We’re a disgruntled bunch of professionals.
There are hundreds of articles, forums, blog posts and comments discussing how we architects are not paid enough and how our clients don’t understand what we do. The most popular discussions at The EntreArchitect Community are always those where we discuss the forbidden fruit of topics; compensation. Post after post, comment after comment, I’ll read the complaints of architects blaming society, our clients and past generations of architects for the ditch in which we find ourselves.
We are not compensated at the levels commensurate with the efforts we extend, nor the value we contribute to society and, man… are we tired of it!
To become an architect, we spend at least five years in college and another three years training as an intern. Many of us choose to pursue additional education and often work many more years than is required before taking the exam to become a licensed architect. The current Architect Registration Exam requires passing seven divisional tests, which often take months, and sometimes years to complete. During a typical architectural project, we make thousands of decisions, work hundreds of hours and are responsible, by law, for the health, safety and welfare of the people using our buildings.
You are worth more.
The profession was severely damaged when the American Institute of Architects was accused of violating federal antitrust laws. In reaction to these suits, the AIA developed its Antitrust Compliance Statement and Procedures and established Antitrust Compliance Guidelines for use within the organization. These documents, created by AIA legal counsel, would ensure that the organization would never again find itself accused of violating federal antitrust regulations. Essentially, they directed AIA members to never discuss fees or compensation, anywhere, anytime.
Whenever I post the topic of compensation at the Facebook Group or here on the blog, I inevitably receive a well-intentioned warning from a fellow architect, saying that I should not be discussing such topics.
We find ourselves in a most unfortunate position. We are not taught the basics of business during our formal education and, as professionals, we are fearful to discuss any topic related to fees. Through trial, error, and super-secret double agent underground discussions (shhh… don’t tell the AIA), we learn what others are charging and how to structure compensation for our services. Rarely are we developing pricing with the understanding and engagement of the basic principles of business.
I am not going to compare architects with other professions, which is often the default argument presented. My suggestion to you is that we alone are the problem. As creatives, our passion seeks the art of design and the process of developing a concept into construction. Rarely are we motivated by money and often reject the notion of making a profit, in fear that it will corrupt the purity of our passion.
The cause of the problem in which we find ourselves will be found by looking within ourselves, individually and as a profession.
The value of architecture and the services we provide are established by you and me, not our clients. As business owners, we establish the value of our products and services. It is time that we look within our businesses, understand the value we bring to our clients, and to society as a whole, and raise our fees to the proper levels required for a healthy, profitable business.
Are you in?
Let’s talk…
How do you establish your fee structure? On what do you base your compensation?
By sharing, we will build a stronger profession full of healthy, profitable businesses.
***
Here is the problem and that is getting everyone to buy in. I tried setting fees based on what I was worth and never got any projects because there was always someone who would do it for less. I started a Linked-in discussion on this very topic. Sadly in my area of the country unless you are one of the “star” architects the building projects tend to be led by the contractors – they are the first one’s owners call, and it is because they are concerned with total building costs.
I am anxious to follow this discussion.
Dick,
I hear that reason a lot and it is definitely true that if a buyer doesn’t understand what they are paying for, they will naturally gravitate to the least expensive option. They assume that quality and level of service are equal by the each seller. I’m curious if you have a system to sell? It’s not enough to simply give a proposal out with higher fees in it. One must actually have a system for selling. One must explain what it is they are offering and what advantages will come to those who are willing to pay more. A few years ago, I outlined what I felt were my advantages that I offer. Before every client/project interview, I review this to remind myself and to boost my confidence. In addition, I stopped emailing proposals to prospective clients. I now require that we meet and review the proposal, paragraph by paragraph, including the fee schedule. There is really no better training for having and justifying your fee than by initiating the discussion yourself. And it gives you a chance to judge their reaction on the spot and explain why and how you charge what you charge. And it can provide as a starting point if your price is too high to negotiate it downward by elimination of services (not ideal, but sometimes needed to get the job and better than lower prices without less services). Of course, all of this doesn’t result in getting every job, every time and there are always those who value price over quality (Often, they are not good clients anyhow). But it has taught me a lot about selling and the art of the deal, and even landed me some better paying projects.
Excellent insight, Chris.
“I now require that we meet and review the proposal, paragraph by paragraph, including the fee schedule.”
