Top 10 Ways Architects Lose Money
Losing Money
Architecture is not known, at least to those involved, as the most profitable of businesses. Salaries aren't commensurate with responsibility. We all need to work on this. Here's my first shot.
The Top 10
#1 ’PLANNED’ LOSES
The number one way to lose money, or at least limit your profitability, is to inadvertently plan for that outcome. Many firms ignore the facts of their own operation and use industry rules of thumb instead. Know your costs and ratios; and run your firm based on facts.
#2 FREE PRE-DESIGN
My experience is that clients do not do their homework when it comes to Pre-Design programming. When you start the project without the client’s program, budget and schedule; and, instead create these things as part of your services, you are doomed to go over-budget on design. Start getting paid for Pre-Design. Don't use your design fee to play a guessing game where no one knows the answer.
#3 UNREALISTIC CONTRACTS
Generally, unrealistic terms in a contract are annoying but harmless. However, an unrealistic scope of work for the stated fee is a good way to lose money. Percentage of Construction Cost Fees are especially likely to be inadequate during Schematic Design and Construction Administration. Keep records of time spent per project per phase, and quote fees based on these facts.
#4 NO PROCESS
You need standard procedures. If you don't have a well-thought-out process for designing a project, there are innumerable ways to overlook issues that will be much more time-consuming to resolve later. Develop checklists for everything you do.
#5 NOT PRUNING
It is really hard to fire people. There is nothing enjoyable or positive about it. But not doing what needs to be done can threaten the viability of the firm - and everyone’s jobs. Delaying the inevitable is an expenditure that affects performance and profitability. Learn to act early.
#6 DESIGN CREEP
When your client ignores the agreed upon scope of work for whatever reason, you are on the slippery slope of ’design creep’. Design creep invariably adds to your scope of work. When this happens, you must develop the habit of asking for additional compensation - a quick email asking for confirmation of the change gets the process started. For your part you also have to stick to the game plan.
#7 PROJECT MANAGEMENT-BY-CLIENT
Clients can get too involved with managing the project. Many clients get very involved in their projects. That is a good thing, usually leading to a better project. But when the client suggests/insists/requests work out of sequence, you have to say “No”. This is often difficult to deal with because the client is spending a lot of money; and “the customer is always right”. Nevertheless, unless you are being paid by the hour, the client doesn't have the right to meddle in your process.
#8 RISKY BUSINESS
Working for developers and entrepreneurs that you don't know is risky business. Designing speculative work that doesn't pan out can mean not getting paid - no matter what the agreement says. Avoid developers' speculative projects and entrepreneurs who are shopping for a low fees with the promise of multiple projects.
#9 INTERMITTENT BUSINESS DEVELOPMENT
The easiest thing to do is to slow down or stop business development activities when you get busy. Because of the time it takes to find work, you are pretty much doomed to a downturn in revenues at some point in the future. The best way to get off this roller coaster is to develop a niche [link to 10/20/12 Publish to Build....], a specialty.
#10 EXCESSIVE EXPENSES
Lots of perks and benefits are seen by staff as a positive thing for your firm to do. However, giving is easier than taking away. Share profits through bonuses, and don't take on any expenses that aren't sustainable through slow times.