Financial Management for Design Professionals

Interesting Blog article from Enoch Sears on

starting your own design business.

www.businessofarchitecture.com
http://businessofarchitecture.com/business/starting-an-architecture-firm-marketing-finding-a-niche-interview-with-architect-oscia-wilson-of-boiled-architecture/

I didn’t want to be an architect. I wanted to be a CEO.

So I am an architect and that helps me run an architecture firm, but the reason I think that most architects struggle when they go out on their own is because they think of themselves as architects and I think you need to absolutely dispel that myth.

When you go out and you’re an entrepreneur, you’re a CEO, period. You’re not an architect any more.

So, you need to spend 90% of your time thinking about how you run an organization, how you structure it, how you get clients, how you’re going to build them, how you’re going to pay people, how you’re going to make an employee manual. That’s what you spend your time on. If you think you can do both, you’re wrong. You’re just wrong.

So if you do any back of envelope math, basic round numbers, how much do you think you can get an hour as an architect? Let’s say you’re in San Francisco let’s say 120. If you’re in any other city, it would be smaller. At 120 an hour, how many hours you really think you can work on billable hours, let’s say maximum you’re 80% utilization? So that doesn’t come out to very much money, right?

So and that assumes you have all the work that you can get, but in reality it’s a fulltime job just to get the work. So how do you really think you’re going to be able to bring in that many clients on that extra 20% of your time, like one day a week doing business development? It literally doesn’t work out, like it’s just not reality.

So I did that back on the envelope math before I started.

What I saw was that it didn’t seem like I can make a living unless I had a team of at least three to four people minimum. So I saw that right away because I knew that it takes a fulltime job to get the work and at least one fulltime job to do the work and then that ratio, one non-billable percent to one billable percent, it just does not work out. You need a few billable people to support 1% who’s not billable.

So I know I just used a lot of like big words and sometimes it’s confusing, but none of those concepts are difficult. I guarantee anybody who’s smart enough to be an architect is smart enough to learn them. So there is one book that I can recommend that covers all of these terms and some basic calculations. Enoch: Please. Oscia: Gosh, I thought I had it on my desk, but it’s called Financial Management for Design Professionals. So I recommend that. Enoch: Okay. Is that by Steve Wintner.

How to treat your designer!

interesting article from "Think|Architecture" advising clients on how to treat their designers:

http://thinkarchitect.wordpress.com/2012/12/03/how-to-treat-your-architect/?goback=%2Egde_2337575_member_193125463

I am boldly going where not too many have dared to go. I’m being honest about how to treat your architect. Be forewarned I’m going to spell it out.

Now I want to go on record that my current clients are wonderful and I treasure our relationships. I have many past clients that I consider dear friends. Furthermore, I’m not crying the blues here due to a fragile ego. I just believe it’s just a matter of education. As in any relationship, if you don’t learn, read or care about enhancing your relationships, they’ll probably fail at worst, or be unhealthy at best. We as the service providers must deliver the best service for our clients; it’s our duty and it’s the right thing to do. However, it’s a two-way street, it takes two to tango, or (insert your own idiomatic relationship analogy).

Allow me to offer a list of things to consider as you hire and work with your architect. Remember, this is a relationship not just buying a product or ‘just buying a service.’ If you want the ‘most for your money’, consider these things carefully.

