Is it possible to be successful in architecture and make money? Of course it is. Here are some thoughts about how.

The recent RIBA Building Futures report “A Future for Architects?” included a paragraph about the prevalent view that architects are not good at or willing to be business people. These views were put forward by the 15 ‘Client Representatives’. Here is the full paragraph:

“Some representatives on the demand side also perpetuated the view that architects are so preoccupied with their ‘vocation’ that they do not consider that practice is a business, and are less excited by the prospect of creating a successful business than a high profile in the profession. There was also some continuation of the belief that architects are arrogant and focused on embodying their own ideologies rather than providing a service to clients. However these views need to be put in the context of the great esteem in which UK architects are held internationally and the undoubted profitability of many of our better established and high profile firms.”

So clients hold us in high regard, and some of us are profitable, especially if we are famous. But many architects aren’t interested in being successful in business. Do these views sound familiar to you?

One thing that frustrates me about these views is that because they are held by some architects – who tell me ‘architecture is not a business’, ‘design is not about profit’ – it can easily be assumed that these views are held by most, if not all, architects in practice. But I don’t believe they are.

I do think that many architects have difficulty achieving serious business success. I also believe that many architects would like to make their businesses more profitable. Yet this can be difficult because the skills you need to run a business are not the ones we focus on in our education. Making things worse is the idea that unless one is Norman Foster, one cannot be successful in architectural terms and profitable at the same time.

Be a good architect and make money

So is it possible to bring a more business-minded approach to your practice whilst retaining design quality? Is it possible to be a good architect and make money? I think it is – I’ve spent many years helping practices do just this.

If you’re proud of your design achievements, but not about your profits, and you’re interested in doing something about it, here are four things to get you thinking.

1. Make time to work On your business

How much time does your practice spend on looking after its own health? How much time and money do you spend on marketing and business development? If the statistics are anything to go by, it isn’t enough.

According to Colander’s recent RIBA Benchmarking Survey of Chartered architects practices (pdf link), only 13% of staff in these practices were non-fee earners, whilst Colander recommends between 20 and 33%. Why so few non-fee earners? Perhaps it is because non-fee earners are seen as a luxury, but they aren’t. These are the people who will help your business become more efficient.

Another underspend area is marketing. Colander’s benchmark for Chartered Practices turnover spend on marketing is between just 1.5% and 2.5%, and only 37% of practices surveyed met or exceeded that benchmark. But the benchmark itself is incredibly low.

The Chartered Institute of Marketings own Marketing Trends Survey for Autumn 2010 (pdf) showed that the average marketing spend for an organisation with a turnover below £1m was 9.96%, dropping to 7.61% for a turnover of £1-10m, three and four times the upper limit of the Colander benchmark. We are starting from an incredibly low point here. Perhaps it is because good marketing requires strategic direction, which requires time spent on the business.

Start to allocate more of your time and money to look at, review and help your business become more successful in financial terms. If you need to, spend some of that money on getting some good outside advice. Of course, this means learning how to let go of a small part of the chargeable work you do to your staff, but they’ll thank you when it means they have a job in a year’s time.

2. Understand your clients better

Before you spend any money on marketing, advertising, PR or business development, make sure that it will be money well spent. Key to your strategy must be a full understanding of your clients. You need to know more about who they are, where they are going in the next 10 years and what is really bothering them now.

Make time to identify your clients well, and listen to them. Get your staff to help you – they probably know your clients better than you do.

3. Focus on Delivery

When you know what your clients really need, make sure that you focus your time on delivering to those needs. Some of your clients will prioritise cost, some quality, some speed of delivery. What matters is that your primary focus is the same as theirs.

This doesn’t mean that you can’t use your design skills to deliver to that need. Your design skills are an essential element of the tactics you will employ. Use them well, without distractions. Make sure you’re not spending time on aspects of a project which are of no concern to your client. When you can deliver, then you get the opportunity to capitalize on a satisfied customer.

4. Demonstrate the value of Design

Whatever your clients priority, you can deliver it through good design. As a result, good design becomes an important factor in customer satisfaction.

