Design Fee Plus Markup: Why Charging Both Is Standard Practice

A member posed it plainly: she charges a flat design fee, then layers a cost-plus percentage on top for everything she procures for the project. Another designer told her she was nuts for it.

That’s a loaded word for a pricing question, because it implies there’s a single correct way to get paid for interior design work, and that this member found the wrong one. There isn’t. There’s a design fee for your time, and there’s a markup for your role in getting product onto the job site, and conflating the two is usually what makes someone call a colleague’s pricing “nuts” in the first place.

The real question underneath isn’t whether you can charge both. It’s whether you can explain, clearly and in writing, what each one is actually paying for.

Why a Design Fee and a Markup Pay for Two Different Jobs

The confusion starts with how loosely the industry uses the word “design.” Some firms are specification only: they draw, spec, and schedule, and never touch a purchase order. Others are full service, sourcing and selling nearly everything in the room. A flat design fee plus a markup makes complete sense in the second model and looks redundant if you’re only picturing the first.

One member of Interior Design Community captured the split well.

“I think so much of the variation in response to questions like this can trace back to the broad definition of the term “interior design”. Some designers are really just selling product (why would they charge a design fee, right?) Other designers are only generating drawings, specifications, and schedules (and don’t sell any product) … Personally I have different price structures for different parts of the job and define “design” as anything permanently attached to the structure (it has a fee) and “decoration” as anything that would fall out if the whole place was tipped upside down (usually product) … but that’s just me.”

@top_rail_interiors

That split, design versus decoration, or design versus procurement, is the actual fault line. Once you separate the two jobs in your head, charging for both stops sounding like double-dipping and starts looking like two line items that happen to come from the same firm.

For a wider look at how these models stack up against each other, see IDC’s breakdown of flat fee, hourly, and hybrid pricing structures.

A colleague who only ever specifies and never procures will look at a flat fee plus markup and assume you’re charging twice for the same hour. You’re not. You’re charging once for the hour spent designing, and once for the separate, ongoing work of sourcing, ordering, tracking, receiving, and being financially and professionally responsible for what shows up on site. Those are different services with different risk profiles, and pricing them differently is not a violation of anything.

The markup itself isn’t arbitrary, either. Most designers pay trade or wholesale pricing that isn’t available to the public, and the margin between that price and what a client pays covers far more than the line item itself. It covers vendor relationships built over years, the buying power that gets better lead times and faster damage resolution, and the staff hours spent tracking an order from confirmation to install. None of that shows up on a design fee invoice, because none of it happened during the design phase.

What Happens to Your Margin When You Only Charge One Fee

Drop either fee and the math breaks somewhere.

If you charge only a flat design fee and skip the markup, you’re compensated for your time and your time alone, on a project where the hours are notoriously hard to predict. Revisions, vendor back and forth, client indecision none of that shows up cleanly in a flat number you quoted before the project started. Without a markup behind it, every one of those hours comes straight out of your profit.

If you charge only a markup and skip the design fee, you’re betting your entire compensation on the client actually buying product through you, and on enough margin existing in that product to cover the design work you already did. That’s a bad bet on a project where half the budget is contractor labor, and it’s an even worse bet on a client who walks after the concept phase.

One member made the case for charging both plainly.

“Yes. Absolutely. We charge for the design services to create the design intent and construction package. Then we also charge for the product- we are retailers as well. And any good design business needs to understand that in order to stay in business you must be charging for both. Otherwise, you are bringing down the entire industry and teaching the consumers our time is not worth it.”

@graceblu

For the math behind protecting that margin once the product is moving, IDC’s guide to calculating profit margin and markup per project breaks down where that number should actually land.

Another member arrived at the same conclusion from a different direction, after watching a flat fee-only model fail to hold up over time.

“Hourly rates for design and a PMF (procurement management fee on trade pricing which is a set %) for product procurement. We bill like lawyers do on every 1/4 hr. I understand many promote a flat fee and I started that way but in my 14 years of being in business you cannot sustain a business and make a living doing that because you end up eating hours especially if you are doing high end custom designs. Each client is different so to estimate hours is not accurate enough; this model encourages decisiveness.”

@kaminteriordesignny

Her model isn’t identical to the original member’s: hourly instead of flat for design, a procurement management fee instead of a cost-plus percentage, but the structure is the same shape: one fee for the design hours, one fee for the procurement work, charged separately because they’re separate jobs with separate margins to protect.

Drawing the Line Between Sourcing, Procurement, and Design

Where Sourcing Ends and Procurement Begins

The hardest part of this isn’t deciding to charge two fees. It’s deciding exactly where one ends, and the other begins, which is a question even experienced designers haven’t fully settled.

