Fees

Perth, 20th May 2010

After yesterdays talk about additional fees it is logical to talk about the main fees. It is one of the most frequent activities I get involved in running the company: the preparation of client fee proposals. Another three are on my desk as we speak. I always say that as long as you are busy doing fee proposals you are in business. At least you have a foot in the door of your potential client. Historical statistics will give you a general indication about your success rate. I don’t know about my colleagues but we run on an average of about 30% as a success rate. It is irregular but averaged over a year it’s about there.

There are several ways to put together your fees, the lump sum method being the one most applied in this region. But that is also the most complicated one as you really need to cover yourself for all eventualities and make sure that all your fixed costs are included. The tricky part is the flexible cost components such as design coordination meetings, site visits, document deliverables, travel, etc. It is important to log in what is part of the fees and what is to be reimbursed separately. If you don’t control the variables in your fees you may end up providing services at infinitum.  Specifically attendance to meetings can be a killer! I guess you learn along the way…I certainly did!

Ideally you have a time based fee, something we manage to apply quite regularly in Australia. An hourly or day rate is perfect as it covers your actual time spent for the client. And time is really our commodity isn’t it? If you keep reimbursable costs such as travel, etc, separate this is the safest way with no real headaches.

 Finally there are also fees that are based on a percentage of the lighting equipment costs. Though not a bad approach it has some pitfalls. Certainly if you wish to be paid regularly as you progress with your work. Most of our practices are relatively small with little cash flow, so the fee structure should be such that it provides you with the quickest and best possible cash flow.

20. May 2010 by Martin Klaasen
Categories: lighting design practice | 1 comment

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