THE RIGHT FIT In-house design will not be a perfect fit for every company looking to offer the service to clients. For many, outsourcing will still make the most sense. For one thing, when design work is not coming in, you don’t have designers on staff waiting for a paycheck. For another, you can avoid the hassle of tracking the extra costs, labor burden, taxes, revenue, and everything else that comes with additional employees and services. Furthermore, you’re free to use a variety of architects or designers to match special skill sets with the needs of a particular project.
But for remodelers willing to take on the added workload, adding designers to their teams can be the perfect way to enhance the total client experience. And remodelers who have made the move report finding plenty of useful things for designers to do during slower times. “When there’s not enough design work, my interior designer will go out on sales calls,” McCutcheon says. “She’ll also drum up leads through her own contacts, which is a great asset. And she photographs all of our jobs and manages our [photography portfolio.]”
Others report that relations with vendors have improved thanks to their designers, who are able to spend time working with suppliers to establish mutually beneficial business relationships. And with improved vendor relations comes a beefed up bottom line.
Perhaps more than anywhere else, the benefit is most evident in building relationships with clients.
“I really like the synergy that our designer brings to our team,” says Aptos, Calif., remodeler Jeff Talmadge. “She has lots of ideas, and it’s great to see her talent and excitement show through, especially during a [sales] presentation. If you can put a potential client in their new kitchen with 3-D drawings and samples, it starts the sizzle,” he says. “Sizzle sells.”
Double Team
Design is a psychologically taxing endeavor, says Berkeley, Calif., remodeler Michael McCutcheon. “In any kind of creative field there are a lot of emotions involved, especially in dealing with rejection.” McCutcheon, whose design team was once composed of two architects, learned this the hard way. “Their egos clashed a lot,” he says.
McCutcheon has since restructured his design department so that he has an architect and an interior designer on staff. “I think this combination has the best chance to succeed in terms of chemistry,” he says. “And they complement each other well. It really reduces the clash.”
The architect-interior designer model is one with which other remodelers have also found success. As with any type of growth, though, building a design department is usually a gradual process.
“Our first move was to hire an interior designer who could do floor plans, 3-D renderings, and product selections,” says Denny Conner, of Conner Remodeling, in Seattle. As his design needs increased, Conner added a draftsperson and eventually an architect. “I might have started with an architect,” he says in hindsight, “but it was much easier to find a suitable interior designer who could work at a rate I could afford, to meet the immediate demand.”
Jeff Talmadge, of Talmadge Construction, in Aptos, Calif., went the opposite route, hiring an architect from the start. The architect currently is responsible for all design duties as well as product selections. “It’s turning out to be too much for one person to handle,” Talmadge says. “There’s not quite enough work to justify bringing on an interior designer full-time, but we’re looking at working with an outside resource.”
Aside from the way their talents complement each other, McCutcheon has found other practical reasons for sticking with the architect-interior designer model.
“If a client comes to us and already has an architect picked out, then we can offer our interior design services to complement their architect, and vice versa,” he says. Being so flexible has enabled him to add additional design revenue on projects where design opportunities would otherwise have been nonexistent.
Bob Fleming’s design department is made up of two lead designers and two associates — essentially two architect-designer teams. “It’s great,” he says. “The associates take care of all the detail work and putting things together, so that the lead designers can focus on the bigger picture.”
The architect-interior designer model is by no means the only way to operate a design department, but it has proved to be a winning combination for many remodelers looking to expand the breadth of their services. —C.K.
Hidden Costs
With bringing aboard any new employee comes the need to generate enough revenue to justify the new hire.
Gary Potter, owner of Potter Construction, in Seattle, offers an equation to determine just how much extra revenue you will need to account for the new employee, labor burden, and gross profit margin.
Say your new designer costs you $60,000 per year (including labor burden) and you aim for a 35% gross profit margin on all of her time, Potter explains. To determine how much extra revenue you will need to generate to cover both the employee and the profit margin, simply divide the cost of the employee by the desired gross profit margin percentage.
In the above case, that would mean that the new designer would need to generate an additional $171,429 to justify her position. So a company that was doing $800,000 of volume before hiring a designer would need to be doing $971,429 afterward in order to operate on the same margins. “That’s a figure that any remodeler making this kind of decision should have in mind ahead of time,” Potter says. — C.K.