I’ve vacillated on this one over the years but am returning to it now, having had, as you, so many “go silent” rejections, meaning that the prospect simply never returned my calls afterwards. A time or two, when persistent calling got me through, I was met with heated accusations of charging a “rip-off fee”, since the competitor quoted a different level of services at very tiny fractions of my proposal. As you said, ” . . . if a buyer doesn’t understand what they are paying for, they will naturally gravitate to the least expensive option.”
I’m getting on board with hosting a meeting with prospective clients to review my proposals in detail. This will allow me to explain the services I offer for the fees I am asking. I hope to educate the clients so that they will not just look at the bottom line number and decide based upon that. A lower number almost always reflects a smaller scope of service, less time and attention.
Writing it all out in the proposal is one thing, reviewing it in person gives me a sense that the client actually GETS it.
If the client doesn’t even wish to take the time to review the proposal, then I assume they are price-shopping, and don’t really care much what the architect has to offer.
Is the Kernel here that The Supreme Court found Architects should be allowed to compete based on competitive fees? I guess Doctors don’t compete on that basis, although I have heard that that might be a part of health care reform starting with MRI’s and other diagnostics.
A good way to help solve the fee problem is for us to expand “Architecture” to encompass General Contracting. As the IT world has hijacked our professional moniker, we should re-coin our identity to Architracting. Maybe this is why the AIA gave approval to the design build strategy.
Kyle, I like it…”Architracting”…brilliant. Count me in.
It’s easy to say, in response to the article, as well as in response to the comment by Mr Jenkins, “Oh, that’s just ‘free enterprise'”; yet government intrusion, due to a highly zealous interpretation of Federal anti-trust/anti-collusion laws (dating from the 1880s), has led our most prominent professional group to take an equally cautious stance to protect its existence. This also ostensibly protects its members from violating those laws — and such violations are indeed quite serious and can lead to substantial prison terms. The stakes are high, and even an accusation can lead to financial ruin, not to mention loss of liberty.
The problem goes deeper than that.
Curiously, while the AIA had, at a prior time, some guidelines on professional fees, it also restricted the direct participation by its members in the processes of construction and development. Advertising was discouraged. Any form of seeking clients, at least openly, was termed “ambulance chasing”, though mainly by the oligarchs of the field. The enforcement of anti-trust laws also kept our professional organization from limiting our options in areas where we have much to contribute and much profit to make (e.g., design-build & development), so there was some gain for the entrepreneurial among us; yet, there is still deep reticence to discuss the fundamentals of compensation in any meaningful way, so that many among us continue these behaviors harming our profession: fleeing in fright from any mention of fees in conversation, self-righteous denunciation of those who attempt to advance the puck, and a race to the bottom.
We’ve got to get past that.
When I was in school, back in the 1970s, we were told that discussion of money was beneath the “dignity” of a professional; well, okay, but so is starvation, or going out of business. It was, in other words, dirty. Our business class content dealt almost entirely with the terms of standard industry agreements. I recall no discussion of the economics of running a firm. I contrast this with courses taught nowadays; I’m most familiar with those taught to interior designers in accredited schools, as I’ve done that for about 16 years. At three different schools, I included specific components in establishing hourly rates, fee structures, similar to methods used by my small firm. (Input from others who teach or have recently taken business & pro practice courses in accredited architecture schools would be enlightening here — what’s your recent experience with the established approach to educating students in this subject? I note also posts on firm structure, “How Wide is your Triangle” by Rena Klein, I think referenced on this site recently.) In conclusion, it seems that teaching the proper methodology is one immediate work-around that can stay within the bounds of existing laws.
We’ve got to go beyond that, so it seems to me like we should seek clearer definition of our true legal limits and possibly seek to alter those to match the reality of practice in our society.
“We’ve got to get past that.” …Amen.
Thanks for the background Andy.
I think it is a matter of how much you value yourself. I often ask a client what they think a fair hourly fee for a professional should be. I usually get an answer in the mid 100’s. Then I explain the hours required and document to them hours required on similar projects by giving them time sheet records from that project with breakdowns of the different phases of services. I also show them our work in the form of design work and construction documents. Once educated they look cautiously at others who’s fees are so low it is an embarrassment to our profession. More often than not I will get the commission.
To many architects are either giving it away or are providing minimal services and documents which further erode our professional standings.
In reality we will never change. This profession is dying a slow death.
