How do architecture firms make money

Wait for an estimate with clear scope of work and quality. Thanks in advance! Yes, every client asks the same questions and they all want to know what their project will cost. The way I handle this is to know some basic rules of thumb costs per square foot in my market.

I find that it is important to talk money right up front though. You need to know what their budget for the project is. One of the rules of sales is to qualify your prospect. If they have an unrealistic idea of what their project will cost, you may be wasting your time pursuing the project.

As a PM with 18 yrs commercial experience, the residential clients I have taken on have vastly different expectations than commercial clients. These open and honest and industry building discussions between architects MUST occur for us all to grow the expectations and status of the profession in the eyes of the public and prospective clients. AIA-MN has a small firm practice committee. Your blog will be a regular topic at any meeting I attend.

A safe, closed post-mortum process on what can be improved. We are a process type group of folks. If we all share best practices instead of pretending our way is the secret path to personal success, our businesses and industry market share will continue to grow.

Thanks again, best in Only architects, engineers, construction and design pros are admitted to membership. Any member may post a discussion topic. My services included building permit and general contractor for a combined fee.

After a few months of work and a very happy raport with the client, he suddenly realized that the fee was too high and severed the relationship, keeping my subs and saving substantial costs for my services. Two mistakes I would like to share here 1 unknowns are expensive and it is very important to be on top of Cash Flow previsions and not let expenses get out of hand.

My take on this experience is overall a positive one although in the short term I lost the job. Not great as far as referal even if the client offered to use the final product for my portfolio.

Construction management is great but you need to be clear about separation of duties and fees. Please comment Thanks for this valuable discussion forum Best CF. Great article! I am in the field of interior design and so many of these same issues apply in my field as well. Thank-you for helping to break this down as I have also found it difficult to know exactly the best way to charge my clients and keep them happy in the end.

Can you shed some light on how you charge for these additional services? Is it by room, or by foot, or is this just a flat rate amount that you determine by project? Any thoughts on this would be appreciated! Typically our additional services are compensated at an hourly rate. I am curious that you listed the selection of Fixtures and Finishes as an additional service. If not, up to what extent of material specification do you do, given that the additional service of fixture and finishes selection is not included?

Please enlighten me. I am an architect in a foreign country and our professional practices may differ. Working with residential clients, we provide designs for locations of fixtures and finishes in our base service.

In our contract, the actual selections of fixtures and finishes the actual shopping is called out as Interior Design Services and we receive additional compensation to provide that service. Purchasing and handling those items are also an additional service. As independent businesses, our services are whatever we choose to offer them as. If we want to include these selections in the base service and many do , we should be certain that we are being paid appropriately for the time and energy involved in providing that service.

Having been an institutional architect in a past life, I know that this service is, in fact, part of the services provided in the base contract for projects like public schools.

Mark, have you posted more about construction management as Advisor not Constructor? I have seen a great deal of demand for this type of service. I am really interested in your posts and Fivecat. There is also course being developed on CM Services for Architects that will be offered in the Entrepreneur Architect Academy launching this summer.

Try using an architect and tell me if they deserve more money. Why not try and explain to us small minded people out here. Steven, seems you got yourself a prima donna architect. It should have been easy to detect right from the beginning. He was probably late with his proposal, the design program, late at meetings, etc. Happens to us architects too with doctors, auto mechanics, etc.

As with any other service you should first test the waters. That makes you another kind of business altogether with all sort if extra responsibilities and liabilities. We started offering simple 3D as part of our services since our CAD software, Vectorworks, already does that. She makes a lot of sense. Mark, thank you for this great post. I have had experience as architect and contractor.

Although you can actually see the money by being in charge of the building works, this takes up all your time and energy. My advice is: convince your client to hire your supervision services, and charge what is worth for them! Mark, This is a great post with a lot of information. I am still in a quandary about fees. Here in west Michigan the residential clientele seam to very conservative and value conscious. How do you know if you are competitive with your competition?

When I was as staff architect at other firms everything seamed secretive. From billing rates to fee amounts. But know that I own my own firm I wish I had been. Jon, Finding your fee is a difficult process as an architect. I recommend finding a fee that does work for the clients you are seeking to serve, even if its lower than you want. Then check the value you are providing and make sure you are providing more value than your competition. Slowly increase your fee with each proposal, while increasing your value.

Be prepared to present, clearly and concisely, why your fees may be higher than your competition and show your prospects the value you will provide that others will not. In order to do that you need to provide more. If you are seeking a market that is only buying on fee, then you need to work to find a different market. But we also chose to start our own firm.

The five steps above are great ways to increase your profit, but unless you know your numbers and can actually plan for a profitable year, the chances of running a successful firm without fear and uncertainty are very, very low.

Track your Profit or Loss on a monthly basis and develop Key Financial Performance Indicators that will indicate the health of your business in real time. 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.

Question: Are you passionate about being an architect? Are you passionate about profit? Mark, I have enjoyed reading your articles for sometime now.

I have been doing commercial projects my entire career, but have been doing residential projects out of my home office for 15 years. These projects range from room additions to large custom houses. Doing residential projects has always been my end plan whether I retired or was released for lack of work. So, I am planning to make the move full time. All of my work has come from referrals. I will not bid against other architects. They either accept me for my reputation and portfolio or not.

I also always ask for a retainer up front before I start a project. Having said all of this my question to you is how to charge clients now that I am doing this full time. I have no idea what small firms charge and am curious where to start. Typically I have estimated the time I think it will take to do a project times an hourly. There are a few options for increasing profit at your architecture firm without necessarily resorting to taking on more work.

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Get the Guide on Moving from spreadsheets to software. Get the guide. Want to join us? He went into business with me to make money. I was stunned. I mean really stunned. I had never heard an architect say he was in business to make money. In fact, it made no sense to me. If you wanted to make money, why the heck would you go into architecture? Granted, I was still young ish and naive. The idealistic student who lived for the design studio was still very much a part of my identity. But 20 years later I can look back on that moment as one that was as pivotal in my development as was my first Erector Set or the box of Lincoln Logs I received when I was 5 years old.

It may be a sad, sobering fact, but making money is what allows us to do the things we want. It gives us power. And if all you want is to be a good designer then make sure you bring people into your office who want to make money. Then, and only then, will you be able to flout your talents, pick your projects and reap the glory that allows you to sit back and say you are successful.

Being a strong businessperson also earns you the respect of your clients. You understand the rules of the game and you wield them to the benefit of your firm, your projects and your clients. Clients are attracted to winners.

Sorry to be the one to rain on your parade. No more playing in the backyard sandbox. Now you have to provide for your new family, that is your firm. Yes, your firm is now your work family.