Procurement
Pros & Cons
Designing Your
Business
Business
Andrew Mitchell, The Design Coach
“Utilising a well-structured procurement process is essential for the successful management of this important service offering.”
Andrew Mitchell The Design Coach
To buy or not to buy? That is the question.
As designers, we have the option to offer procurement as one of our services, which means purchasing goods on behalf of our clients. Not only does this increase revenue and profitability, but it also provides a higher level of service, and can help to better control the aesthetic outcomes.
Many of the designers I work with have shied away from offering procurement services due to a lack of confidence and a range of concerns about the potential risks associated. Such concerns should not be ignored and can be mitigated with the right knowledge, processes, and protection.
When making the decision to add procurement as one of your services, these are some of the most important factors to be considered:
- How do you effectively and efficiently manage purchasing, manufacture, and delivery?
- How to charge for your time and add margins to the product?
- What do you need to set up to manage these projects?
- What products should you buy? What should the builder be responsible for? How do you protect yourself from the risks associated with procurement?
- How much time will this service take, and what team members will you need?
- How will you streamline the process for accuracy and efficiency?
As a starting point, we should be thinking about the overall experience of our customers. A premium interior design package should provide a complete end-to-end service that makes the whole process as seamless as possible. The ideal client more than likely doesn’t want to lift a finger, and completely trusts that we, the professionals, will take care of every last detail. Procuring on behalf of our clients should form an integral part of that service. Taking care of this part of the project can also help to manage the budget on behalf of the clients, ensuring blow-outs and major variations are minimised.
Many of us have worked on exciting projects that have unfortunately been compromised due to the clients’ rogue decisions made after our involvement in the project has ended. Having the ability to influence the selections, placement and styling of the furniture and decorative items through to completion allows more control over the outcomes, and will almost certainly elevate the finished scheme, allowing for the designer to photograph their work at its best.
Choosing not to manage procurement can also mean that you’re leaving a lot of money on the table, both through the fees charged for managing this service and the margins that can be made on the products. While there are no set standards for charging, there are a number of viable structures adopted within the design industry for fees and margins. Whatever method is adopted, we encourage communicating these structures consistently and transparently to your clients.
You can explore charging structures further through The Design Coach free e-Book Fees and Margins: The Foundations.
Here we provide 6 Tips for managing procurement successfully so that you can confidently add this important service to your design practice.
6 Procurement Tips
1. Sell Your Services
- Ensure that your clients understand the value you bring to the management of this stage of the project, including efficiency in ordering, co-ordination with trades and streamlining of the delivery process.
- Where appropriate (depending on your margin structure) sell your clients on the savings they will make off standard retail prices. In some cases, designers can access job specific discounts due to the ongoing loyalty and volume of orders placed.
- Educate your clients on the value of the relationships you have with suppliers for priority service during and after the procurement process.
2. Communicate Charges Clearly and Consistently
- Create a clear structure for charging for your time for your design management fees.
- Set up a consistent structure for adding margins to products.
- Communicate these fees consistently through your proposal, T&C and during the facilitation of the project.
- Consider operating with transparency to build trust (read our article on Transparency)
3. Purchase Wisely
- Seek professional advice about the items you can safely purchase on behalf of the clients, and which should be left to the builder to be covered by their warranties and insurances.
- Choose your suppliers carefully. When we buy on behalf of the client, the suppliers we choose become an extension of our business brand.
- Choose quality products that you know will be fit for purpose, meet the standards and codes, and are supported by warranties and an after-sales service.
4. Protect Yourself
- If you’re unsure about your legal responsibilities, seek the advice of a lawyer.
- Create a solid set of Terms and Conditions that mitigate your liability and protect you against legal action. Ensure that these T&C are reviewed and approved by a specialist lawyer (check out the TDC Contracts for industry specific T&C).
- Ensure you have the right protection with relevant insurance policies. Get educated about what’s included/covered in your policy and what’s not included/covered. Read the fine print in your policy.
5. Get Organised
- Create processes to manage the workflow of procurement, from specification and estimation through to ordering, management of deliveries and handling of faults and discrepancies.
- Streamline the management of these processes with Project Management software such as Programa.
- Consider the increased workload this service will require to be efficiently managed. Do you currently have the skills within the business to manage these new responsibilities?
6. Manage Your Finances
- Ensure this is a profitable addition to your suite of services. There is a high level of management required, increased responsibility and potential risk. Ensure it’s worth it financially!
- Set yourself up for regular reporting and analysis. Are your margins profitable enough? Are you charging for all the work needed to deliver successful outcomes?
- Create financial forecasts to assess the future pipeline of work, breaking revenue down into fees and procurement margins.
- Set up separate bank accounts to ensure your procurement revenue doesn’t get intertwined with your trading account that manages day-to-day expenses.
Choosing to manage procurement offers a range of advantages, from increased profitability and efficient project implementation, to enhanced client satisfaction and greater control of aesthetic outcomes. Utilising a well-structured procurement process is essential for the successful management of this important service offering. Preparing your practice with the necessary administration processes and contractual tools will ensure that you effectively set customer expectations and thoroughly protect yourself from possible challenges.
To find out more about Andrew and The Design Coach:
Website www.thedesigncoach.com.au
Instagram @thedesigncoach_au
Email hello@thedesigncoach.com.au
Book a Discovery Call here .
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