The profession will change. I will take time, but this site and what comes after this site will make the difference.
You in?
Now that we are starting to come out of the recession now is the time to review where we went right, where we went wrong and what to do going forward. It is going to become a even more challenging economic future with more pressure on fees not less.
But I don’t see any other way to go forward than to try and demonstrate and communicate more value and require better compnesation for it. Hyper- inflation is a possible threat looming where our costs keep going up while our revenues do not. That condition is already here inching it’s way up. It’s just a question of how high and how fasts it will accelerate.
And also accelerate marketing to see more prospects in order to be prepared to say no to the deals that don’t make sense. If every one of us were to do that then the market would improve for us all by adjusting our own market. We can’t count on that so we have to have the discipline to just do it ourselves. It will also take sacrifice. You might have to do without a certain level if revenues while trying to getting the better paying clients.
I have already committed to lower overhead. The more money you have in the bank, that better you can negotiate, Because you can afford to walk away from the deals of desparation.
Of course, you wil be undercut by the competition. I’m getting to the point where I don’t care anymore. I’ve also noticed that those are the ones that often win in a negotiation, the ones that don’t care. And it’s not a put-on. They really don’t care. But the often seem to win in spite of themselves.
I am prepareing to try and demonstrate more value to the client. Like 3D visulaization that I just got one client to pay more for. In reality I didn’t make any more money because it takes longer but it does set me up for a higher level of clientele next time.
As far as offering general contracting services that is great if you are geared toward that. And I am a licensed GC that doesn’t build. Although I would be willing to develop. Right now GC’s are getting beat up just the same as we are. Only we can take a losing design home with us at night and finish it. They have to reach into their wallets to finish it.
So long as you have the acumen for that it would raise revenues as well as the bar in the industry. But it’s no picnic.
As far as meeting with every prospect face to face rather than e-mail I will takethat under advisement. I would say that you could burn alot of gas and time doing that for the same result. People often act like your pal face to face and as soon but as you are gone they might never return your calls anyway. So I would say to be selective as far as doing most everything such as reviewing a proposal face to face. But I do catch myself relying way to much on e-mail. Which can also be dangerous because you slip on something you say and be misunderstood without body language behind it.
I am also looking at any alternative I can for making money. For instance, I just took on doing inspections as a contractor for a national company . This has not been a big money maker but it off sets some costs. The idea is to try and be open to any new opportunities. You stop looking, you stop seeing.
But client’s are naturally going to try and beat us down just like anyone else who will let them. I’m not going to be unrealistic and say that I will never back down. But now is the time to start disciplining yourself to back down less and less. And prospect more and more to compensate for the inevitable loss of some clients. Which ones? The bad ones.
“Of course, you wil be undercut by the competition. I’m getting to the point where I don’t care anymore. I’ve also noticed that those are the ones that often win in a negotiation, the ones that don’t care. And it’s not a put-on. They really don’t care. But they often seem to win in spite of themselves.”
I think it is more a sense of confidence and understanding of their financial situation.
When a prospect chooses to work with another firm strictly on price, I am thankful we did not get the job.
“When a prospect chooses to work with another firm strictly on price, I am thankful we did not get the job.”
— Agreed. Commodification does not exclusively subsist at the bottom of the market.
A few years back, a book was published by the name of “Co-Opetition: A Revolution Mindset That Combines Competition and Cooperation: The Game Theory Strategy That’s Changing the Game of Business”. The gist is, let the bottom feeders have what settles there, until they starve; of course, we’re experiencing far greater complexity in accepting this now, so it’s tempting to continue dropping until we truly hit bottom. However urgent our financial affairs may be, design professionals will do well to avoid this downdraft; otherwise, we’ll be the feed of the bottom dwellers — we’ll be “what settled”.
Hi Mark,
As you know, this is one of my favorite topics – and my personal mantra, Architectural services are NOT created equally. First and foremost is what are OUR goals as an Architect and right up there is what are the goals of the prospect – If your goals are great design, great service and great long term relationship, and their goals are price driven, it will NEVER work, and you should be grateful not to further the relationship, as it will inevitably lead to resentment on one or the others side. You’ll be frustrated the client really doesn’t care as much about design and service as you’d thought, and they would willingly cut out those brilliant design decisions and selections to save money. No fun. NOT profitable as you will have to “undo” all those design hours by finding “alternatives” in the bidding phase (at no additional fee), and in the end, a project that you may not even want to photograph. (By the way, in my humble opinion, If you can’t photograph it, then it really hampers your ability to prospect for new work and/or publication/awards). All that time invested, (months/years)….you get what I mean, and you want referrals – the lifeblood of most of us practitioners.
