Design Costs

It occurred to me today - quite out of the blue - that designers are woefully underpaid for their services. How, for instance, can it be that a designer might struggle to get paid 5 or 6 percent of the value of a vessel, yet a broker - who carries no liability, no necessary qualification, and who spends just a few hours on each sale - can reap 10 or more percent....?
And the notion that just because one already has a design prepared in the form of stock plans, that they're suddenly worth less... how absurd is that? When was the last time you got charged less by your doctor, just because he performed the same operation yesterday?

I say it's time we all started charging more!

 

The point is that designer is selling 'pictures', but broker is selling 'boat'. It is the mentality.

Average customer will scream: "What? XXXX for concept design? But it is only a picture!!!"

 

It is the same story with all types of engineering services. It happens to me most of the times that I have to concede substantial discounts to take the job. If I don't someone else will - that is the basic problem. Some people call it free economy.
But I do have a limit and it is called - dignity. Few weeks ago I had sent one client away because he stepped beyond the red line of decency, insisting to have me cut the fee so much that I've lost every enthusiasm and motivation about doing the job for him. At some point I told him "I will rather sell flowers, go and find yourself another engineer". But you know, I could do it because I have pretty much work in this period (though just a small part related to boatbuilding). I do realize that in these crappy days many people are not in such a comfortable position, so they will have to accept whatever price they have to. And so all the rest of us will have to adapt.

 

Elegant engineering is a joy to behold and well worth 5 or 10 %. Hacked engineering not so much. I entirely sympathize with the designers and engineers who struggle to get a decent piece of the action. Everyone plays a part and I think you guys often get the short end of the stick. Without quality engineering regardless of who supplies it there just isn't very much to work with.

 

This is an age-old problem--how much should you charge for boat design and engineering? I have a couple of guidelines to go by:

1. Check with your peers from time to time as to what they charge, and charge something comparable. It can be a little more or a little less, but keep yourself in the same ballpark.

2. I believe that I should charge more than my plumber. Currently where we are in northern Florida, plumbers charge about $100 to $125 and hour for a house visit. I should be able to command a higher fee than that. Granted, they know pipes frontwards and backwards, plus they have insurance, performance bonds, licenses, tools, and trucks to pay for. And I am all thumbs when it comes to fixing pipes, so I respect their talent. But I spent a lot of intellectual capital in getting to where I am, and I deserve the fees that I charge, and they are more than my plumber.

3. Whenever I raise my rates, and it is usually with a lot of agonizing, I always make more money. It does not drive customers away in the long run.

4. There will always be some that say you are too expensive, but there are also always a lot more people waiting in line to hire you. "If you don't like the price, sir, then please step aside and let me help the next person in line."

5. Always do good work for a reasonable price. Which is to say, don't cheapen yourself and your rates, but rather try to give that extra little bit of knowledge or time that the customer does not expect. He will feel like he is getting a good deal. And then he'll tell his friends. And they'll tell their friends, and pretty soon you get that line waiting at the door.

Good luck,

Eric

 

Eric, that's a perfect reasoning. In particular, your points n.2 and n.5 are closely related to my observation about the need to give a dignity to our work.

 

I naturally agree with all of you... it was a slightly-tongue-in-cheek soap-box rant that I felt like having... and what better place to do it than where you know everyone will agree with you!

On a more serious note, it is an age old problem - and one which everyone seems to solve in their own particular way...
Some, like Eric, charge by the hour - a most sensible approach IMHO.
The traditional approach was probably to charge a percentage of the vessels cost, which I always found somewhat odd, as the amount of work involved in the design isn't always related to the cost of building it.
Then there's what I suspect is the most common approach - the designer estimate's how much work's involved, takes a punt as to how much he/she thinks the client is prepared to pay and what is likely to be charged by other designers and then comes up with a number somewhare in the middle - usually in the full knowledge that it's far less than it ought to be...

 

Yes, one's dignity is usually well earned. You've trained for it; it takes some smarts to solve the problems at hand, and that is something to be proud of.

I have never charged a percentage of the building cost, because many times the boat actually never gets built, or it gets so drawn out over time, or the owner is building on the cheap. Why should I put off being paid for my work by being dependent on someone else doing theirs? Not a chance. I usually charge a fee up front for any work to do, with interim payments along the way and a final payment when the final bit of work is delivered. People are pretty happy with that. I charge by the hour on short jobs, and when the project is more involved, like a whole or major portion of a design, I do exactly as you describe--punt with a fixed price and hope for the best. More often than I care to admit, I tend to underestimate the time involved to complete the project so that my hourly rate is a lot less than what I should be getting. I keep track of every job by hour and task so that at any given time I can revisit what I did on such and such a job, break down the tasks and time spent, and make an estimate for the new work with some sense of my past history. You win some and you lose some, and the average usually isn't too bad by the end of the year.

Eric

 

I think time rate is more fair then percent of costruction cost. But I use company running costs as basis for quotation, not hourly rates of mine or other specialists.

Say, if the customer does not order interior design or electrical system design to us, we still have to pay salary to these specialists. It is unlikely that they will be busy with other projects

 

I'm not directly involved in such matters at present. But I'll chime in anyway:

George Buehler's custom design payment scheme ( http://georgebuehler.com/paymentsch.html ) is probably the most fair and honest that I've seen published: a set fee, payable in set increments when the client and designer reach agreement on key milestones in the process. I think Eric Sponberg's system for big custom jobs is fairly similar?

