Community Q&A: Should you take commissions from trades?
Today I’m starting a new community Q&A series on my blog where I answer questions that come up in my Facebook group and outline my thoughts on what people are asking.
I often have questions that come up in the Facebook group that I have strong opinions about, so I thought I would use my blog platform as a place to outline how I would approach different problems that come up within our design businesses.
If you want to submit a question for me to answer for this series make sure to join the Facebook group and post your question!
To start this series I’m going to be responding to the question below that was asked in the group yesterday:
Here are my thoughts on this:
Consider this scenario:
You are working with a client and you recommend a particular joiner/cabinet maker to them for their cabinetry production.
The cabinetry bill for the client is going to be $100,000 but the ‘under the table’ deal you have with the joiner /cabinet maker is that they will pay you a 20% commission for any work that you send their way.
This means that you now get $20,000 in your pocket for recommending that trade.
Sounds good for your profit margins, right?
But don’t forget the joiner/cabinet maker needs to make a profit as well.
So your commission isn’t coming out of the actual price they COULD charge a client. Instead, what they are doing is adding your commission to what they would actually charge the client for their cabinetry.
So instead of the cabinetry costing your client $80,000 it is now costing them $100,000, so that you can get your 20% commission.
Given that it’s more than likely in this scenario that the designer was also paid by the client to design the cabinetry it means the client has essentially now paid the designer twice for the same work (and likely knows nothing about the deal between the designer and cabinet maker either).
Although a lot of the design industry works in the way I’ve described in this scenario, it’s not the way I ever felt comfortable running my business.
The issue I have is that most of the time these relationships are set up in a shady way where the tradesperson will ask the designer ‘how much do you want to make on this project?’ and the designer will tell them.
Why do I say it’s shady?
Because the designer and trade normally have this as a highly secretive arrangement that nobody ever speaks about with the client. The commission is often not disclosed in contracts between the designer and their client, so the client has no idea they are paying $20,000 more for their cabinetry (plus all other secret markups they are being charged for throughout a project).
I have never run my business ‘the way the industry has always done it’.
I have always questioned what feels right for my business according to my own personal values AND what is in the best interests of my clients.
Providing an exceptional client experience is always my Number 1 priority over making more money.
And by providing as much value to my clients as possible, plus optimising my business for client experience rather than profit, I’ve found over the years that I’ve automatically made more money by doing it this way.
[By the way, I continue to run my business in exactly the same way now that I sell online templates and courses as well.]
This was a lesson I learned many years ago when I read one of my favourite books called ‘Anything You Want’ by Derek Sivers. In the book he talks all about running a business with client focus first and profit maximisation second and how by doing it this way you end up making a lot of money anyway.
I personally think it's better to work in a collaborative way with your trades and suppliers rather than taking commissions from them.
You send work their way and in return they also send work your way too.
Instead of joiners/cabinet makers having to mark up their bills so I could get a commission, we worked together to help my clients get the best possible price for their cabinetry. This was then a perk I was able to use during the sales process, which meant I used to sign a lot of clients quite easily.
I have always seen trade relationships as a partnership and a collaboration between two businesses that are both working towards the same goal (i.e. both trying to create exceptional outcomes for clients and grow their businesses at the same time).
My opinion is that it's unethical to 'double dip' your clients - i.e. charge them for your design work and then also take a secretive clip from the joiner/cabinet maker (who will have to charge your clients more to allow for this).
I feel that I have already been paid to do the design work and that it’s a duplication of payment to take a second clip from trades.
My opinion is that access to my trade relationships is part of the professional perks that a client gets access to when they work with me.
But what you’ll hear from other designers in the industry is this:
“it’s your right to take a clip on the cabinet maker’s work as well as this is your payment for giving the clients access to your trades “ - I personally feel this should be built into my design fee
“you’re leaving money on the table” - but what if you could get more (and better) clients by not doing it this way?
“this is how the industry all do it” - that’s not actually true as many don’t do this, but even if it’s how the industry has behaved in the past, does that actually mean it’s the right way of doing business?
The trick to building partnerships and collaboration with your trades is to be careful about those you choose to partner with. I always looked for people who ran their businesses with client focus first and who had business values that aligned closely with my own.
I also think taking a commission from trades is a conflict of interest.
For example, are you only recommending that joiner/cabinet maker because you get a better commission from them?
Or are they actually the best cabinet maker for the project?
I've personally had a lot of issues with different suppliers letting me down over the years - e.g. joiners who start a job but then delay the project, muck my clients around or something else happens. I didn’t want my business tied to the way other people run their businesses as it was out of my control and could reflect badly on me if something went wrong.
Instead, the way I handled trade relationships for my clients was to have a few different options of joiners/cabinet makers (and other trades) that I could suggest to my clients to speak with and then get my clients to choose which one to use.
That way it is THEIR choice, not mine.
And if something did happen then it wasn’t a reflection on me or my business. I also made a point of explaining to my clients why I worked like this as it was important for them to understand that I was on their side and that we were in partnership together (not that I was doing something shady behind their backs).
I also had some really annoying things happen with trades over the years and I wouldn't want to have taken commissions as this would have made things even more difficult to resolve.
Whenever I’m questioning issues like this in my business I always like to put myself in the shoes of my client and think about how I would feel if roles were reversed.
I would ask:
is taking a second payment from a trade for work the client has already paid for via design fees an ethical decision? My view is obviously that it isn’t, but there are plenty of designers that don’t agree with me on this
if you are taking commissions from trades are you disclosing this to the client? If you aren’t disclosing this then why not? To me this feels shady and is one of the main reasons that we find many clients these days will go behind their designers’ backs looking for ‘better deals’ - it may also be illegal, so make sure you’ve had advice on this
if the client found out you were getting a clip from a supplier/trade that they didn’t know about, how might that look and feel to the client? Would it make them question or distrust you in other decisions?
if you were the client in this situation, how would you feel about all of this?
Clients these days are very savvy, their projects are expensive and it is their money. If they feel like something shady is going on then of course they are going to go behind your back trying to seek out alternative solutions.
The industry has worked in this way for so many years that many designers feel like it’s fine to keep doing this.
But I have always run my business in the way that feels most aligned to my values and I feel that double dipping clients by making them pay more for work done by trades is not the right way of running a business.
But remember, this is just my opinion and my way of working and there are many other views in the industry and different ways that designers work.
The only way that is the right way is what is right for you and your business (as long as you are acting ethically and legally of course).
But all I would say is that optimising your business for client experience and satisfaction, rather than for how to make as much money as possible, 100% works.
The reason I know this is that it’s how I’ve run my business from Day 1 (and my business now makes multiple seven figures per year in revenue).
Profits come by providing as much value as possible and optimising for client experience and satisfaction over making as much money as possible.
If you want to read the rest of the industry views then make sure to join my free community Facebook group where you can read the responses to this post and many more like it (plus ask your own questions as well).
What I've said in this post isn't directed at the person who wrote the post, it’s just a chance to write out my thoughts on the topic. :)
Thanks for reading and catch you in my next post :)
Clare x
Dr Clare Le Roy
Courses and Templates for Designers and Architects
DO YOU WANT TO….
Improve your professionalism?
Find more clients?
Bring in more revenue?
Create better systems and processes?
Then check out my business courses and templates for designers and architects.
These courses and templates leave you with work done - not just a long list of things you need to do next. We have a really strong focus on taking action and getting things created that improve your business.
