Ep 225: Profit Isn't An Accident Series - The Markup Myth

Why Cost Plus 30% Is Quietly Killing Your Profit In this episode of Profit Isn't an Accident, Michelle Lynne tackles one of the most accepted pricing "standards" in the interior design industry: cost plus 30%. And here's the truth most designers never hear: A 30% markup is not the same thing as a 30% profit margin. Michelle breaks down the real math behind procurement, markup vs. margin, and why so many talented design firms are unintentionally underpricing themselves into burnout. If you've ever felt busy but not profitable, this episode explains why. You'll learn how to evaluate your procurement costs, rethink your pricing structure, and start building a business model that actually supports your firm long term. In This Episode, We Cover: Why "cost plus 30%" became the industry norm The difference between markup and profit margin Why a 30% markup only creates a 23% margin The hidden costs of procurement most designers ignore How time, freight, damages, storage, and admin eat into profit Why many design firms are unknowingly subsidizing procurement with design fees What "minimum viable markup" means Why Michelle recommends a minimum 75% markup How vendor relationships can improve your margins Why charging correctly improves the client experience The emotional side of raising prices How pricing acts as a filter for better-fit clients Why profitability creates freedom, flexibility, and sustainability Key Takeaways Procurement Is Not Free Every item you source requires labor, communication, coordination, tracking, problem-solving, and risk management. If your markup does not account for those operational costs, your firm absorbs them. Markup and Margin Are Not the Same A 30% markup does not equal a 30% profit margin. Example: Wholesale Cost: $1,000 Selling Price at 30% Markup: $1,300 Actual Margin: 23% That difference matters more than most designers realize. Design Firms Are Running Two Businesses You are both: A service business (design expertise) A retail business (product procurement and sales) If your product pricing is too low, your design fees end up subsidizing your retail operations. Your Pricing Impacts Your Client Experience Underpricing creates stress, overwhelm, and operational strain. Profitability allows you to: Hire support Improve systems Deliver a better client experience Protect your energy and creativity Michelle's Recommended Pricing Structure Michelle recommends designers move away from cost plus 30% and instead consider: Higher product markups (often 75% minimum) Procurement management fees Passing receiver/storage/delivery costs to clients Stronger vendor relationships to improve buying power Mentioned