Interior Designer Compensation Models: A Guide to Fees, Pricing, and Procurement
- Michael Burton
- Jun 3
- 8 min read
Updated: Jun 5
Part 1: Understanding the Major Compensation Structures Used in Residential Interior Design
“So… how do you actually get paid?”
It’s a question people sometimes hesitate to ask.
We understand why.
After nearly twenty years in financial services before joining Blair, including over a decade as a Certified Financial Planner (CFP®), I learned that conversations about money are rarely just about dollars. They are usually about trust, expectations, transparency, and alignment.
If you are considering hiring an interior designer — whether us or someone else — understanding how a firm gets paid can help you ask better questions, evaluate proposals more thoughtfully, and avoid surprises later.
Before discussing our own approach, it's helpful to understand the broader landscape. In Part 1, we'll examine the major compensation models used throughout residential interior design. In Part 2, we'll explain where Blair Burton Interiors fits within that landscape and why.
Why Different Compensation Models Exist
Many people assume, prior to exploration, that there is a single standard way interior designers get paid.
There isn't.
In that respect, interior design is more like the legal profession than most people realize. Consider the strikingly different ways that lawyers get paid:
A defense attorney, estate planning attorney, and M&A attorney may all be lawyers, but the nature of their work often leads to very different compensation structures.
Interior designer compensation is not dissimilar:
Some designers bill hourly.
Some charge fixed design fees.
Some earn a percentage of the overall project budget.
Some earn a portion of their compensation through product procurement.
Many use a combination of approaches.
Let's begin with the oldest and most straightforward model: hourly billing.
Hourly Billing
Hourly billing is one of the most straightforward compensation structures within the design industry. Under this model, the designer tracks time spent working on the project and invoices the client based on hourly rates established within the agreement.
These rates often vary depending on the role of the team member involved. For example, principal designers, senior designers, project managers, procurement coordinators, and administrative staff may each bill at different rates depending on their level of expertise and responsibility.
Hourly billing is particularly common in:
highly customized projects
projects with evolving scope
renovation work with many unknowns
consulting engagements
early design phases
projects requiring extensive coordination and flexibility
One of the primary strengths of hourly billing is adaptability. Because the work is billed based on actual time invested, the design process can evolve organically without requiring constant renegotiation of a fixed scope.
This flexibility can be especially valuable in large custom homes and renovations where conditions frequently change throughout the life of the project.
At the same time, hourly billing can create uncertainty for clients who prefer highly predictable budgeting upfront. It also requires a high degree of trust and transparency between the client and design firm, since clients are relying on the firm to manage time responsibly and efficiently.
In healthy client relationships, hourly billing often works best when:
expectations are clearly defined
communication is consistent
budgeting conversations happen regularly
both parties understand that thoughtful design work is often iterative by nature
Periodic Hourly Rate Adjustments
Many long-term design agreements also include provisions allowing hourly rates to increase periodically over time, often annually.
At first glance, this can feel surprising to clients — particularly on projects that may span multiple years. But in practice, these adjustments are often less about increasing profitability and more about maintaining stability and continuity within the design team itself.
Large custom homes frequently extend over two, three, or even four years. During that time, salaries increase, operational costs rise, software and technology expenses evolve, healthcare costs change, and inflation impacts virtually every aspect of running a professional firm.
More importantly, retaining experienced team members over long timelines is critical to maintaining project continuity and quality.
Clients are rarely well-served by constant staff turnover midway through a complex project.
Stable teams preserve institutional knowledge, maintain momentum, and reduce costly communication breakdowns. Periodic rate adjustments help firms continue supporting and retaining the people who are deeply involved in shepherding a project from concept through completion.
Flat Fee Billing
Under a flat fee structure, the designer establishes a predetermined fee for a defined scope of work.
This model offers clients a high degree of predictability upfront. In many cases, clients appreciate knowing early in the process what the professional design fees are expected to be.
