The Importance of Establishing an Interior Design Budget and How to Talk About it With Your Client

A client and an interior designer shake hands after agreeing on a project
Establishing a realistic budget is a critical step in every interior design project. Whether you are renovating a house, designing a new building, creating an addition, or giving a facelift to a kitchen, bathroom, bedroom or living room, an accurate and well-thought-out budget is an absolute necessity for your design project’s success.

However, some interior designers find it difficult or awkward to talk about budget with their clients. Others make the mistake of underestimating the cost of a project, leading to disappointment. We cannot overstate the importance of initiating a conversation about realistic budget with a client at the outset of the project.

In this article, we will explore some approaches to talking to your interior design clients about budget, and how to make sure it is one the client can rely on.

Discuss Budget Early on in the Project

Some interior designers recommend that you don’t talk about the budget in the first meeting with clients. They believe that you should use your initial consultation to get to know the client, gain their trust, and see if they are a good fit for you and your practice. This meeting will also help you determine the scope of the project.

If you choose not to discuss budget at the first meeting with your clients, the topic should be brought up at the follow-up meeting. Regardless of whether you talk about budget in the first or second meeting, it is important to talk about budget early on in the process. We caution against starting work of any kind until you know the amount your client has allocated for the project – otherwise, you run the risk of the client running out of funds and the project never being completed. How much your client is able to spend will also determine the price range of the products and materials you are shopping so the project can stay within budget. You don’t want to waste your or the client’s time looking at items that do not work with the budget.

It is a widely held belief that any discussions about money occur in a face-to-face meeting, rather than over the phone on via email.

This conversation should be a dialogue rather than a one-way communication, with an opportunity for questions and back-and-forth negotiations.

What Should be Included in the Budget?

Your client should understand that a project budget is more than just the construction costs to avoid any surprises. Here are additional items that should be included:

  • Demolition and proper disposal of items
  • Contractor’s profit
  • Site development costs
  • Design, engineering, architecture and other consultants’ fees
  • Furniture, Fixtures and Equipment (FF&E)
  • Administrative costs
  • Moving and storage costs
  • Shipping, freight and installation costs
  • Sales tax
  • Construction contingency (more on that below)

There are two schools of thought regarding whether your design fees should be included in the project’s budget. On the one hand, there is the belief that when clients consider budget, they are thinking about what physically goes into a space. On the other hand, many designers feel that anything that is an expense should be included in the overall budget. Regardless of which you choose, your fees should always be clear, and separate from the other items on the spreadsheet for the sake of transparency.

Tips on Helping Clients Establish a Budget

There a many formulas that interior designers apply to give clients a sense of what their budget for a design project should be. Some estimate the cost of furnishing an entire home ranges from 7 to 10% of the home’s overall value. For example, the client can expect to pay between $350,000 and $500,000 to design and furnish a home worth $5 million. But that doesn’t even include renovation costs such as construction expenses.

It also doesn’t include the “other costs” category, which include freight charges, cleaning costs, installation and sales tax. A typical formula is 15 – 20% of the overall budget for accessories, 8.5% for sales tax and 12 – 15% for freight and delivery.

So how do you determine an Interior design budget?

You can start by presenting your clients with a sample budget for a project of a similar size. You might ask them to provide you with the amounts they consider reasonable for the different materials and products they will be purchasing. A popular technique is to discuss the target investment with your clients, that is, the amount they plan to spend for their project. You can also ask them to establish a design wish list comprised of everything they would like included in their project, and compare this to the target amount to help establish a realistic budget, because sometimes they are not aligned and some high-end items need to be cut.

There are many interior design budget planning tools that you can find online including ones that are free. These plans are typically Excel spreadsheets on which you and your client can list the products, finishes, fixtures and labor needed along with their associated costs.

Establish a Contingency Fund

There has rarely been an interior design project that didn’t involve some kind of unexpected work or materials.
Your client should be made aware of the need for a contingency fund at the time you are discussing budget. Most interior designs agree that they should put aside 10% to 20% of the project’s overall cost for unforeseen circumstances. Clients should also understand that a budget is only as estimate, and that it cannot be further developed until at least after the design stage of the project.

As you continue acquiring more clients in your interior design practice, hopefully you will start to feel more comfortable broaching the subject of money and budget. You will also get a better sense of how to establish a realistic budget, and stay within its parameters to end up with a successful project and a happy client.

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