One of my biggest eye openers was when I found out that Interior Designers have somehow unlocked the key to more significant fees, and clients seem to be more than willing to pay them! As I tell my clients that I’m an Architect that “sells design” (as opposed to expediting services which we inevitably do as part of our scope), I try to separate the type of services my firm provides compared to others they may be interviewing. My advice is identify which of your services “wear both hats”, as I refer to it, and either have them as an add on service, or a reason your percentage is more than the competition. The two simple ones to identify are lighting design and built-in cabinetry. If a client needs to hire a “specialist” for these services, it’s at a cost. If it’s included or identified with you, it’s less work and burden to the client and they save money with one stop shopping.
If your firm provides some other service that you are pursuing, such as “green design” etc, you might want to hone in on that to similarly separate your self and the advantages over your competitors for an increased fee.
Try it on your next few projects, and above all keep your message consistent with each new prospect! Hopefully it will translate to fewer projects with more aligned fees. Yes, FEWER projects with BETTER fees. Good luck with the results! best, Carol
Thanks for sharing Carol.
Thanks, Carol.
I want to make two comments. First is in response to the authors statement, ” As business owners, we establish the value of our products and services.” I would argue that thee marketplace determines the value of our products and services. If not, I ask HOW do WE determine these?
The second is with regard to fees. I have seen architects tremble in fear whenever the f-word is broached. While architects are not allowed to collude regarding fees, there is nothing wrong with architects posting their fees (or fee structures) on their websites or other promotional materials. There could be ramifications (i.e. fee shopping) to this, but it is perfectly within the bounds of the law. But, architects would know what others are charging, in the same way supermarkets know what their competition charges.
Realtors are allowed to charge the same fee because their’s is “common knowledge”. At one time architects had fee schedules (published by the AIA) which could have been adhered to. Perhaps we blew it by deviating from these in order to stay competitive?
In any event there needs to be some detailed commentary provided to architects to determine what the anti-trust laws permit and do not permit.
Edward, to tackle your points somewhat out of order . . .
• “Realtors are allowed to charge the same fee because [theirs] is ‘common knowledge’”.
— I understand that a preponderance of real estate agents seem to charge fees within a narrow range, more so than architects. I have read that the US DoJ expressed plans to take legal action under the anti-trust laws against the real estate sales industry, and that the industry’s primary association indicated an intent to fight these actions (unlike the AIA several decades ago, which entered a consent decree).
— What is your source for the “common knowledge” of the real estate sales industry’s “being allowed” [by whom?] to charge the same fee? It’s not my intent to dispute over this. I’m really interested to understand the source of a possible defense for some reasonable “prescriptive” standards (if there are any) for fees or commissions in any sector of businesses possibly related to ours. I’m not advocating that there are, or aren’t any, here, but it would be useful to this forum to know the source and be able to access it.
• I strongly agree with your note that ” . . . there needs to be some detailed commentary provided to architects to determine what the anti-trust laws permit and do not permit.”
— I have the impression that the AIA’s position might overstate the core legal requirements, due to stipulations of its consent decree and an abundance of caution. I’d hate to run afoul of this; however, I’m not sure I understand what they look like in my practice. This is especially true in a context of the collegiality of professionals with morally (& legally) superior concerns to protect the health, safety, and welfare of the public.
• “. . . with regard to fees. I have seen architects tremble in fear whenever the f-word is broached”
— HAha! How True!
• “. . . marketplace determines the value of our products and services. If not, I ask HOW do WE determine these?”
1 — The answer here is not that we determine the value to the recipient; we can only guess — they determine the value to them by buying, or not. We, however, determine our value to ourselves by how much or how little compensation we require, and we determine the cost of providing that compensation within various parameters. The latter cost can be calculated.
2 — Many architects do not know how to make these calculations. These folks especially include younger practitioners, some older practitioners, and certain practitioners experienced in firms where they were never exposed to financial management. Many understand each phase of a project very well, otherwise, and are talented architects. A number of them suddenly appear on the market as “solo practices” due to downsizing, then vanish.
