3 Ways to Increase Your Architecture Firm’s Profitability – It’s Not All About Winning New Business

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Those that pursue a career as an architect do so out of a desire to create aesthetically pleasing, innovative, and functional designs for their clients. However, architects that move into running their own firm must focus on staying profitable above all else.

Running a business and making it profitable isn’t something you’re taught when studying to become an architect. As a result, it’s something many architects, turned business owners, struggle with.

This is not only about company survival and paying the bills. Having a profitable firm with a healthy cash flow means that you have more freedom when it comes to winning new business and choosing which projects you want to work on. And this ultimately makes work more rewarding for you and your team.

To help you increase the profitability of your firm, here are three things you should focus on:

1. Don’t work for free – charge for all the time spent on client’s projects

It’s surprising how often clients aren’t billed for all the work completed on their projects, and reversely how many architecture practices are happy to leave that money on the table.

Making sure you bill for every hour you spend on a project is incredibly important for profitability. For example, you have client meetings, you call contractors and give them input, you request quotes for materials and services, and you alter designs in response to customer feedback.

You should be billing your clients for all this time.

The easiest way to ensure that this happens is to implement processes and systems that allow you to view and track time against your projects. This will also allow you to see if you are constantly going over time or under charging against projects and enable you to more accurately forecast the cost and time involved in future projects.

2. Charge what you’re worth – is it time to raise your rates?

When was the last time that you reviewed your rates? Following on from the previous point, once you start tracking time and expense accurately and consistently, you will get a much clearer view of how profitable your projects are. You can then compare this to your competitors to see if you need to increase how much you charge.

If you are offering quality work and going above and beyond for your clients, you should make sure that you are charging accordingly. The main barrier that firms come up against when introducing price increases is the fear that it will impact winning new business and client retention.

However, in most industries, clients are willing to pay more for high quality products and services. You know what they say, buy cheap, buy twice.

The best way to get clients to pay more for your services is to focus on the value of your work. By increasing your rates, you position yourself as a high-quality architecture firm and you will attract clients who are willing to spend more to get a premium service.

For example, lawyers have no problem with selling their services at $300 per hour when there’s $100,000 claim at stake. Or a tax expert working on getting a tax saving of $50,000 for his client has no problem charging $400 per hour.

Clients are willing to pay higher rates if the value received is multiple times more than they have spent.

3. Find a Niche – identify your ideal clients

What type of projects is your business known for? What are you an expert in? If you don’t know then you need to find out.

A mistake that many architecture firms make is to offer too broad a range of services to try to appeal to a wider range of customers. This can position you as a generalist rather than a specialist, which can actually make winning new business and client retention harder in the long run.

Trying to appeal to everybody means you’ll end up attracting nobody – people want to work with experts and developing your niche will put you in that expert category. Working within a niche can also enable you to charge more for your services as discussed in the previous section.

So, how do you develop a niche?

You need to look back at the projects you and your team have worked on and identify those where you delighted the client, delivered excellence and that played to your team’s strengths. Once you have that list, you need to look at which projects were the most profitable for your firm.

Once you have this information, you can group the projects by type and identify which type/s of projects your firm delivers especially well and use these to develop your niche.

Next steps to making your architecture firm more profitable

Architects are talented people with a unique set of skills, knowledge and expertise but transitioning to owning and managing an architecture firm isn’t easy. Winning new business and retaining clients, managing cash flow, and ensuring that your team has everything that they need to deliver great work for your clients is a lot to think about.

Something that underpins managing a profitable architecture practice is ensuring that you and your team are at their most productive both in the office and on-site. A lot of this comes down to having the right processes and systems in place.

Technology plays a big part in this and Deltek offers several solutions to support teams when in the office and on site. All are designed to increase efficiency and productivity and ensure that you are delivering successful and profitable projects.