If value for money is important, show how your design skills delivered it. If meeting standards has been an issue, show how you used design to deliver a solution. If the client needs a collaborative approach, make sure your design skills contribute to the success of the collaboration.

Make the value of design a key element in the way you communicate your success in delivering their project. Tell the story through design, keeping design in the loop. By sharing the importance of design to the success of your clients projects, you will help them value it on their own terms, and it will become part of the story.

What Next?

These are just four ways you can help make your business more profitable, without sidelining the importance of your architectural skills. Indeed, pursuing these goals will help dispel the myth that architects “are arrogant and focused on embodying their own ideologies rather than providing a service to clients”.

If you’d like to know more about how they might work in your practice, why not get in touch?

Training to become an architect is a long process, involving five years of study interspersed with two years of practical experience in architects offices, and ending in a final exam, also taken in practice. As a result students are dependant not only on a university education but also on their ability to find placements in the businesses of their elders.

The last few years have been particularly difficult for graduates (known as Part Is) and postgraduates (Part IIs) struggling to find somewhere to get enough reasonable experience and support to take their finals. As a result many will put behind them years of design teaching and debt to leave the professional conveyor belt. I know this because in the last recession, my path to RIBA Part III came to an abrupt end for the same reason.

Now something is going to be done to help at least some of these students stay in architecture. At least that is the plan. But will it work?

The Minimum Wage Ruling

Last week the the RIBA announced that from 1 July, Chartered Practices should pay PEDR students (that is, Part I and II graduates and postgraduates working towards their finals) the National Minimum Wage as a minimum.

The decision comes from a recommendation by the RIBA’s Pay and Conditions Working Group, set up last autumn to look into “significant concerns over pay and conditions for architecture students completing fee-earning work in practices”.

In her statement published last week, Ruth Reed, President of the RIBA, says that the National Minimum Wage will help students, who will soon be facing higher fees at college as well, complete their education, thereby helping the profession as a whole.

The decision on the minimum wage is seen as the first step, and the RIBA intends to work with students and practices to set appropriate rates of pay across the UK in the coming year.

What is the National Minimum Wage?

You can find out about the detail here, but the minimum wage is £4.92 an hour for 18-20 year olds and £5.93 and hour for 21 year olds and older. Most Part I graduates are 21 or older, so lets look at that figure. It equates to a salary of approximately 11,500 a year. How does that compare with what I earned when I was a Part I graduate?

What did you earn in your years out?

I completed my first architecture degree in Liverpool in the Summer of 1989, and was offered one job at £7.5k and one at £6.5k. I took the lower salary because it was a smaller practice where I thought (correctly) that I would get a good grounding in the nuts and bolts of architectural practice.

Three years later I completed my second degree, it was 1992 and there were no jobs to be had in Liverpool for a Part II graduate. Practices in London were offering placements, but for ‘expenses only’ and I couldn’t afford to take one. So I took the opportunity to do research and teaching in the University instead.

According to the Bank of England’s inflation calculator, Six and a half thousand pounds in 1989 would be equivalent to £12,600 today. So around £1000 more than the National Minimum wage. It wasn’t hard for me to live on in 1989, but I was living in Liverpool (which was, at the time, quite a cheap place to live).

I also had the benefit of a full grant to complete my education. This paid for all my university fees, plus a maintenance grant of around £3800 a year to live on. By the end of two degrees I had an overdraft of about £1800, and no Student Loan to pay back.

What does this mean for the profession?

In a few years time an architecture student is going to be looking at a debt of £30-£45,000 just in university fees. Add to that the cost of living as a student (which if it were the same prices as my education would be around £40,000 for the five years) and just the years of study are going to be out of reach for many students who studied when I did. A student loan will not cover all this cost, and many architecture students will have to work during their degrees to make ends meet.

In the long term, I feel that the architectural profession, which before the post-war expansion of the redbrick universities was a wholly elitist one, will return to being the province of the elite, in the same way that the legal profession is. Young working and middle class (or middle income) people who aspire to this profession can forget it. I was one of the lucky few.

