Contract - July/August 2016 - 32

Besides, do you really want a client that
is hunting for the best bargain? What kind of work
would ultimately come out of such a partnership?
If you are in a position in which you constantly have
to cut costs to compete, consider refocusing your
practice on the types of clients that you can be
of the greatest service to, and, more specifically,
those who understand the value of your work.

Why You Should Never Lower Fees
by Evelyn M. Lee, AIA

Evelyn M. Lee, AIA, writes
a regular column for Contract
on business practices in design
and professional development.
Lee is a senior strategist at
MKThink, the ideas company
for the built environment
based in San Francisco,
and holds graduate degrees
in architecture, public
administration, and business
administration. Lee is
currently a member of the
AIA national strategic council,
and she previously served
a two-year term on the AIA
national board of directors.
In 2014, she received the AIA
Young Architects Award. Her
website is evelynlee.com.

Evelyn Lee will be a featured
speaker at the 2016 Contract
Design Forum, November 9-11,
in Del Mar, California. The Forum
is open to qualified candidates-
those who are engaged in the
commercial design profession-
to attend and participate.
Visit contractdesignforum.com
to learn more.

32

While attending the American Institute of Architects
(AIA) National Convention in Philadelphia in May,
I had an interesting conversation with several peers
regarding the pricing of our professional services.
As a strategist for the firm MKThink, I noted
that our hourly rate for design strategy is much higher
than a firm would charge for standard interior and
architectural services. And while I am a licensed
architect, I recounted that one of the reasons that
the AIA appellation does not follow my name on my
business card is because I prefer that clients view me
as a consultant first and do not use the fact that I am
a licensed architect to question the rate that they
should be compensating me.
For standard professional services, though, what
can interior design and architecture professionals
do to ensure that we are compensated for the full value
that we bring to the table? The simplest response:
Never lower fees.
I often hear the complaint that many clients do
not understand the monetary value of the services that
designers offer. But, in order for clients to understand,
we all need to consistently charge the full cost of
our services. Sure, that may be easier during robust
economic times, but it should also hold true during
the more difficult years, too. And there will inevitably
be tough times ahead.
Here are three specific reasons why design
professionals should never lower fees:
Someone will always do it cheaper
If you lower your fees by five percent, someone
else will always be willing to lower their fees by that
much or more. Part of selling yourself and your firm
to potential clients requires quantifying the accurate
cost for your quality work and services, even when
that may come at a premium compared to the
competing firms.

You forfeit future bargaining power
Once you give a client a discount, they will always
expect it, especially if you prove you are able to
deliver a full set of services at the discounted rate.
Raising your price after the fact inadvertently
forces the client to reevaluate the relationship
and consider whether or not they should stay with
you or switch to a competitor.
For most firms, especially during
economically challenging times, agreeing to
reduced compensation from one client usually
means doing the same for all new clients. That
potentially results in an entire portfolio of work
that will never pay you for your full value.
Your profit margin goes down
Firms determine their rates for a reason. But
no matter how the equation comes together, the best
practice is to base it on the right numbers that will
make a business profitable and sustainable. Cutting
fees ultimately requires the firm to work harder
to make up for lost revenue. It means you need more
clients or projects than you would otherwise likely
need to carry. When that happens, it is not always
possible to ensure the best work is consistently
delivered to all clients.
During my conversation at the AIA Convention,
one firm principal admitted to calling competitors
to ask them why they are lowering fees. He said that
he takes the time to educate them in basic economics,
hoping they understand that lower fees collectively
devalue the entire market. Surprisingly, some of his
competitors actually listened to his advice and held
strong, even through the recession. Today they are
all the better for it.
You may think that now-when so many firms
are trying to keep up with all of the work that they
currently have-is a curious time to be addressing
this topic. But, why not? Rather than wondering why
design services continue to be devalued, now is
actually a good time to revalue the rates that you have
been charging. Ask yourself and your management
team: Is the firm being compensated adequately?
When the next down market occurs, get creative
about cutting your overhead-but not necessarily
your staff. Evaluating your fee structure now
will enable the firm to not have to reduce its rates
in the future. c

contractdesign.com 	

JULY | AUGUST 2016

PHOTOGRAPHY: CARL BOWER

COLUMNIST
http://www.evelynlee.com http://www.contractdesignforum.com http://www.contractdesign.com
Contract - July/August 2016

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