This is a repost from deep in the archives. Originally published on the week of this blog’s relaunch on December 12, 2012, this article has been the most popular week in, week out. Leave a comment and share your tips and tricks. How do YOU make more money?
To successfully complete a project, an architect is responsible for making thousands of critical decisions. To complete the development of a standard residential additions and alterations project, it takes several months of focus and dedication. Many of us work long hours, long into the night, through weekends and holidays.
The innovative ideas and concepts we create can often only be born after hours (sometimes days) of intense thought and several dozen layers of sketch paper. The personal emotion, attachment and dedication that each project receives is unequaled in any other profession.The time and effort required to properly develop a design and complete a thorough set of construction documents is difficult for most anyone outside the profession to understand.
As a requirement for licensure, registered architects are responsible for the health, safety and welfare of every occupant in every project we design. Like any small business, architects must pay the typical operating expenses required to remain buoyant, such as utilities, professional service fees, consultants’ fees, insurances and several other overhead expenditures. But wait… for architects, there’s more. To protect us from the liabilities inherent in our responsibilities as licensed professionals, most architects also purchase an additional Professional Liability insurance policy costing several thousand dollars each year.
Then, there’s that little thing called profit. Every business, including architecture firms (yes, its true!), must earn a profit. It’s one of the rules to “the game”. In order to continue pursuing our success as architects, we must not only cover our expenses and take home a salary, we must make enough to reinvest into the business.
Most sole proprietors and small firms I know, struggle to meet the minimum requirements of operation. Forget about profit.
Simply stated… Architects just don’t make enough money.
We deserve to earn more. So, in the spirit of pursuing our passion and attaining the success we dream of, I have compiled the following ten ways architects can make more money.
Every architectural services agreement should include a section on Additional Services. These are services available to your client, but are NOT included in your basic architectural services.
Are you giving away services that you should be compensated additionally for? Many architects are doing just that.
In our Agreement for Architectural Services at Fivecat Studio we clearly identify several Additional Services. Services such as Existing Conditions Surveys, Interior Design, Kitchen Design, 3-D Modeling, Illustration, Rendering and Estimating are all offered to our clients as additional services.
Since we launched our firm in 1999, most every prospective client I meet asks if Fivecat Studio offers construction services. Many people have the perception that architects build buildings and many others wished they would. So, in 2007 we stopped saying no and launched our Construction Management Services. In doing so, we more than doubled the revenue we collect from each project for which we perform these services.
Through the years we have learned that not every project and not every client is a good fit for these services though.
If we feel that the project and the client are compatible, we offer Construction Management Services as an Advisor, not as Constructor. It is important to differentiate the difference between the two services. I will publish a more thorough post on this topic in the future, but the basic difference is in the agreements between the owner and the multiple contractors. As an Advisor, the contracts are direct between the owner and contractor. The architect is responsible for managing costs, sequencing, scheduling and payments. The full liability for the construction falls upon the contractors. The architect is simply an agent to the client with no liability for the construction.
As a Constructor, the owner contracts directly with the architect for construction services. The architect is then responsible for constructing the building, hires the contractors directly and inherits the associated liability. More liability means more liability insurance, which increases your firm’s expenses and your firm’s exposure to legal action. Until the volume and revenue from our CM Services allow for more investment in growth, we will stick with offering Construction Management Services as an Advisor.
Selection of Fixtures and Finishes
During the Design Development Phase of each project, we provide our clients with a “shopping list” and contact information to suppliers and sales people we know, like and trust. While our clients shop, we develop the design. We are always available to support them, answer any questions and guide them in selecting items appropriate for our proposed design.
In the case where a client would rather not be responsible for this task, we offer the selection of fixtures and finishes as an Additional Service and take on the full responsibility for the choosing these items.
Each client is different and their desired involvement in the process varies. Offering multiple ways for this process to occur keeps each client happy and allows for the firm to be properly compensated for the additional work required to perform the task.