The minimum wage sticking plaster is to be welcomed, but it is much too little, too late for the future of our profession.

What you can do

If you’re an employer, you can pay your staff fairly. If you don’t think you can, then read this post and this one about the very subject.

I’m all in favour of the minimum wage being paid to graduates. In fact, I’m in favour of graduates being paid a fair wage for a fair days work, because a good practice can turn a year out student into a profitable fee earner in a few weeks. If you aren’t doing this in your practice then chances are you’re showing yourself up as being unable to run your business properly.

Can you help the debate about the wages of architects and part qualified architects? If you are one, please take a few minutes to complete the archaos survey. Archaos is the UK architects student society, and they are gathering evidence of what people are actually earning at the moment to help inform the debate.

Complete the survey here.

Thank you.

While you’re at it, why not work out how your year out salary compares to the minimum wage?

Many people who run businesses aren’t in it because they love it, and they aren’t constantly motivated to change things for the better. Why should they if it is working? It is only when other pressures force a reassessment that they start looking at their business practices in more depth. And that’s when things get interesting for their suppliers.

I’ve been contacted by several 3D visualisation firms over the last few days, interested to find out why they are having difficulty getting work. Here are my thoughts, which might equally apply to architects themselves.

If you are not selling the commissions you were, then there are a possible number of reasons for this.

1. The work has dried up for everyone;
2. Someone else has taken the work from you;
3. The work has been Redefined.

Who actually buys your services? The person who buys is the key to your understanding of the market. If you can’t understand the client and their motivation then you’ll be unable to adjust your offer to meet their need.

1. Why Work Dries Up

When do people commission visualisations? It seems to me that architects either do them in house or buy them in for a client, and building project clients might commission the visualisations themselves. The visualisations are going to be commissioned for a particular purpose, such as to support a planning application or an application for funding, or for marketing of the project as a whole or individual parts of it, for example as part of the marketing of the building.

Causes of visualisation commissions drying up might be simply due to a slowing down of the development process because

1. fewer planning applications are being made;
2. fewer properties are being sold (and therefore marketed).

So it is pretty likely, given the current climate, that there is less visualisation work about. Which brings us to number 2.

2. Why Someone Else Takes Your Work

If the industry is being squeezed, the people who commission you might well have decided to make efficiency savings. One of the things they are looking at is how to save on the cost of visualisations. If you are competing in an oversupplied market (like architects, or visualisers) it is essential to be prepared for people undercutting you.

If you want to avoid competing on price (and who wants to do that?) then effort has to be expended in making sure that you have the right client base and that they value you for the right reasons, which mustn’t include low costs. That means getting your lead generation process finely tuned, so you get leads from the ideal client type. It might also mean you need to go looking for different clients. If they exist.

If you take the time to research your clients then it might soon become apparent however, that there is another reason why your work might be drying up, and this is much more serious, even than the price cut.

The Third Reason

When people start making an effort to cut costs, existing established, long standing relationships come under the sort of scrutiny they don’t normally get. Within the process of cost cutting people also start reassessing how they can change the services they use, or whether they can do without certain services altogether.

For example, they may decide to stop renewing their servers and move to a cloud based computer system. They might find someone inhouse who is short of things to do but keen on visualisation, to do the 3Ds themselves. Forget that you might be better at it than them, that isn’t in their radar at the moment.

They might even cut out the service altogether and try to rely on other, cheaper methods of achieving the same thing. The worst bit is, whilst they are doing this, even if they don’t find a cheaper method, they will find different methods. And they might like them, and the phone will stop ringing.

What to Do

So what can you do about this? The answer is to be nimble.

Be constantly aware of how your clients are feeling, where the market is moving, what the threats and opportunities are in your industry. And then act.

Scrutinise what you are offering to your clients and see if it matches their concerns. If it doesn’t, do something that will. Whilst you are at it, make it something special, something different. Something they’ll like to find.

No use trying the same old service if the goalposts have moved.

No use complaining things shouldn’t be changing.

They are.

What are they going to change into?