Lawyers charge by the hour- good for them, as long as things are busy, but usually a bit too uncertain for the client's liking. Most engineers I've dealt with are on a flat salary, with their design house charging a fixed "base price" for the initial scope of work and an hourly rate for anything beyond the original scope.

As a client, I'd prefer to know up front roughly how much I'll have to pay. As an engineer, I'd tend towards a pre-arranged price for the original scope, charging hourly for smaller jobs or changes to the original scope.

I agree with Will that designers and engineers tend to get a smaller share than they ought to reap. A good engineer has a comparable level of training to a lawyer and takes on comparable or greater responsibility, and should be paid accordingly. People grumble when their lawyer asks for $150 or $200 an hour, but they do recognize that this is what such services cost. An engineer shouldn't have the overhead of a law firm, but still needs to take home a salary commensurate with his/her training and experience.

 

Just to make an observation -- a lot of people choose careers because they love what they do, not to make money. If you're interested in making a lot of money, it would be a good idea to do some research and find out what people in your chosen profession earn before investing a lot of time going down a road that doesn't go where you want to head.

Many years ago I worked as a recording engineer. I could hire the best musicians in the city for $20 an hour -- many of them moonlighting on their jobs with the symphony. Most of these people had over 20 years of experience, and had spent many thousands of hours perfecting their skills. Today, you can still hire master musicians for $20 an hour. It must not be the money

Talent, skill, and compensation have only a tenuous link to each other.

 

I think you are missing the point here, or maybe I have understood it wrongly.
I believe that 99% of persons involved in boat building and design are driven by passion for sea, for boats and, more generally, by passion for beauty and artworks (which ALL boats ultimately are, imho).
The 1% percent who do it just for money are tycoons who are specialized in financial operations related to buying shipyards in stagnation or in difficulty, restructuring and upbranding it, and then re-selling it after 5-6 yrs with a huge profit.

So, it is no - most people in this industry don't do it to become rich. They just want to be payed a honest fee for their job, having in mind the knowledge, experience and professionality they are putting into a design.
And also having in mind that, if Eric Clapton misses a note during a gig it is just a wrong note which will soon be forgotten by audience.
If a designer or engineer mis-calculates a structural feature of the boat - it is boatowner's life that might be put in peril. It is generally true for every technical or engineering service, not only boatbuildng.
So what is the right price for that legal and moral liability? I hope you don't really find it correct to have a designer or engineer accept such a responsability for $20 per hour? I don't and I won't.

 

It has always amazed me that "the public" values the services of doctors & lawyers more than engineers, designers & tradespeople involved in the construction of bridges, buildings, shipbuilding, etc., for this very reason. To date, I have found that the maxim, "You get what you paid for", is most appropriate when discussing the quality of boat design plans & the level of designer involvement during the construction phase. Unfortunately, the average consumer surfs the internet, finds the "bargain-basement" designs & wonders why some designers charge so much in comparison to these volume-based design companies.
Mike

 

I sympathize with you guys but see things from a slightly different perspective. When I need engineering it is part of the cost of doing business. Regardless of how you charge for your time, in the end it boils down to how much value does your portion contribute and how much is it going to cost.

Elegant engineering is hard to define but easy to appreciate. Unless cost is no object at which point fees no longer should suffer from normal constraints, your services have to be cost effective and should ease not hinder the construction process.

How much is too much or not enough? In the end supply and demand shape the answer. How many people can do it and how much demand is there for the service. What plumbers, doctors, and lawyers charge has little to do with it. Their rates are shaped by the supply and demand for their individual services which have little bearing upon any situation other than their own.

I am not denigrating your experience or education. In it's own way arduous credentials gained through lengthy education act to restrict supply generally raising prices for services rendered, yet demand plays just as big a role. Demand is not within your control but dominates the equation. The most realistic way to price your services is by your backlog.


I'm not trying to be arguementative or stir the pot I begrudge no man adequate pay for services rendered. These are, to the best of my ability, neutral observations. Nobody owns a customer.

 

TollyWally gets it right. It's pure economics -- it's supply and demand. Granted, the consumer is generally ignorant of what they are buying -- but that knowledge gap is up the supplier to bridge. In my opinion, a naval architect would have to do something fairly radical to stand out from the crowd.

I've seen B&M architects design public buildings worth tens of millions of dollars for minimum wage, just because they were given artistic freedom and wanted to have their name on the project. I've seen attorneys do pro bono work up the circuits and to the Supreme Court -- work worth a million dollars or more -- just so they could prove their talent and have their name on the case. Those are the actions that make them stand out, and create demand for their services (assuming they win).

The plumber, on the other hand, is almost a commodity. If one quotes me $1,000 -- another $500 -- and another $400 -- I'm likely to pick $500 (skeptical of the low bid, and equally skeptical of the value in the high bid).

A lawyer is not a commodity. After Johnny Cochran got OJ off the hook -- he could name his price. But he had to prove his value first. A designer is not a commodity, but how do they prove it?

I know I'm rambling ... so here's my question ...

What can a naval architect do to differentiate their work, prove their skills, and separate themselves from the pack? Modest and incremental improvements are probably not going to cut it.