It’s said that the hard lessons are the only ones we really learn.
I had a coach a long time ago, a gruff old man from a former Soviet bloc country. One of his bits of old country wisdom was, “Pain is best teacher; perhaps only teacher.” Someone else once said to me, “The universe will keep delivering you the same lesson until you finally learn it.”
Sometimes we have to learn those lessons the hard way. Personally, I’d prefer to learn my lessons from other people’s mistakes, and I suspect that many readers would too. That’s a big motivation for why I write the editorials I do.
Most of us learn the hard way that not everyone is an ideal customer for what you do. In fact, not everyone can be your customer — period — ideal or otherwise. That seems self-evident, yet we often find ourselves trying to make people our customers who shouldn’t be. Designing and installing residential AV systems is a long-term commitment, and it’s essential to determine if the dealer/customer relationship will be a positive one.
That’s where charging design retainers comes in.
Customers are free to pick their contractors, and contractors are free to select their customers. Your prospect’s reaction to design fees quickly establishes how committed they are to the process. My old boss said to me, “If someone is going to be difficult over a $300 deposit, they’re never going to play ball on a twenty grand job. You’re better off finding that out now.”
As always, he was right. It’s not just about weeding out and identifying quality prospects, although it mostly is. Your time and expertise are valuable. If you’re good at what you do, you need to make that clear. Broadly speaking, people will treat you how you allow them to. And if you devalue what you offer, that creates the perception that what you do is worthless.
Past the importance of helping you determine who’s going to be a worthwhile client and who isn’t, how you structure your design retainers is almost an afterthought but generally falls into a pattern. Among the AV contractors I’ve known, well-established, high-end AV Pros often charge a one thousand dollar fee for the initial consultation, with a further design retainer of 2% of the total project size collected if the client greenlights the project.
Companies whose typical jobs are a mix of small and medium-sized projects typically have two fee structures, one for smaller jobs, and one for larger. For example, $400-500 to create a proposed design for single-room AV projects, and 3% of the estimated job cost for whole-home projects. Regardless of project size, it’s typical for the company to credit the initial retainer towards the project upon acceptance.
If you’re new to the business and haven’t previously charged design fees, you will find that your business grows after you do. You’ll spend less time making unsuccessful pitches, and you’ll close on more projects.
In fact, you’ll find over time that you can raise your fees — and your clients, at least the ones you want to work with, will happily pay them.