Profitability for an architectural firm
Profitability for an architectural firm
Architecture in the collective imagination = creation - drawing - art - design
Day-to-day architecture = organization - costing - accounting - administrative - production
Few people understand the immense role played by the administrative management of an architectural firm. When you ask a quidam about this job, he imagines an artist with a drawing board, a ruler and a pencil.
The truth is quite different. The administrative tasks of an architectural firm require a real organization to the millimeter that each design professional approaches with his weapons. There is no manual for the perfect entrepreneur, and even less that for the perfect manager of an architectural firm, but this article can enlighten you on certain significant aspects of your profession. We will not make big speeches on lists of tasks to be carried out, simply this inventory: “The sinews of war is profitability. »
Let's just start. Profitability: Ability to make a profit.
That is to say whether the turnover generated by your company covers the costs and expenses inherent in the proper conduct of your activity and therefore naturally leads your accounting result towards profit or deficit. You therefore normally have an annual inventory of your company thanks to the edition of your balance sheet.
But… what is your margin rate? your break-even point? If you get a new project, are you able to hire a new employee?
There is no question of continuing to spread trick questions that you cannot answer. And if you can't answer it, know that you are one of the 83% entrepreneurs who don't master their piloting, and that's okay! 🙂
It's a bit like boarding a Paris – Hong Kong flight with “kerosene” and “engines running”.
Part of you will think “we have no reason not to arrive”, and another part will say “do we have enough liters of petrol and are we sure that all the engines are running? ".
This little metaphor brings us back to your activity… to thinking about the profession of business manager. Because it's a job in its own right.
💡 Know your expenses, turnover and margin throughout the year
To start… Do you just have a list of your projects?
As an architectural firm, it is essential to know the turnover generated by each project, and the margins planned per folder.
Maintaining an up-to-date list of your projects, in particular through management software, allows you to centralize everything and get more visibility over the weeks, months and years to come. You can define a provisional figure according to the quotes to be produced, you know exactly how many projects are in progress, the progress and delays of each one, also allowing you to better manage your teams on each project.
You got it, it's important!
Use this new organization to compare your expected margins at the start of the project with reality upon delivery of your case!
💡 Make a forecast, update it and compare the figures each month with the actual
Is your company correctly optimizing its workstations?
Your administrative assistant is there every morning at 9 a.m. and your project manager has been trained in Autocad and attends your site meetings. But now it's all about making sure your team is efficient.
It must respond to all your requests as a business leader. Normally, you have built your business with all these aspects. You have thought and added processes in your company. But it is important to regularly take stock of the situation and think about its tools.
Make sure that your team manages flows, spends as little as possible on overheads, checks subcontractor invoices, invoices 100% for your projects, does not forget the lifting of reserves the following year, etc.
To optimise its positions correctly also means ensuring that each position is valued and trust your project managers, an essential cog in the smooth running of an architectural firm. It is through your project managers that the projects live, they participate in the cohesion of the team and represent the interface between the various stakeholders. For more dedicated advice, do not hesitate to read our full article on the subject: How to hold your project managers accountable?
Today you become aware that your plane is flying, that it is going from point A to point B, that it is making the same route as that of the competing airline... However, there are many parameters that can create a chasm between your profitability and that of the competitor.
💡 Empower project managers with budgets, expenses, invoice tracking and time spent.
By remaining in the parallel, do you think that your agency carries out as many projects as its competitors?
To ensure your competitiveness, it is important to know your conversion rate, and to be satisfied with it. Make sure you know the delta between the number of projects you respond to and those assigned to you. This percentage should suit you, but keep in mind that it is always possible to improve it!
The transformation rate that interests us can also be observed for each of the employees involved in the commercial development of your agency. It's about measuring your performance level.
No need to create a competition, but the simple fact of identifying one or more elements that shine or darken the picture will allow you to be able to make a first pruning of the direct and concrete axes of progress.
💡 Analyze your results during calls for projects to increase your ability to obtain new projects
Who, what, how much, how?
It's a bit like the existential question of the business manager... To answer these questions, don't hesitate to cross the elements, to make your data speak and to create the first Performance Indicators, or KPI (English version)…You have heard of them and now you even want to implement them in your company!
Through a management software built for architects, you can easily observe many indicators thanks to dashboards.
Analyze the indicators related to your projects, your finances, your invoicing, your teams and make your figures speak, these are the performance indicators that will allow you to report on your progress towards your objectives.
That's it, you're starting to project yourself as a real pilot! However, this article is exclusively focused on the profession of architect because there is one more element that you must master compared to other business leaders, that of not being totally in control of the game...
💡 Put in place clear KPIs for the agency as well as for the team to follow every month
How to be profitable without being the master of the game?
Not being the master of the game means not being able to offer free pricing based on the calculation of your charges and the margin you wish to make.
Today, there are few architectural firms that can afford to practice free pricing, and if you fall into this category, I take my hat off to you because you have reached architectural nirvana.
Most architects bear the selling price of the intellectual service they provide. A percentage is applied to the amount of the market, a few lines of studies, drawings and other designs, follow-up and coordination are added by additional sale, but overall, your activity is restricted by a price depending on your client and your project and not dependent on your level of profitability.
However, remember that you are the pilot of your activity. It is governed by a very sensitive axis which is this percentage side which does not allow you to make a pricing according to the needs of your activity. You therefore need all the more to be a good pilot because your data is sensitive, you have a great responsibility that you transfer to your teams and you are also guarantors of this balance through monitoring and management.
Through the different points seen together, you can direct the result of your business ! You are now aware that this is an action that you can carry out gradually and in the right direction.
All this to bring you to the conclusion of this article…
💡 Monetize each of your services
Set up your own performance indicators and start measuring them and asking your teams for feedback on their own indicators. Your company must ramp up on its own after the simple implementation of follow-up of conversion rate, turnover per employee, profitability of each project, accumulation of ongoing projects, forecast of figure according to the quotes to be make etc.
If you want to do all this, if you want to optimize your work, delegate day-to-day tasks, monitor the profitability of your business, take a few minutes to visit this site : www.ooti.co
OOTI is your tool. Do not miss a simple and intuitive solution that will allow you to become aware of your efficiency, to animate your daily profitability and to manage your activity.
I don't have time to read everything, can you give me a little summary?
- Know his turnover on each project as well as its margin
- Empower project managers on the budgets and availability of the teams
- Follow her conversion rate projects signed vs. competitions, tenders
- Implement key indicators ( time spent per phase, number of overdue invoices each month, etc.)
- Don't work for free
- Use OOTI so as not to waste precious time