How to Handle Clients Shopping Around You    (AKA – doing their own thing and letting you know later)

As professional designers and decorators, no one is impervious to the client you have taken on shopping on their own, checking the validity of your prices, coming up with new products etc. etc. Here are some guidelines you may consider when this dilemma arises.designer with clients

1 – First really zeroing in on the clients you are about to deal with is crucial. Using confidence and discernment, ask the right questions in the first appointment. This goes a long way in seeing whether they are your ideal client. You can’t be shy about bringing up why they want a designer. Is it just overwhelming what they think they need done? Do they tell you they don’t have time to figure it all out? If you see they are reasonably capable intelligent people who have made good choices up to now in their home, maybe they are simply lacking confidence in their choices and you will be bolstering their decisions as a consultant. Maybe the wife gives in to the husband as the more dynamic/less savvy decision maker and if she doesn’t have backup from you more design choices will be compromised. Ask about their budget for the project and have a ready response as to how costs (including hiring you fit in). Sticker shock sets in early and can stifle a project before you realize what is happening. Explanation about how you handle purchases (see point 3) will keep them on track and avoid them shopping around you. Remind them they are hiring you as a designer, not a shopper with an inside track. Many clients feel they are owed your design discount if they hire you. Be very clear on whether you will give them a discount and whether it is on just retail, split or simply included that as part of your fee. Be confident in the added value the client receives because they hire you and be ready to pull out these attributes versus an item price when this discussion arises. Once in the project, the clients will get input from friends and relatives who have better ideas (and jealousies), contractors with bad advise who don’t like designers and other designer “friends” who think they should have gotten the contract. How much negativity and defending your plan you want to put up with will determine how much to included in your contract and if you want to put in a clause that helps you walk away from the contract early and gracefully without losses.

woman with shotgun

2- How far into the project are you? Has a complete presentation been presented? Were both/all clients who have a financial stake in the project on board for all that you discussed? How many parts of the project were left in limbo to be decided later? Leaving an appointment with questions you can’t answer or phases undecided does two things: it gets the clients involved and excited about the design process and it leaves doors open for them to further try to “solve” design dilemmas on their own online. They may even stumble on more products they would like brought in. They will think they have arrived at the right conclusions (not knowing all the facts), think they have trumped your decisions and start wondering why they are paying you. Your early preparedness and forethought goes very far to ward off a client going rogue. Be very specific about line items that are crucial to the project and the reasons behind them.

contract with ropes

3 – Your goal in a design project is dual. You want a great outcome with a finished project. You want to get paid for what you have to do to get that great outcome. Even more important than point number 1 is whether you have a contract or Letter of Agreement in place explaining your role and how you get paid. It could state these options:
– That you receive compensation for time (your standard billable hourly fee) plus a percentage of products if they buy on their own. You explain that changes from original products, finishes, styles all disrupt the project timeline and have to be coordinated with specs and what else is happening in the rooms. If they order online, products can come in damaged or not looking like you thought they would and take up more time to ship back and choose another.
– That you allow for x number of emails of products they come across to review the specifications to see if they work. Over a certain number (if you even have an allowance) you charge for the research time with your hourly fee.
– Or you have two fees – one lower fee where you do all the purchasing, and one higher fee when their purchases are incorporated (with your approval)
– You could give them x hours for a review of x number of products and that is all.
– It should state who is responsible for what – what happens if products aren’t the best choice, delivered damaged or don’t fit. Put in a clause to how you will handle decision changes by the client. Also state what the consequences would arise as a result of changes and delays. Try to head off heated debate ahead of time with solutions to common delays in the timeline.

angel devil woman

You can’t determine every problem that may occur until you go through circumstances you never planned on. But once you do you will never forget to educate future clients how you will handle that situation should it arise. Trying to determine early whether a potential client wants a designer, shopper or consultant will also help you figure out if they are the customer you want or are capable to work with.

Margin vs. Markup – How Not to Give Money Away

financial control

Many creative types that pursue a career in designing or art manage to keep the mathematical area of the world at arms length – until it inserts itself into their lives in order to calculate pretty much anything or run a business without making all the mistakes first. Yes it’s true, creative businesses rely on numbers and formulas.  Formulas help all of us when trying to market our skills, establish our value and project a long term view of our finances.  When you start your business you tend to not place enough value on yourself and the services you provide. You are feeling your way, conscious of the competition that abounds and grateful for just about any job that comes your way. Time passes and you realize you are guessing at pricing according to how much you think each client and situation can bear.  Your mark ups fluctuate with each item and you have no idea what your margin is.