3 — When the fee proposals of these ephemera deviate from the general range, this confuses clients and disrupts the flow of clients among established professionals. Such outliers can be good or bad. Many of these newly founded firms suddenly disappear after mere months in operation, if that long. This is bad for clients and the profession. Nothing against “newbies”, but I’ve received calls for help from past prospects who’d hired a firm like that for less than 1/3 of my proposal (some call this “working for wages”, pejoratively), only to receive comments from the authority having jurisdiction and call their selected firm’s phone to find it disconnected, mere weeks after stamped drawings had been issued. FAIL!
4 — I’ve noted three reasons for neonatal firm failures, primarily. First, they may have never intended to remain in independent practice, so they went to work for another firm — I believe this to be a wrongdoing, usually; second, they were almost certainly under-capitalized and ceased being able to function (why their phone was disconnected) — this may be a lack of wisdom; third, cash flow was insufficient to carry them to the next project, due to inadequate hourly rates being charged for the billable portion of their time — this lack of knowledge is most quickly correctable with a little information. How many of us know the simple, three part formula that establishes our hourly rates?
With apologies, I realize this reply is longer than your post, but you bring up some deep questions.
Great stuff Andy. Thanks for sharing.
Edward: We establish our value by choosing the market to which we serve. If we are serving a market that does not value the services we provide, then our fees will be low. If we choose to serve a market that values what we provide, then our fees can be higher.
In the market which I serve here in Westchester County, NY local architects typically charge 8% to 10% for residential work. We determined that, in order to pay our expenses and make a profit, our fee must be higher. At 12%, we make enough to run a healthy business and, in doing so, we attract a better client. I chose to set our fees at 12%, not the market.
Yes, we all need to have an idea of what others are charging for specific scope and hours.
Most clients have no experience hiring architects as the only way is to base on fee.
For any projects, I think all architects need to charge a fee upfront to explore the full extent of most scope; unless it is very simple and he or she has done it a thousand times.
This simple preliminary exploration should be billed (a few hours of visit site and city hall) This will show the client the various risk ramifications. This is also a good time to test out if the architect can work with the clients. If the client is unwilling to spend a few hundreds upfront for architect to do this preliminary exercise, I think the architect should not take this job at all.
All architecture students should also take a
business course on writing proposals and business operation of an architecture firm.
The best way is for architects and engineers teaming up together to build their own projects and forget about clients.
Stay tuned Nung. The first Entrepreneur Architect Course will be about creating your own proposal and agreement.
This reminds me a bit of the professional practice course I taught. I tried to teach from my own experiences in being an entrepreneur. Among other things, the students had to write business plans and proposals. In one case, I informed two students (who were partners) that their hourly rate was going to have to be about $750.00 in order to generate the salaries they had chosen from themselves – and that was billing 32 hours per week!
See, these students just picked a number (what they felt they were worth) and tried to design their fee structure around it. But, in a scenario where we are forbidden to know what the competition charges, this is not far off what we are expected to do!
In order for us to determine the value of our products and services….we must know where the marketplace is at.
Our pro practice course included too many topics to allow time for a full business plan, but our students researched the costs of operating a firm and used a three-part spreadsheet to learn the cost of an hour of time for each professional position within their hypothetical 3- to 5-person firm. I’ve usually sent students in my courses to salary.com & similar sites to research varying levels of compensation, depending on experience and responsibility in their chosen field. They would plug that into a spreadsheet, along with other factors, to calculate a direct personnel expense for each position within their hypothetical firms. This gave them a realistic idea of what to expect as compensation (hourly & annually) when they graduated and also taught how a typical firm might charge clients for their time.
Edward,
Great to find you here!
I suppose we can all look at Salary.com and the AIA surveys to determine what typical salaries are. But, isn’t this really a reflection of the marketplace? I’m still left to wonder how WE determine our value of our products and services?
Quite true — sites like salary.com are only useful to see what the marketplace offers as salary to employees. Its use as a reference for students is intended as a pragmatic introduction to the “real world” of what they might expect when they go for job interviews, as well as a source for info on the class project.
The upshot of using such a tool may well be that we see our value as far greater than what the marketplace is willing to pay. In that case, we can either succumb to the malaise that seems to grip much of the profession or think of ways to overcome it. When we look to determine our value, we’re examining it from the other side (ours!), we find often a big difference from what others want to pay us!
