Have you thought about which pricing model works for you? When I did this simple, straightforward exercise I was shocked at what I found so listen up!

Today I’m sharing a quick exercise you need to do to ensure that your business’ pricing model is actually the most profitable one for you. Your success and profit margin don’t simply rely on revenue. I learned this the hard way!  So take the time to research your own profit margin to ensure your pricing model is the most lucrative and successful for you and your business.

Episode Highlights
  • The Profit Clarity Challenge – Rebecca reveals the eye-opening moment when she discovered that the service she thought was her most profitable wasn’t. Learn how to evaluate your own business in just an hour and uncover which services are truly driving your profits.
  • Revenue vs. Profit: The Game Changer – It’s not just about bringing in money—it’s about keeping it! Rebecca breaks down the difference between revenue and profit and why focusing on where you’re making the most profit can transform your pricing strategy.
  • Pricing Models Demystified – Rebecca shares her insider tips from her Pricing with Confidence mini-course, walking you through today’s most effective pricing models for interior designers. Get actionable advice on how to adjust your pricing to match your business’s most profitable areas.
Episode Resources

Read the Full Transcript ⬇️

 

Rebecca:
Hey hey hey, it’s Rebecca, and you’re listening to Resilient by Design. This is a short episode. Today I want to talk about profit. How do you pick a profitable pricing model? Let’s talk about this because, quite truthfully, for the first several years of my business, I wasn’t clear on where I was making a profit. Part of that was because I wasn’t making a profit at all.

In fact, I was spending more than I was making, and I didn’t realize I was collecting money only to then pay my taxes. So, there’s that. All that aside, though, there are certain aspects of your business that are more profitable than others. And here’s my challenge to you in this short episode: I want you to look at your business.

Look at the past six months, past month, or past year—however long you’ve been in business. Take an hour. Commit one hour this week—just one hour. Open up your QuickBooks, design docs, Excel spreadsheet, or whatever you use, and I want you to compare the money you’ve brought in versus the time you’ve put in.

Now, this might sound complicated, but it doesn’t have to be. For us, we always used design docs, so it was relatively easy. We could look at how much money we collected for our time and how many hours we spent. Then, separately, look at all the products I resell: how much did I resell them for, and how much did they cost me?

Those were the two areas where we saw profit. If you have multiple revenue streams, you’ll want to look at each one. For example, if you offer e-design, that’s probably a different revenue stream than decorating or full-service design. If you offer “design for a day,” look at that as a separate revenue stream.

Maybe I need to back up a bit because some of you might be wondering, “What do you mean by revenue stream?” Start by making a list of all the ways you bring in money: your time, products, small services, consultations—everything. For me, it’s never been that many items. It’s been my time for design, consultations, and products. So, those were always my three revenue streams in my design business.

Write down what your revenue streams are. Then, I want you to look at the past year, for example: how much money did you bring in from each revenue stream? If you’re not already tracking this and can’t easily decipher the differences, then you need to set that up moving forward. For us, in design docs, we created unique categories with the help of our accountant, so we could differentiate between the money we received for the design phase and for the implementation phase. If you’ve taken Power of Process, you know what I’m talking about.

That was really important to me, so down the road, we could see if we were more profitable with a fixed fee for design or for implementation. And I’ve shared this before, but it actually turned out to be the opposite of what I thought. When I sat down and did this exercise, I looked at how much we brought in during the design phase versus the implementation phase. Based on the hours we put in, we weren’t making as much money in the design phase as I thought. I thought we had it locked in, nailed down. I believed that was our most profitable area, but we weren’t as efficient with our hours as I thought we were.

Turns out, we were making much more money in the implementation phase. I did this exercise because I was considering scrapping implementation altogether, as I was so frustrated with managing trades and client expectations—it was really challenging for me, as you’ve heard me talk about. For me, it was a wake-up call: “Oh, I’m actually making money there!” So, we needed to focus on really making money there and improving in the design phase.

I want you to do this too because, like me, you might find that reselling products provides a lot of margin and profit. There’s money to be made there. I teach this in Power of Process and in Pricing with Confidence—the idea that you shouldn’t share your discounts because there’s profit in that.

All that to say: do this exercise. Look at where you bring in the most profit, not just revenue. There’s a difference, right? On the surface, it might look like you’ve collected a lot of money from product sales over the last year—let’s say $300,000—but how much of that did you pay out to suppliers? If you’re passing on discounts or splitting them, it doesn’t matter how much money you brought in on products if you’re not profiting from it. You need to look at the profit.

Once you understand where you’re making the most money, you can start to tailor your pricing model for your design services. That’s exactly what I talk about in Pricing with Confidence. It’s a bite-sized, short course where I walk you through the main pricing models I see in today’s interior design industry. I share all the different ways designers are doing it, including my method for calculating my design fee. You can take from that and adjust your pricing model, but you do need to know where you’re most profitable.

All right, I hope this information inspires you to do the work without overwhelming you. Simplify it. Don’t get caught up in the details. Just focus on the big picture: where are you making the most profit? Then tailor your pricing model accordingly.

I hope you enjoyed this short episode. Let me know in my Instagram DMs—have you done this? I would absolutely love to know which area of your design business is the most profitable. You might surprise me! Let me know, and I’ll see you soon.