Flat fee structures often work well for:
clearly defined scopes
furnishing-only projects
projects with limited unknowns
phased engagements
projects with highly disciplined decision-making
Flat fees provide budgeting clarity, but they do not eliminate uncertainty. They simply determine how that uncertainty will be managed.
If the project expands significantly beyond its original assumptions — through design revisions, construction changes, indecisiveness, scope additions, or extended timelines — the firm may find itself performing substantially more work than originally anticipated.
As a result, flat fee agreements often include:
carefully defined scope limitations
revision limits
additional service provisions
change order mechanisms
exclusions for unforeseen conditions
When structured clearly and communicated transparently, flat fee arrangements can work extremely well. But they also require a high degree of alignment around expectations, responsiveness, and scope management throughout the life of the project.
Percentage-of-Construction Billing
Some interior designers structure compensation as a percentage of overall project construction costs.
This model is more common in:
large luxury residential projects
full-home custom construction
projects with deep architectural integration
highly comprehensive design involvement
renovations or remodels where the Designer is also serving as the General Contractor
Under this structure, design fees scale proportionally alongside the size and complexity of the overall project. For example, a 10% design fee on a $2 million construction budget would result in a $200,000 design fee.
The central premise of percentage-based billing is that larger, more expensive projects often require substantially more design labor, coordination, and management.
One advantage of this structure is that fees can scale naturally alongside the growing complexity of a project. As homes become larger and more customized, they often require more coordination, specification, communication, procurement, detailing, and overall project management.
At the same time, percentage-based structures can occasionally create concerns around incentive alignment if not discussed openly and transparently. Clients sometimes wonder whether increasing project costs may indirectly benefit the design firm financially.
As with any compensation structure, success depends less on the formula itself and more on whether expectations, incentives, and communication remain aligned throughout the project.
Procurement Margin Models
While the compensation structures above primarily govern professional design services, many residential firms also utilize separate procurement compensation models tied specifically to furnishings, materials, and product sourcing.
Procurement is one of the least visible — yet most operationally intensive — aspects of the interior design industry. And because of that, it is also one of the most misunderstood.
Many clients understandably think of interior design primarily as selecting furnishings, finishes, and materials. In reality, procurement often involves an extensive operational process that may include vendor communication, quoting, ordering, freight coordination, receiving, inspection, storage, installation coordination, warranty support, and much more.
On large residential projects, procurement can become a substantial operational undertaking in its own right. As a result, many firms utilize procurement-based compensation models to support this portion of the work.
Two of the most common procurement structures are discussed below.
Retail Discount Spread
Under this structure, the designer purchases items through trade accounts that provide pricing below standard retail rates. The client then purchases the item from the designer at either full retail price or a reduced retail rate.
For example, let's consider a Custom Made Sofa, sold only To-The-Trade, with an MSRP of $10,000. If the Designer's contract calls for a 20% discount from MSRP for the client (which is not uncommon under this model) and if the Designer's trade-only discount is 50% (which is also not uncommon), then here's the math:
For the Client:
MSRP (retail price): $10,000
Client Discount = $10,000 X 20% = $2,000
Client Price = $10,000 - $2,000 = $8,000
For the Designer:
Client Price = $8,000
Designer Wholesale Cost = $5,000
Designer Procurement Compensation "Spread" = $8,000 - $5,000 = $3,000
Two commonly cited advantages of this structure are familiarity and simplicity. Purchase proposals under this model typically show and often emphasize the cumulative discounts for each purchase because the Design Contract defines the procurement process in these terms.
Because most of the time anyone goes to buy something we do not know the wholesale cost of the item, the Retail Spread Discount model provides a very familiar purchase experience.
We know the standard price. We know what it means to buy something "on sale." Because this structure often presents pricing in the familiar language of “discounts from retail,” many clients intuitively find it straightforward and psychologically comfortable to navigate.
At the same time, some clients prefer greater visibility into actual wholesale costs and procurement margins. For those clients, other structures may feel more aligned with their preferences.