As a result, many design professionals shed our bad-pay clients (okay, gradually), change our marketing to address those who are willing to pay for our value, or move into non-traditional modes of practice, such as design-build, design-develop, bridging (see http://www.bridginginstitute.org/ and http://www.bridgingmethod.com/?sec=2), program management, and other approaches. I’ve read, but can’t find the source, that the lowest compensation in several fields of the design professions (architecture, interior design, engineering) occurs in traditional practice, especially in single-discipline firms.
The glib answer, then, seems to be, “Find those things in my expertise that pay the most, and only do them”. Easier said than done, but it points in a useful direction, though sometimes that “4-hour work week” can cause a too-drastic reduction in overall compensation, if entered too suddenly and without proper planning.
I think you will find Archinect’s Salary Poll very interesting: http://salaries.archinect.com/
Indeed, the Salary Poll is interesting. I think I last looked at it awhile back, and it had so few posts that I thought it not to be useful. Better, now. Thanks Mark.
The residential market is especially tough, since we’re often competing against folks who have neither the education nor the license that we bring to the table. Often times, residential “plans” are seen as a commodity by the client, and marketed as such by the low-end drafting services. For this reason, I seek a balance of commercial and residential work in my practice.
I often have to remind myself (and sometimes mention to prospective clients) that nobody blinks an eye when a realtor charges a 6% commission to market your house and help shuffle some paperwork through the system. When I compare the time and effort effort involved to design and detail a similar home, it’s easier to see the value of our work.
I’ve also seen registered architects undercut non-licensed residential designers, using the rationale that “they” were going to steal “our” projects. This is not rare or in isolation. Those of us who know how to present how our capabilities benefit our clients will still get the good jobs.
Wow, lots of great discussion here. I don’t think I can add anything new to the discussion but I wanted to share a comment and a short story.
First the comment: Going all the way up to Kyle Jensen’s comment about “Architracting,” we (ONE 10 STUDIO) have had a reasonable amount of success running an Architectural and Construction Manager as Advisor (CMa in the AIA Doc suite) approach on SOME projects. Like anything, this is not a one size fits all approach. On the projects where we do act as the CM, it definitely allows us to control the process and demonstrates the value that we bring to the process. The trick is educating the client and then securing full buy-in and support. This approach is definitely not the norm in the Indianapolis market.
Now the short story: We (ONE 10 STUDIO) have a commitment to hiring and developing PAID interns. Earlier this week one of our interns had a social function at her university. It was attended by faculty, parents, students etc. At lunch the next day she told me that many of the parents, after learning that she was about to graduate with her “architectural degree” had the “wow, an architect” reaction that many of us have experienced. It’s cool to be an architect. We’re all rich, sports-car-driving, artists of the built environment … right?! Her sharing this story led us to a conversation that falls in line with the discussion we’re having here.
Why is there such a huge gap between the romanticized perception of what we do and what we are and how we’re perceived, accepted and treated around the negotiating table? Numerous reasons and examples have been stated here. I’m going to side with the camp that’s saying we have to look at ourselves and our profession. We have to unite; we have to tell the story about our work and our profession; we have to sell the value of our services again. What we do is cool; it is necessary; it is valuable. We’ve allowed some of that to be taken away from us over the years. It’s time to take it back.
Great discussion. I hope it continues as I find it both informative and inspirational. Our firm has dabbled at Construction Management and Design Build approaches, but has currently made the commitment to pursue those models in order to survive in a rural area saturated with small projects as a primary market. The larger project market that we served in the past does not currently exist. We currently have an architect-led design build project for a group home that was born out of our client relationship. While it has its challenges, it marks the beginning of our future.
Perhaps the single most helpful cash flow practice we have adopted is to require 20% of our fee up front, with that deposit to be applied to the final invoice(s). That practice has sustained us through some difficult times, and has prevented us from being “stiffed” while in construction. Anyone in the business can tell you that the chances of not being paid increases exponentially during and after construction of the project. If the client will not pay you when he/she needs you, will he/she pay you when he/she does not need (or perceive) you? We typically walk away from clients that refuse to pay the deposit. This is part of our “red velvet rope” policy (Thank you, Michael Port)-we are not here to serve every potential client, only certain clients. Those who appreciate our value and those who are willing to pay for our service are two of pre-eminent qualifers for admittance.
Although I am a building designer not a licensed architect,
Great topic!