1. Be honest – This is a virtue that is most important in any relationship. Most, if not all of the suggestions listed below come back to this one. Our relativistic postmodern world tells us we can alter truth to fit our situations. They’re lying. Your architect does want you to be honest with them. Tell them what you’re thinking, what you like as much as what you don’t like. If they’re worth hiring in the first place, they’ll really appreciate your honesty. Remember, honesty without grace and discretion can also be rude.
2. Call them back – This is primarily true for those searching for an architect. Once you’ve made an inquiry to an architect for their services and they’ve called you back or sent you a proposal, call them to let them know if you’re still interested in working with them or if you’ve decided on some other direction.
3. Tell them why you didn’t hire them – Architects will give up considerable time to meet with you, review your project and discuss how they plan to work with you. They may have even gone as far as to work up a scope of services and a fee proposal. This takes time, thought and money. If you choose not to hire them, so be it. But be “man-enough” or <insert your own idiomatic phrase> to tell them honestly why you didn’t hire them and hired someone else. We cannot grow or alter our interviewing or proposal skills if we don’t know why we “lost the job.” It’s the least you can do in exchange for their time. The Golden Rule always applies to these situations.
4. Tell them why you did hire them – Ok, you’ve signed the proposal and wrote them a check. You’re obviously comfortable with them. Now tell they what they said or did that gave you the confidence to hire them. It’s not just an ego boost, but it will help them understand in more specific terms how they have earned your trust. We already feel accountable to our clients. This only increases when we know why you like us. Try it and see what happens.
5. Tell them your actual schedule and your actual budget – Too often we lie to people about this item thinking it will be abused otherwise. We tell someone to show up earlier than we need them to show up because we believe they’ll be late. We lie and tell people we want to spend less than we are willing to spend because we think they’ll go over our figure. This doesn’t work in a healthy relationship. Tell your architect what your drop-dead-bottom-line budget is and tell them again if it changes. Don’t tell them a number and then spend twice that just to avoid a higher fee. The same goes for your schedule. Trust goes both ways. Wouldn’t you like your architect to trust you as much as you want to trust them?
6. Be patient – Yes time is money and you would like to enjoy your project sooner than later. However, architecture is made by a process. Hiring an architect is like being on a journey. First of all, they probably have other clients other than you ***gasp***. Also, coming up with creative solutions doesn’t always happen by simply sitting down and working on your project. This is a subject all to itself, so I’ll save further discussion for another day.
7. Learn to differentiate between what you want to spend and the concept of ‘expensive’ – This requires research and careful work alongside your architect. The architect’s role is to work within the boundaries of your budget. You may have to make hard decisions about what you can include in the scope of work. Some aspects might have to wait until a later phase or be scrapped altogether. However, just because a design feature does not fit within your budget doesn’t make it expensive. It just means it’s outside of your budget. Saying something is expensive has an implication of spending more for something than it gives value in return. This will frustrate your architect.
8. Be engaged – The best clients are the ones that are engaged in the process. This goes beyond discussing or talking about the fun aspects of design. It means you listen to your architect and are interested in the variety of issues and concerns they’ll share with you. When they ask you for input and a response, schedule time in your busy life and make the necessary decisions. I’m not advocating taking over the role you’ve hired your architect to play. Just pay attention to their work, review the drawings and information they give you carefully and be part of the conversation on all levels. If you’re getting bored at a meeting, end it and schedule another one.
9. Respect – Aretha couldn’t have sung it any better. Besides honesty being “mostly what I need from you”, respect is probably the second most important trait to give to your architect. Yes they are being “paid for their work”, but they really crave and deserve your respect. This goes for their time, their talent, their experience and their efforts. They may not solve your problems on the first go around, but they want to please you and they want to make great architecture. We all believe it will improve your life. Architecture is made by a process and comes out of a creative, but educated mind. Your architect is a professional and deserves to be treated as such. If they’ve acted otherwise, then go back to the first item above – be honest with them. If they’re worth hiring, they’ll deserve the respect.
10. Pay them…promptly – Have you noticed as Americans we’ve developed a habit of looking at bills and invoices as optional. I’m amazed at how many people feel they can use a service or have access to goods or products and not pay for them. Ask around and someone will vent about someone who owes them money. Architecture is a business and when a service is rendered to you, you must pay for it and pay for it immediately. Do you want your architect to be motivated to work on your projects within your schedule? Then write them a check as soon as the invoice arrives. Architects will generally work first on the projects that have no unpaid balances. Why should they work for free? Read item #9 above. Besides the business aspects of it, it shows a lack of respect for them and their work. If there is a reason you’re withholding payment, go back to item #1 and be honest with them. You still owe them the money, but if you need to clear the air, then speak up.

Architects treasure their clients and are painfully aware that without clients, there are no projects. We are driven by a strong sense of ethics and a duty to provide our clients the best service possible. I would venture to say most of us want to far exceed your expectations and in some cases blow your minds. We enjoy pleasing our clients. However in a relationship, both sides must work at making and keeping the relationship healthy.

Has this helped? What would you add to the list? What do you think? It’s ok, be honest.