Prior to starting our own firms, we business-owner architects experienced an “entrepreneurial seizure”, as Michael Gerber so accurately described in his book, The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It. It’s the precise moment when a passionate employee commits to starting her own firm. Frustrated by the process (or lack of process) established by her employer, she decides that she can do better.
Do you remember that moment?
The passion required to overcome the fear and uncertainty of launching a start-up business is a very powerful emotion. It’s what takes us from “business-owner architect” to Entrepreneur Architect. It’s what gets us out of bed every morning and keeps us going years later.
Passion for what we do though, will only take us so far. To become a great firm, a truly great business success, we must also have a passion for profit. I know… Profit. To some, profit is a dirty word, but the reality is that without profit, your passion for being an architect will very quickly evaporate. It is the passion for profit that allows us to grow our firms and continue to build successful practices.
Much like winning a game, earning profit feels great. Not just emotionally, but physically. Neuroscientist and clinical psychologist Ian Robertson writes about the the neuroscience of success in his book, The Winner Effect. Earning a profit (winning in business) physically alters our brain chemistry and increases the production of dopamine. It sharpens our focus and desire for continued success. Earning profit literally causes us to become passionate about earning more profit.
The lack of profit alters our brain chemistry as well (unless your business is set up to run as “non-profit” of course). Running a firm without profit is frustrating and frightening. We become depressed, disinterested and our passion for the profession fades. During times of economic slow down, the dangers threatening our firms not only come from outside pressures but literally from inside our heads.
So what can we do? Here are five approaches to earning more profit.
Cut your expenses.
Look at your books. (You do keep a record of your earnings and expenses, right?) Review your expenses and eliminate any unnecessary or wasteful spending. You may be surprised by how much of your earnings are used for supplies and services you don’t really need. Remember, the goal during this economic crisis is survival. Wait for the “good times” to return before spending your hard earned revenue on coffee service or extra phone lines you don’t use.
When times are tough it is so easy to get snared in the trap of business debt. Credit cards and lines of credit shift from “safety net” to reliable source of “income”. Before you know it, you’re maxed out, paying massive amounts on interest and working with no net at all. Make a plan to reduce or eliminate your debt and start working with retained earnings to pay for expenses.
Huh!? Increase payroll to earn more profit? Yes. Healthy businesses must grow. You can’t do it all yourself. With the right team in place, you can take on bigger and better projects. Expenses will be distributed among more income sources and you will earn more profit. Be careful though, hiring the wrong people may cost you much more than you’ll be paying them.
Raise your fees.
Competition has increased among architects and some prospective clients are selecting firms based on cost. Many architects have cut their fees to the point where profit is impossible. Remember, without profit our firms will fail. Higher fees will not only keep your firm running strong, but will indicate the true value you bring to a client.
Expand your services.
Architects must think beyond the traditional design studio business model. In 2007, with the current economic storm heading our way, my firm expanded services to include Interior Design and Construction Management Services. This change in offerings allowed us to increase potential revenue with every project. Fees, once paid to outside designers and contractors, are now earned by our firm. Not only has potential profit resulting from each project increased significantly, but we have more control over the final quality of our projects resulting in happier clients.
Without passion there will be no profit and without profit you will soon lose your passion. To be a successful Entrepreneur Architect we must have both. It is the Passion Profit Cycle that builds great firms and allows us to continue to do what we love most; practice architecture.
Stay tuned to Entrepreneur Architect. (Click here to have my posts delivered directly to your inbox.) I will share more ideas in future posts on becoming more profitable and building great architecture firms.
Are you passionate? …about profit?
You should be.
In this crazy tough economic environment, what are some ways you have found to become more profitable?
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To learn more about the neuroscience of winning, check out this recent interview with Ian Robertson and Leo Lopate on WNYC Radio.