By establishing financial standards, you separate yourself and your personal emotions from the entity that is your business. A business is guided by laws and regulations of the state. It has a brand, a name, a method of how it operates – a personality. By knowing at a glance the state of the business’ finances, you gain confidence and understanding of the health of the business and what it takes to grow it.  Also, as your business grows, you may need investors to shore up your foundation in order to take advantage of more things to sell, a website, a building to operate from. If you don’t know your margins, you can’t make projections, and you would not impress a potential investor as a good risk.

financial pie

Two of the most basic formulas business owners need to understand are what their profit margin and their markups are based on and the difference between the two.  Establishing a profit margin lets you know instantly how much of the sales of each item or service will be going towards your operating costs and profit. It can then help you make the best decisions as you build your business.  If your design job you just contracted looks like it will bring  in $5,000.00 in gross sales to your firm and you established from your financial history that your net profit margin has been 33%, you will arrive at the figure $1650.00 as your reward for your efforts.

Looking at your formula a different way will let you know how much each item will have to be marked up in order to establish your client’s price. Remember using percentages keeps your evaluation of your financials on a more objective level.  It helps us from not getting bogged down and muddled by individual figures.  It also is a clearer picture of what is the most profitable area to sell and which costs are rising.

A markup percentage guides you as you set pricing in your various categories. The markup is based on cost and is not equal to the gross margin percentage, whereas gross margin is based on the selling price.  In fact your mark up percentage is always a little higher than the margin percentage (except at the 50% level).  For example in the category of “furniture”, each piece that you sell is referred to as a unit. If you sell a chair for $100.00 and it cost you $50.00, to determine the percentage of markup you would subtract the $50.00 from the 100.00. You would arrive at $50.00 which you again divide by the cost of the unit. The answer is 1 which in percentage equals 100% markup.  Mark up helps you determine the price based solely on the cost to purchase or produce it.  If you later offer a discount, it will insure you don’t price it less than what it cost to purchase it.

The Formula for determining markup:  Markup Percentage = (Sales Price – Cost of a Unit) divided by the Cost of a Unit.  

You can also set your prices with your gross margin.  This margin is based on the sales price.  If you sell a chair for $100.00 and the chair cost you $50.00, you use the formula for the gross margin:  (Gross Profit divided by Sales Price) multiplied by 100.  

. The gross profit is $50.00 and the gross margin is 50%. To convert this to a markup across the board for all the furniture you sell you use the inverse of the equation:  You typically want to set pricing by the gross profit as that is what will be looked at for your financial statements.

 Sales price  equals the cost of the unit divided by 1 minus the gross profit percentage:100 = 50/(1-.5).    .

Another way to put it:  If a table cost you 250.00 and you want to use the margin .4 or 40% to determine your sales price, you would divide 250.00 by 1 minus .4., divide by the inverse .6  and your sales price would be 416.00. Viewing the difference between markup percentage and gross margin percentage use the markup formula: 416.00 minus 250.00 equals 166.00 divided by 250.00 equals .66 or a 66 percent markup.

To sum up the difference between markup and gross profit margin:

The markup percentage is 100 times the difference in price minus cost divided by the cost.

The gross margin percentage is 100 times the difference in price minus cost divided by your selling price.

Feel free to download our handy PDF chart to show the difference in percentages between markups and margins: Click here –  Mark up vs margin







In the last post we described the limitations of what a gross profit, gross profit margin and net sales are.  But we also explained our businesses have more “bags” that hold more figures that need to be factored into a financial report.

shopping bags

In business, we are all about not just doing a great job for our clients and building our reputation, but at the end of the day, we want to see profit also.  It is exhilarating to work long and hard when we know we will take pride in the successful outcome of a project well done. It is also easy to take that final payment and want to go out and celebrate with cash – or give ourselves a reward. The payment feels so good that it is tempting to not see those dollars as part of a whole. The WHOLE of course being your entire business. The payment isn’t yours any more than it is your employees’. It belongs to the entity you have named as your business.

plus and minus

In coming to grips with managing your business finances, one of the principles you need to understand is how your net profits differ from your net margin.  We discussed how your profit varies from your gross margin or gross profit margin. Drilling down, we then have to take that information and understand the net profit and margins.  Simply put, your net profits are the total of what you have sold minus the cost of the goods you sold minus your operating expenses minus interest and taxes. Seems like more minuses there than plusses, doesn’t it? But this is the reality of money and business. It’s a juggling act. Keep your costs down and you will reap more profits.