Image: Looking at The Wave from a different angle by Alaskan Dude

The RIBA Linkedin group has been hosting an interesting discussion thread called ‘Re-Educating Clients’ over the last few months in which I have been participating. You can see it by clicking the link above (but you need to join the group and be a member of Linkedin).

It is a fascinating discussion with a great deal of consensus around the positions ‘They don’t understand what we can do’ and ‘we should understand them better’. Then at the weekend Mark Raymond, an architect in Trinidad and Tobago, posted a link to one of the profane but amusing satirical conversations between a graphic designer and his client which is doing the rounds on Youtube at the moment.

NOTE: Please don’t watch it if you don’t like swearing.

The plot in essence is a conversation between the client who is asking for a huge amount of ill-defined work, delivered yesterday in exchange for a pittance, and a graphic designer whose response is to descend into more and more hideous insults. Its funny, and sad.

I find these videos telling. If the graphic designer can only insult the client he clearly hasn’t got a reply to the case for ‘free’ or ‘low cost’ graphic design. His response is a desparate, pointless exercise akin to gnawing your own arm off or banging your head against a (polished plaster) wall. It is madness.

Do architects really feel this way? How much pain is there in this industry?

If you really feel like this then you must stop injuring yourself and your firm and take stock. Now.

]]> http://www.justpractising.com/its-about-money-stupid/architects-my-client-doesn%e2%80%99t-understand-me/feed/ 13 http://www.justpractising.com/its-about-money-stupid/architects-low-pay-%e2%80%93-what-to-do-about-it/ http://www.justpractising.com/its-about-money-stupid/architects-low-pay-%e2%80%93-what-to-do-about-it/#comments Tue, 10 Aug 2010 20:37:36 +0000 su http://www.justpractising.com/?p=1170

Low Pay is a subject of some discussion amongst architects, not least in the UK, where Keith Tomlinson has set up a Facebook Page ‘Architects Against Low Pay’ to campaign for change. When I wrote about this in June I made the point that tackling Low Pay in Architecture also means

“teaching people who have architectural practice how to run them on a profitable basis, and not to resort to exploitative employment practices as a substitute for business ethics, just because ‘its what we did when I was a Part II’.’

So when Dominic Kos of World Architecture News asked me to help support their new survey of architects pay, I jumped a the chance to make some suggestions as to how architects might improve their business profitability, so that they can pay their staff a good wage, and get some real income themselves.
The article was published in the World Architecture News Review today – you can read it here:

How to pay your staff (and yourself) well

Do let me know what you think of it. And if you’d like to know more about what architects are paid all over the world, why not get your practice signed up to the WAN Survey of Salary, Benefits and Diversity 2010 this week, and in the autumn you’ll be able to access the results of the survey.

On Thursday the RIBA issued a press release, RIBA President Ruth Reed takes action to tackle student hardship and low pay, which set out proposals to deal with financial hardship amongst architecture students, graduates and young practitioners.

The proposals include:

1. an increase in the student hardship fund (to help ‘at least another 100 students’);
2. a review group to improve pay and employment conditions (and in particular ‘rigorous minimum pay requirements’) for implementation in 2011;
3. a ‘campaign’ to remove exemption from minimum wage for practical training over six months;
4. research into alternative careers for the 50% of graduates who don’t become architects.

Back in March the low pay issue hit the headlines with allegations that a London Architect Practice was offering a part-qualified architect a job at £400 for a 70 hour week, and I responded that these situations arise because either architects are either bad at business or they are willing to abuse employees (or both).

Looking at these new steps, which have been championed by RIBA President Ruth Reed, I’m encouraged by the review group because on the face of it the intention is to make a genuine effort to change the low pay culture of practice. The press release states that the review group will be comprised of representatives from small practice, ARCHAOS and APSAA, in other words small firms, students and professional studies advisors. Whilst it is a shame that there is no mention of large firms (who are surely not innocent of bad practice), at least this is encouraging.

On the other hand, the campaign to remove exemption from minimum wage for practical training over six months in effect means that a graduate or post graduate masters qualified architecture student can be employed for nothing at all for up to six months. Surely this isn’t acceptable? On the other hand, you might be shocked to learn that students in practical training are not entitled to the minimum wage, if their placement doesn’t exceed one year. (Thanks Malcolm Stroud)

Don’t moan, get stuck in!