“Asking for a point of clarification on sourcing and procurement…i charge hourly for my time to purchase PLUS my mark up. Are others using mark up to cover your time to procure? Where is the line between sourcing and procurement. Proposal is sourcing and once approved it is procurement?”

@monikakaplandesign

That’s worth answering for yourself before a client pushes back on an invoice, not after. A workable rule: sourcing, building the proposal, presenting options, getting client sign-off, is part of the design service, because it’s still creative and advisory work. You’re choosing and recommending, not yet transacting. Procurement starts the moment you place the order: issuing the purchase order, tracking production, coordinating freight, handling damage claims, managing receivers and warehouses. That’s operational work, and it’s what a markup or procurement fee actually pays you for.

Drawing that line in your own head matters less than putting it in writing. A client who sees “design fee” and “procurement fee” on the same invoice with no explanation will ask the same question your member’s colleague asked: why am I paying for this twice? A client who sees those fees defined separately in the contract, with separate scopes, generally doesn’t ask at all.

Educational content, not legal advice. Exactly how you define sourcing versus procurement, and what percentage or rate you attach to each, should be reviewed by an attorney familiar with design contracts in your state before it goes into your agreement.

Two Valid Ways to Structure It

There isn’t one correct way to split design and procurement into fees. There are at least two that work, and the right one depends on how confident you are in your own time estimates.

The first option folds procurement time into your flat design fee and charges cost-plus purely for the handling and risk of the purchase itself. Designers who run this version successfully tend to describe it the same way: it only works if you already know, with real accuracy, how many hours a typical project eats, because there’s no separate clock running to catch the overflow. Done well, it reads to clients as the most transparent option on the table, one upfront number with no surprise line items.

The second option keeps procurement on the clock, billed hourly or as a flat percentage, separate from whatever you charge for design, which is the model @kaminteriordesignny described above. It’s the better fit if your procurement hours genuinely vary project to project and you don’t want to absorb that variance inside a flat number.

Which option fits depends less on what sounds more professional and more on how your own client base behaves. Markets where clients scrutinize every invoice line tend to reward the flat fee model, because there’s one upfront number to agree to and fewer moments to second-guess. Markets where clients expect visibility into every hour tend to reward the hourly plus PMF model, because nothing is bundled into a number nobody can see the math behind. Neither is more legitimate than the other. Pick based on your clients and your own tolerance for tracking quarter hours, not on what feels more defensible in an Instagram comment section.

Either way, the same warning applies if you skip the documentation.

“This is fairly standard, I don’t get it. Design is one thing, procurement is a whole different service and should be billed accordingly (now, there are a few different ways to charge for it…). Unless your flat fee includes a major fee for the entire procurement process (which I couldn’t get away with in a smaller city), you have to charge for that!”

@iveydesigngroup

For a closer look at how to weigh hourly billing against a straight markup on procurement, IDC’s framework on procurement fees, hourly rates, and markup lays out the tradeoffs in more detail.

That’s the rule worth taking from this whole thread. It doesn’t matter which structure you pick, flat plus markup, hourly plus PMF, or something else entirely, as long as procurement time and risk get paid for somewhere in the agreement. The only version that actually fails is the one where nobody’s fee covers it.

Stop Letting One Comment Talk You Out of a Sound Fee Structure

Being told you’re “nuts” for a pricing decision is uncomfortable, especially when it comes from another designer. But “nuts” usually means unfamiliar, not wrong. A specification-only designer looking at your invoice with both a design fee and a markup is comparing it to their own model, not to any actual standard.

The fix isn’t to drop one of the fees to make your invoice look more familiar to other designers. It’s to make sure your own contract spells out, in plain language, what the design fee buys and what the procurement markup buys, so a client, or a skeptical colleague, can read it and understand exactly why both line items exist.

A simple test: open your own contract and see if you can point to the sentence that explains what the design fee covers and the sentence that explains what the procurement markup covers. If you can do that in under thirty seconds, your structure is fine, whatever a colleague on Instagram thinks of it. If you can’t, that’s the gap to close before your next proposal goes out, not the fee itself.

“PS Also, just do whatever you find works best for you! It’s great to get advice from other people in the industry, but don’t take it as the bible! Everybody needs to do things their own way with their own systems that work best for them and their clients!”

@kateandersonstudio

That’s the practical bottom line. Charging a flat design fee and a cost-plus markup isn’t nuts. Charging either one without being able to say exactly what it covers is the part worth fixing.