Purchasing and Delivery
Once all the fixtures and finishes are identified, we then document the selections and include their specifications in our Construction Documents. During construction, the purchasing of these items is the responsibility of the contractor, or the owner purchases the items themselves prior and furnishes them at the appropriate time.
As a courtesy to our clients, we offer a Purchasing and Delivery Service which makes the acquisition of these items our responsibility. The additional attention assures our clients that the items ordered will be correct and delivered on time.
This process takes lots of time and effort. It is not typically the responsibility of the architect to perform this service and if you take on the additional work, you should get paid for it. Although, that does not necessarily mean that it should cost the client much more.
Fivecat Studio is compensated for this service as a percentage of the cost of the items we are handling. We then forward all our trade discounts to the client, which will often equal the amount that we are being compensated for the service. The client has less responsibility, the order is properly handled, we make more money and the client pays little or no more than they would have without our involvement. It’s the classic “win-win” scenario.
There is an alternative approach to the Purchase and Delivery Service described above. You can purchase the products at the your discounted trade price, mark up the price to cover your time and effort to handle the transaction, include an amount for profit and offer the products selected by your clients at their full retail price.
Most every project includes lighting, plumbing fixtures, furnishings, accessories and finishes such as tile and stone. Who better to sell those products to your client than you?
Most architectural service agreements identify out-of-pocket expenses that will be reimbursed to the architect, separate from and in addition to compensation. Many architects though do not keep a record of these expenses and therefore, do not properly collect the amounts owed to them for the project-related expenditure.
Quantify your reimbursable expenses and collect.
This one may be the easiest way to make more money. It does not require performing any additional work and there’s no waiting for clients to pay you.
Prepare a thorough evaluation of all the money your firm spends. Categorize the list into “required”, “not required” and “waste”. Spend only what you need to grow, eliminate waste and end up with more money each month.
Monetize Your Website
Most architects have websites to market our firms. If you don’t… you should. We built Fivecat Studio from the ground up, with no money and no clients, using our first website. There is no way that we would be where we are today without fivecat.com.
Most firm websites includes basic contact information, a bio describing the firm and a portfolio of select projects. With any amount of traffic, you can add features to your site and start making some additional money to supplement the services your provide as an architect. As an expert, you can offer e-books for sale. Prepare a Resources page with affiliate links to items or services for sale that people visiting your site will find useful. You can also sign up for Google AdSense and make money through advertising on your site. If designed well and presented properly, your site can become a source of additional income for your firm.
The more traffic visiting your website, the more money you can make. Continuously updating your site with new work and additional information can help attract visitors. Adding a blog and consistently writing on a topic interesting to a niche market (say maybe “custom residential additions and alterations”) can help to create a following and build trust. Trust will help you sell more through your site and maybe even convert a prospect into a paying architectural services client.
Recently, due to the slow down in the economy, many architects have reduced their fees in order to be more competitive. This may work to win the project, but if your fee is not high enough to cover expenses, overhead and profit, you will not be in business for very long.
If you choose to reduce your fees, you must also increase volume and complete your projects quickly. The smaller fees made on each project must add up to provide enough revenue to cover expenses and make a profit each month.
Raise Your Fees
The alternative to increasing volume is to raise your fees. Provide value by spending more time on design, more thoroughly developing your documents and serving your clients well throughout the entire process. This business model allows you to take on less work and spend more time on each project.
As mentioned above, most of us are already devoting the time and extra effort to our projects. We are passionate about what we do and we want our designs to reflect our true talents as architects.
The problem most of us have though, is that our fees do not reflect the dedication and investment we bring to each project.
Calculate your expenses, quantify your time and effort, add an appropriate profit margin and get paid what you are truly worth. You are a licensed professional and your services are worth a higher fee. Raise your fees. You are an architect… and you deserve to earn more.
Do YOU make enough money? There are other ways architects can make more. What are some ways you have found? Please share your thoughts in the comments. I’d love to hear from you.