Setting competitive fees for your business

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(FORTUNE Small Business) -- Dear FSB: I have a small interior design firm. Is there a formula I can use to calculate overall client charges to determine how competitive my business is?

- Mary, Vero Beach, Fla.

Dear Mary: Determining whether or not your fees are competitive isn't an exact science. There are several factors you'll need to take into consideration before you can assess your billing structure.

As with real estate, it all starts with location. A big design firm in New York City or Los Angeles is going to charge higher fees than a small group in Florida or South Carolina, says Micheline Laberge, a licensed interior designer based in Sarasota, Fla. She suggests first researching interior designers in your area to find out their fees.

The services your business offers is another factor that will impact how much you charge clients.

"Interior design is a complex field with over 100 specialties. For example a designer who does only optical offices is going to provide different, specialized, services compared to a designer who is decorating a family's living room," says Mary Knackstedt, a consultant on interior design practices who runs Knackstedt, Inc. in Harrisburg, Pa. She adds that another factor in setting fees is your capability as a designer and your level of experience, compared to your competitors.

Also, the resources of your firm will affect the type of services for which you are able to charge. A high-tech design studio that can do engineering specs, or one that has state-of-the-art catalog systems and a large staff, will likely charge more than a small operation, says Knackstedt.

She recommends hiring a business consultant who specializes in creative companies to help you set up your business structure, and points out that an interior designer should assess his fee structure annually as the market changes.

Maryanne Hewitt, past president of the International Interior Design Association, Florida chapter, found a formula that worked for her by assessing her professional and personal financial needs as well as the amount of time she can work weekly.

"I know how much money my business needs to bring in to cover overhead fees and how much salary I need to cover my family's expenses. This amount helps me determine how many hours to work per week. I take stock of my competition's hourly wages to determine client fees, both scope and hourly," Hewitt says.

Phillipe L. Sommer, the Director of Entrepreneurship Programs at the Batten Institute at the University of Virginia says designers should be flexible and stresses the importance of having an open dialogue with your client in regards to fees and services provided.