores $500. There's also the opposite end of the spectrum. Someone wants a media room with a plasma. It might take two hours to put that proposal together (assuming you aren't doin CAD drawings etc.). Do you charge them the same amount?

This is where some real round tabling in person can be effective. It's so hard to cover it all here.

I usually charge an hourly rate, often with a "not to exceed amount" without the clients permission. And I do NOT apply it to the project cost if they purchase the system. It's WORK, why should I give it away. We desperately need to move away from this model in our industry where we expect to pay the bills from product sales, especially as products become easier and easier to find discounted on the Internet. Right now too many business "subsidize" their design work and labor departments with profits from their product sales. I think a lot of companies (mine inclided) are getting away from this and it is in my opinion a much better way to operate. Please note: I did Not say it's necessary to give up profit on equipment but we should NOT give away our labor. That's CRAZY and if you are doing that you are either giving away money OR not really giving away labor and just making it up some place else.

Sorry to go off on a tangent. I use to do the thing where I told people I would apply the design fee to the project. Now I look upon it as crazy and unnecessary. It's like an attorney telling someone he will charge them for the first 10 hours but will refund the first 10 hours if you end up charging up 100 hours with him. Ever heard of an attorney or ANY professional doing something like that? Why should we?

Edit: of course it all depends on your market and a bunch of other factors as to how you have to decide to charge and charging a fee but applying it to the project is probably a heck of a lot better than charging no fee at all.

This message was edited by QQQ on 02/08/05 15:02 ET.

I am personally glad to see this in a open forum that our potential clients could see. It validates what we tell them about the time and effort that goes into designing their systems and that we are not charging them to pad the bottom line. Thanks Q for bringing up the topic that you don't get a "credit" for prep work done by other professionals for the work they will ultimately do for you. It would be nice to have an accountant that works that way though! Unfortunately their are too many guys in my market that will give clients a shopping list for free. A potential client (that is now NOT a client) recently contacted me for a 10 zone - 6 source whole house audio system, some basic lighting control, and surround sound system in his family room was pissed that I wanted a design fee to put this all together for his $500K tear-down he was in the middle of. He went with the guy that gave him the list that was missing about 35% of what would be needed to complete the job. I'm sorry to have lost the work but glad that he hasn't called!

Actually Mike, I just had a doctor offer something similar the other day. The physical exam and tests were about $500 but he promised he'd give them to me for free if he found cancer because of all the surgery I would need. Needless to say, I was thrilled.

There are merits to both the flat fee people and the pay as you go types. The software I use puts in a design fee as a percentage of labor costs; labor goes up, the presumed design effort goes up.

The flat fee idea has merit in that it keeps Impaqt's company from becoming the third on every "get three bids" person out there. I hate that mentality, and have been third far too many times. Keeps the tire kickers out.

On the other hand, a flat fee does not reflect actual effort on a larger bid. I expect anyone charging a flat fee for "most" bids and one that is as fast a typist as John (!) will also know that a bigger job might need a bigger design fee for the greater effort.

I sit on the fence on this with my policy. I do "proposals" that do not include a price list, at no cost to the customer. If someone comes back and asks for a pricing breakdown I offer to complete a design for them for the fee; yes, it is refundable when the job is comissioned. My labor cost has the design fee factored in as part of the work, not as a gimme to the customer charged to sales overhead.

Generally, we dont charge design fees for "Suround Around" setups... (Plasma, Componetns and 5-7 speakers) Thats pretty much the staple of our retail floor and those guys up fron do a great job getting those together.... My design work is usually reserved for Multi-Room/Dedicated home theaters, and the like.....

Like I said, the Charge is discresionary.... The salesman have the ability to modify it to the particular client. If its a Particualary large job (250k+) then we usually build aditional Design and consultaion charges into the bid. But as far as the 50-100K Multiroom systems go, its a flat fee. Generally, if we get to the point of multiple revisions, we have the job. so it doesnt bother me to make the necessary changes.

(30-50 pages generally consist of about 15-25 pages of Cutsheets and general product information...... Sometimes this doesnt even get looked at... But the clients apreciate having all the info on their system up front.)

But if that's so then you really haven't "refunded" anything have you :-)? Sort of like marking a product up $200 extra then saying "SALE, $200 OFF!". Don't get me wrong, I'm NOT saying I have a problem with that approach, I just get a kick out of calling it "refundable".

It's really no different than factoring in travel time for a service call and charging $95 for the first 15 minutes. Now you've covered your travel time. But if you were to tell the client you're charging them for travel time instead, they'd get upset. Human nature can be a funny thing.

Interesting responses. Over the course of the day, before I read the last few responses, I thought about this quite a bit. Many installers, especially those with software to assist with proposals and design (SRS, D-Tools...) can incorporate design fees into each product (figured in to the labor charged for each product) just as TheaterWorks said. Charging a flat rate up front for systems under, to use Impaqt's example, $100,000, and then crediting back into the job is something I am leaning towards but ultimately it depends on what you are trying to "get" by charging a fee.

For instance, QQQ wants to be paid for, literally, a design. He will give the client design documents, etc. Others will require the flat rate almost as a qualifier and to protect themselves from shoppers and tire-kickers so they don't waste their time. I guess the correct method of billing design work depends on what your reasons are for doing it...

"I sit on the fence on this with my policy. I do "proposals" that do not include a price list, at no cost to the customer. If someone comes back and asks for a pricing breakdown I offer to complete a design for them for the fee; yes, it is refundable when the job is comissioned. My labor cost has the design fee factored in as part of the work, not as a gimme to the customer charged to sales overhead."

I agree with Theaterworks on this one. Proposals are a fair way for the 3 bid customer to make a descision on a contract. Once awarded there is no way to charge a design fee, with the exception of a change order when re-designing the job or part of it is required.

It is always a sensitive subject...
Certain builder referrals, designer referrals and former client referrals can sometimes be waived, especially if the builder asks the client to sign a waiver to allow other than us on their jobsite!! I know "contractors" that are in this boat with a lot of upscale builders.

I guess it's a part of the initial meeting and how well we qualify the customers. I ask who they have spoken to and who they plan to speak with. (the custom equivelant of "are you ready to buy today?")

But there are always the "get three bids" guys that you spoke of that may warm up to some cut rate guy... after all who doesn't like saving some money sometimes.

I have had the unfortunate situation of a well established satellite and antenna outfit cutting price on my bids a lot back in the 90s. These clowns even stole my proposal cover sheet WORD FOR WORD.

I have seen them reverse engineer my quotes more than once with very questionable results. But someone saved a few dollars!!!

I railed my rep once when he told me that they even tried to get one of my key lines, they didn't even have the imagination to apply my designs to similar products that they already use.

I used to joke that I was going to send THEM a design fee!!

It's interesting to look at this from the other side of the fence. A couple of years back we had some work done at our house, and I was in the position of reviewing bids for big $$ on work that I wanted done by other people.

While it was entertaining to see how poor some of the bids looked relative to their huge cost, no one offered a design document as part of the bid, only as part of the signed contract; the drawings went away at the end of the presentation. On the other hand, it not the kind of work (construction, landscaping) that the uninitiated might think you could find in a big box store, like they could with our products. No design fee was asked for by any of the bidders.

Our industry in different in that those not in the know can think that it's just an assembly of boxes plugged together. Yes, we need to educate, but that's hard sometimes when the buyer does not want to learn, they only want that price so they can "compare".

Off the soapbox, back to work.