Wholesale Cost Plus Markup
Under a Wholesale Cost-Plus procurement compensation structure, the designer applies an agreed-upon markup percentage to its wholesale price.
For example, let's once again imagine the same $10,000 custom sofa made by a trade-only manufacturer. If the Designer's trade-only discount remains 50% (as above) and the Designer applies a 30% procurement mark-up (which is fairly common for established firms), then here's the math:
Sofa MSRP (retail price)=$10,000
Designer's Wholesale cost = $10,000 X 50% = $5,000
Client's Price = $5,000 + ($5,000*30%) = $5,000 X 1.3 = $6,500
Client's savings from MSRP = $10,000 - $6,500 = $3,500
Designer Procurement Compensation = $5,000 X 30% = $1,500
Many clients appreciate the underlying transparency this model creates because they can clearly and simply infer their designer's procurement compensation for any proposed purchase. It's a simple reverse-engineering process. So, sticking with that same sofa:
Sofa Cost Proposed to Client = $6,500
Wholesale Price = $6,500/1.3 = $5,000
Designer Compensation = $6,500 - $5,000 = $1,500
Some firms disclose this underlying math on every item, though this is less common in practice. Because seeing compensation attached to every individual purchase can sometimes distract from the client's decision-making process, it is more common for a Designer to allow such details to be inferred by the client, and when necessary discussed in more detail upon request.
Importantly, the operational work behind procurement remains largely the same regardless of which structure is used - Retail Discount Spread or Cost-Plus Mark-up. The real distinction between these models is not whether compensation exists, but how the Designer's trade-only wholesale discount is allocated.
Under a Cost Plus Procurement Model, clients typically receive a larger share of the Designer's trade-only wholesale discount. And this is its chief advantage.
Viewed side-by-side, the distinction becomes easier to see.
Hybrid Compensation Models
Many established interior design firms ultimately operate under some form of hybrid compensation structure.
Rather than forcing every aspect of a project into a single billing methodology, hybrid models allow firms to match compensation structures to the type of work being performed.
For example, a firm might bill hourly for design and project management services, utilize procurement compensation for furnishings and materials, and employ flat fees or retainers during specific project phases.
The goal of a hybrid compensation model is not complexity for its own sake. The goal is aligning compensation with the work being performed.
In practice, many sophisticated residential projects naturally require this kind of layered structure because different phases of the work involve fundamentally different kinds of labor, coordination, risk, and operational management.
Mapping Interior Design Compensation Structures to Different Types of Design Work
The graphic below illustrates how different compensation structures often align with different types of design work.
These examples are intended to be illustrative rather than prescriptive. Exceptional firms can be found operating successfully under every model discussed in this article.
The Most Important Question of All
Every agreement ultimately still depends on the personal integrity of the people participating in it.
I saw this repeatedly during my years in financial services. Certain compensation structures, particularly the "Fee Only" model, were often presented as inherently more fiduciary than others, as though the structure itself could somehow guarantee ethical behavior.
In reality, while compensation structures absolutely influence incentives and behavior, I saw commission-only financial advisors do exceptional, high-integrity work for their clients. And I encountered fee-only advisors whose work did not always reflect the level of care, attentiveness, and client-first mindset the structure itself was supposedly designed to encourage.
In the final analysis, no compensation structure creates character.
No compensation structure, by itself, can guarantee the humility, generosity, wisdom, or trustworthiness that allows a professional relationship to truly thrive.
The best compensation model in the world cannot substitute for integrity.
Ultimately, the healthiest client relationships are built on something deeper than pricing: trust.
Looking Ahead
In Part 2, we'll move from industry-wide compensation structures into the specific model we use at Blair Burton Interiors.
We'll discuss why we chose it, how we think about procurement and transparency, and how our approach has evolved as our projects, team, and responsibilities have grown over the years.
We'll even explore some of the non-financial "pay-offs" we've come to appreciate along the way.