The difficulty of course, will be in the effective implementation of these actions so that they produce real productive change where it is needed, i.e. graduates are paid a fair wage for a fair days work. This means any action must also tackle the long hours/unpaid overtime culture, or higher salaries will be meaningless.

It also means teaching people who have architectural practice how to run them on a profitable basis, and not to resort to exploitative employment practices as a substitute for business ethics, just because ‘its what we did when I was a Part II’.

If you’d like to get involved in this debate you should definitely join Keith Tomlinson’s Facebook Group ‘Architects against Low Pay’ which has over 2800 members. Ruth Reed has joined the group and is responding to forum discussions. Lets use our social tools to help her push ahead and make some real changes.

In September of 2009 there were 4.9% more RIBA Chartered Practices than at the same time in 2008, according to RIBA Director of Practice Adrian Dobson.

Figures released by the RIBA show a change in distribution of practice size which has penalised one man bands and larger firms in favour of small and ‘micro’ firms of 2-10 staff.

Last year I wrote about the breakdown of practice sizes recorded by the RIBA in 2008 which showed that 76% of chartered firms (about half of all UK architects practices) had fewer than 10 staff. A year later this proportion has risen to 79%, with medium sized practices (11-49 staff) falling to 18% and large (50+ staff) dropping from 4% to 3% of chartered practices.

The chart above shows the subtle changes and the figures are reproduced in the table below. Thanks to Adrian for letting me publish these latest figures for you in response to my previous post.

Most of you charge according to your costs. Charging what you are worth to you. That keeps you in your comfort zone, but it is not how successful businesses charge. Apple, Nike, Unilever, Tesco, etc. all charge what they are worth to their customers.

This article is about showing you how to charge what you are worth to your client. You will need to do two things; make the client want your service, then make them pay their top price.

1. Make them want your service

This is selling. You might not believe it, but you are probably good at selling. Well, at least the main bit about understanding what your client wants and putting a proposal together in line with that. The bits you probably find daunting are pricing and closing (which we’ll come back to).

To understand needs you have to know your client’s business, so question and listen well. I know very little about your business, except that your clients’ needs will be more complex than just cost. On most occasions, they’ll include variations of quality, innovation, time to completion, on-time delivery, flexibility or cash flow.

If these needs aren’t present, then you have no chance to add value. In the short-term you will only be able to compete on price, which means in the long-term you can only survive by managing out cost (probably reducing your salary/dividend).

So, think with your client. Think for them. Ensure your proposal focuses on what is important to them. For example, if cash flow is their concern, construct a deal where you get paid when they do. If it is time to completion, guarantee the completion of the time critical work within so many days of the handshake.

Ensure the client realises that the success of their project depends on your contribution.

2. Make them pay their top price

Great, they want your solution. Though, you’ve yet to talk about price. If they have asked you, you would have avoided giving a price by explaining that you can’t until you know what they want? The real reason is because you first need to know how much they are willing to pay!

The price they pay will depend on:

1. The choices they have. The less complex their needs, the easier it will be for them to create choice. Are they talking to other architects?
2. How much they think you will accept. Why would your client pay 10,100 when they think you’ll accept 10,000? So, hide this fact, be very aware of the signals you give off. Also, make it difficult for them to break down and compare your costs. Always quote for a completed service, if your quote includes hours or day rates, these might be challenged. If they survive this challenge, then they are too low!

You are now about to talk price. To do this, ask them again whether they are happy with the proposal? Then re-state your proposal, emphasising the key benefits. Finally, introduce the price, saying “we can do all that for you for X.”

But go for a high price. They’ll probably pay it, especially if cost is not the key driver, you nailed the proposal and they have no idea that you would accept less. Be courageous. Just go for it. And be reassured, it gets easier every time…

Now for the final close, “would you like to place the order?” “If not, what is stopping you?” “So, if we resolve that, would you be ready to place the order?”