There is nothing illegal whatsoever in discussing the mechanics of setting up a fee. What can not be discussed is what fee prices to charge and nor can we ask how much another person charges. Although, like the law allows you to find out what others are charging like a computer seller seeing what the others are pricing through looking at what the ads they have. Commodore knew what Apple, Atari and IBM were charging. They just had to pa attention to ads. Then Commodore simply figures out how to sell the product for less.
When we charge, we can find out what the others are charging. However, there isn’t suppose to be direct contact discussion of how much to charge with a competitor. Surely, if they advertise or posts their prices publicly then that is fair game to take note and then do your own number crunching of how you do service and compete.
There can not be discussion among competitors of the same or closely related field where there be competition on how much to charge. If one party asks the question and another responds by a suggested prices then both parties have engaged in conspiracy to price fix. If possible, response should not be to give a precise figure but explain the process of deriving a fee. Things to consider and so forth.
Enough said by this building designer.
There are numerous factors which create downward pressure on design fees, especially in residential design.
One advantage is for the residential practice to be located in a market which requires an actual licensed architect to provide plans for many types projects to the permitting department as was the case in Chicago and surrounding suburbs.
When I exited this market things become more challenging to acquire the same fee levels because you are competing against non licensed persons.
Additional downward pressure is applied because of the prevalence of residential “plan books” or online sources, where plan can be found pre-made and ordered.
However, over the years I have learned one of the greatest reasons for low fees demanded by a certain class of prospects. (this certain class is nearly always first time consumers of architectural services, and nearly always building the entire project on bank loan; and other factors but YMMV)
The greatest reasons clients demand and simply must gravitate towards the lowest fee, in spite of very excellent reasons to do otherwise is because our compensation must come from PRE Construction loan, PRE real estate sale dollars.
The market accepts a 6% real estate commission. This is paid by the SELLER. But the seller never actually sees the money, Never goes into their bank account, Never actually writes the check, it just comes out of closing costs.
Similar for construction costs. The home builder/ remodel client often is not paying for the concrete, plumbing, GC profit and overhead out of his own check book, its a line item request on their pay application filed with the title company escrow who distributes payments from the client’s loan proceeds.
$6,000 extra during construction equates to maybe $4.20 a month on the homeowners mortgage, that a venti mocha, no big deal.
But $6,000 worth of design fees it a hard cash check written right out of the homeowners pocket.
This is HUUUUGE I tell you.
Think about your own personal economics.
If you bought a car, did you get some options? What if I told you the only way to get a sunroof or GPS or whatever was to write a separate check for the full amount of that option before the factory will even start to build the car. This illustration is a stretch, but this is exactly the point.
Its hard to part with cash, unless you are building the whole thing with cash, then the client can more easily see some value.
As an architect I have been able to, on many projects save more than my entire fee during the bidding and negotiation phase by helping the client navigate multiple GCs and during CA helping represent the design documents during the RFI and change order game.
You can sell that!
But that’s a “what if” possible benefit, to the client type faced with financing the entire project with a Bank Loan, where a your FEE is a slap in the pocket book for certain, and those savings are just a maybe someday.
So, aside from working for low low rates, you have basically two options, let such clients go.
OR
Build the project, become the CM, show them you can save them money by open book bidding and managing all trades yourself.
Well actually you cannot do this yourself for a client, until you actually do it yourself. If you have never worked for a GC or a design build firm, you need to construct your own project.
I wrote my mid career M-Arch Thesis on “Architect Led Design Build” after 12 years of practice, more than half with design build firms. Looking back 13 years, now it seems sophomoric, so much has been learned since that time.
But one thing I will still stand behind, the best way for any architect to really know whats going on in our own profession is to actually build a substantial project. An entire house would be great, but at least a multi-room home addition with plumbing and heating.
Jonathan Segal teaches on Architect as Developer, which is the next tier.
In this case “The Market” and your investors are the client, and this is a huge improvement over the whims of clients, but another topic for another day.
For now we are starting a new life with an adorable toddler so I am keeping it small doing design only.
Because of this, I am realizing I need to simply let some prospects go because those types of folks just need to go work with a drafting service or a GC.
It would make me crazy trying to service them at 1/2 or less my rate, ESPECIALLY if during their project we landed a really good client.
So we have a very modest life to weather slow times, which I also recommend.
Less debt equal less stress.
Cheers!
DC