The net margin factors in how much you made selling what you sell, the cost of what you sold, the operating expenses of your business and the cost of taxes and interest you may have from loans and credit cards. A margin is a ratio comparison and puts all these figures into a percentage. It is the percentage of your revenue you can use to form a cash flow projection which in turn is the basis of your budget based on your financial history. The formula for this is:


Why do we need to know this? First, like in a family, you need to know how many mouths to feed (the mouths being your costs of operating ) in order to know how much it will take to feed them. You will have to strategize ways to make money, increase sales, sell more without increasing your expenses significantly. Keep track of your methods. If it is possible to compare your business with others like yours, try to find out what they are doing that you are not. If you obtain a loan or add a credit card, however, remember, it becomes another mouth to feed, even if you have the illusion of more money in the coffers for awhile.


When you use a spreadsheet and make the comparisons of your income and outgo, it will somewhat eliminate the worries that keep you awake at night and put a realistic perspective in front of you as to where the dollars for a new pair of shoes might come from. Using and having a good communication level with a book keeper or accountant is even better.  They will keep you objective about your business and help you to see which areas are most profitable and what you may want to eliminate.  You will be better able to see where you might have left money sitting on the table with a client and how you can’t buy so many personal expenses through your business.






There are so many ways to justify a personal expenditure of a new suit, new bag or briefcase  when you are in the design field. After all appearances mean so much don’t they? Our work is judged by how we look and come across, isn’t it?? Especially when we “know” we made profits on our last couple of jobs we should be able to allow for a splurge, right?  Don’t we need to celebrate a new contract with a delicious lunch after an appointment??  Isn’t that what return on investment is? Or was that petty cash or owner’s capital – a tax deduction?  Whatever!!


In this first of a series on taking your business’ financial temperature lets drill down on the first element of finance:  gross profit margin.

When we view our profit on a job or our profits from the last quarter all it says is that __?___dollars were made. This is gross profit stated in dollar amount.  It’s a hard, cold figure. But sometimes we don’t see the baggage it carries with it and our responsibility to that baggage.  The gross margin, or gross profit margin, is that dollar amount as a ratio expressed as a percentage of our sales minus the cost of those goods we sold. It  doesn’t show you what is in all the other bags, but it does give you a clearer picture of your profit and its relation to the products you sell.  It also is a basis to establish your markup, which we will get into in another article.

If the cost of the goods we buy, or labor to make them, increases over time, the gross margin will help you see that you also must raise your prices to your clients.  By the way, cost of goods, although not taking business operating expenses into account does include variable costs you accrue depending on the kind of business you run.  If you are a workroom, these costs will include materials, direct labor such as sewing the product or installation, depreciation on machinery and freight expense.  We have all been impacted by the past recession and it has caused us to seek out better alternatives to keep our cost down. As a business person, our responsibility is to find the best source which offers a better product or services requiring less time, greater turnover, travel or cost on our part. This will increase your gross margin.

Another way to increase your profit is to take the risk of offering a discounted sale on some of the goods you sell, trying to attract more buyers. If it does attract new clients, your volume of sales can offset the discounted price and increase your gross margin. Packaging services together at times and offering the upgrade like “…would you like to add a dessert to your meal…” can also be a profitable option. If time limits are offered whether on the end date of a sale or as an incentive to pay an invoice by a set date, you can often sell more or collect more quickly.  View this as another relationship in your business. Seeing the gross margin as a relationship between what was a successful sell, how much it cost you, and how much you sold it for will help you evaluate whether each particular product or service you offer is a worthwhile profit center.

We need to keep in mind that even though profits rise, if the gross profit margin stays the same, we aren’t any further ahead.  One of the first signs of financial trouble is the coinciding of increasing gross profit with a declining profit margin. If the gross profit margin is higher, it means you have found ways to stabilize or decrease the cost of the goods sold and you have a healthier company. The cost of doing business doesn’t enter into calculating the gross profit margin – only the cost of goods sold.  However, if you offer discounts they have to be figured into your formula which “refine” your gross profits and are called net sales.  Your net sales are your total sale (gross profit) minus discounts/ deductions, any returns or damaged goods. The net sales  are often recorded in lieu of the gross sales on an income statement as gross sales alone can overestimate the financial status of the business.  Down the road, your company will be valued by your accountant and investors based on the net sales figure because it shows how stable the sales growth actually was.

So – to clarify:

Sales minus Cost of Goods equals Gross Profit

Gross Profit Margin is the Sale minus the Cost of Goods divided by the Sale

Net Sales equals Gross Profit minus deductions, returns and damages



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