They may very well try to negotiate the price down. Hold your nerve. Re-sell the benefits. Be friendly and understanding, but say sorry and emphasise the work involved and that your offer is market competitive. Then re-sell the benefits, again. Pause and keep pausing and see what happens.

If they continue on price, ask them, “other than price, have they got any issues with the proposal?” If you think that they really do need something from you, go on give them something (you should now have plenty to give!). This will seal the deal and help them go away with a positive feeling.

So, if you want to transform your practice from a busy one into a highly profitable one, then start charging what you are worth…

Sean Sidney, Negotiation Specialist

Su writes: Sean has kindly offered a free chat if you mention my blog, Just Practising. Call him on 07816 072339

Image: From the Building Article: Low-Paid architect jobs: An offer you can refuse

The construction press is hyperventilating at the moment about an email that a London firm of Architects allegedly sent an unemployed ‘Part II architect’ (i.e. a part qualified masters level applicant). You can read the email on Building’s Website here and also in BD.

The articles I have read so far have focused on the outrage, the potential illegality and the loss of talent that may result from such practices as asking a highly qualified employee to work a 70 hour week for £400.

But I think there’s something more important at stake here, if we’re going to get rid of the long hours, low paid culture that has blighted our profession for so long. And it’s not to do with the employee either; it’s to do with the employer.

Here’s what I wrote in response to the building article:

I run a practice of architects that does not subscribe to the long working hours culture, but it is prevalent in the profession. I remember on graduating with Part I in 1989 (when the last recession was well on the way) I was offered a year out post in London which only paid travel expenses.

The reason why architects stoop to such crass and sometimes illegal tactics such as those set out above is that they are either 1) not in control of their finances or 2) willing to abuse empoyees.

As most architects in the UK are more poorly paid than most other construction professionals, I believe that the likely answer is 1).

If architects were able to

• identify the service they provide and the value of it;
• price it appropriately and negotiate a good deal;
• work efficiently and manage ‘mission creep’; and
• recover fees efficiently,

then they wouldn’t have to decend to abusing their employees like this.

Don’t blame the recession, look at what you can do to make more money.

Here is a breakdown of the size of RIBA Chartered architects practices by size (no. of employees). It shows that over three quarters of the 2800 chartered architects practices in the UK have fewer than 10 staff, and more than half have fewer than five.

Why is this important?

Firstly it is interesting to consider why it might be that architects practices are generally so small. As you know I am of the opinion that many architects are not confident about being businessmen and women. Running a business has not been a subject of much consideration traditionally, and from discussions on this blog I’m of the impression that having an interest in business matters, in particular profit, is considered rather distasteful to some.

Nevertheless there is some logic in larger practices being more profitable, especially if they are organised in a way that tasks not required to be performed by a registered architect are done by others, be they part qualified staff, juniors or administrators.

In a small practice however, its much more likely that the partners/architects do everything, including composing and preparing their own documents, processing post, answering the telephone, writing cheques and sticking on stamps. And even more difficult is the delegation of ‘real work’ as it was recently described to me on twitter – the design of buildings. If delegation is difficult for you, then you’re going to be unable to closely supervise more than a couple of people, and even if you’re confident in that, no-one can manage more than 7 people without an additional layer of supervision, at which point the partners have to consider stepping away from the day to day management of projects altogether and get on with building a business, a full time task in itself.

So maybe architects practices are small because their owners don’t want an organisational structure like that. Maybe they are small because their owners want them to be. Or maybe there is another reason.

What do you think?

Before I got involved in the architectural world I’m not sure what I really gave it much thought. When I was given these figures, for which I am grateful to RIBA Director of Practice Adrian Dobson, I was interested to know whether the small size of architects practices would come as a surprise to people. Is it a surprise to you?

Notes: These figures are from July 2008, the height of the boom, and only represent RIBA chartered practices. The RIBA estimated that the 2797 Chartered practices make up about half of all Architects practices in the UK.

Around of third of RIBA chartered architects work in practices under 10 people, a third work in those with 11-50 people and a third in large practices (50+ staff).