And how you can fix them.
Success in architectural practice can be elusive, however you define it.
Regardless of practice size or age, many practice owners, directors and leaders believe that if they devote most of their energy to creating great architecture, business and financial success will follow.
Then five, ten or fifteen years on, they find themselves still struggling to get their big break – winning the clients or projects that a few other, ‘favoured’ practices seem to attract with ease.
So, what are those ‘successful’ practices doing differently?
Or, more importantly, what are you doing, or not doing, that’s holding you back? What’s creating the barrier between you and practice success?
My professional journey has allowed me to count an abundance of architects as friends, colleagues, partners or associates. And I think I’ve heard just about every hard luck, dumb luck and success story you could imagine.
And when I look deeply into those stories, I find there are some things that the great practices just don’t do – how many of these common business mistakes are evident in your practice?
You’re playing-to-play, not playing-to-win
Becoming an architect, or any kind of creative professional, takes a lot of hard work. And getting to the point of founding your own practice is certainly an enormous achievement. You’re now in the game!
However, like any footballer, actor, or army general, just being able to do what your colleagues and competitors can do only gets you so far. Sure, if you can be your best, you’ll probably be able to pay the bills and you may produce some happy clients along the way. But if instead you aim to be the best, to lead rather than follow, and to do everything possible to win, rather than just survive, you’ll go a long way to creating not just brilliant architecture, but sustainable financial success as well.
Fix: Create or update your business strategy – and make sure it’s based firmly on a winning mindset.
You don’t know your ‘Why?’
Of course, playing-to-win means you need a plan to win – strategies and tactics to take your practice where few other practices go. And a plan needs a specific objective, aim or purpose. Otherwise it’s a pointless plan.
In any business, and your practice is no different, having clarity of purpose is essential to success. And this purpose can’t just be ‘to create great design’ or even ‘to build unique residences.’ Like Google, Apple or McDonalds, who are all winners in their respective fields, you need to articulate a purpose that can continually drive you and your team to exceed your clients’ expectations. This is your ‘Why?’
Fix: Take some time out with your team and a specialist consultant if possible, to clearly identify your ‘Why?’
You’re not proactive about lead generation
Offering amazing outcomes to your clients won’t matter much, however, if you don’t have any clients. Or if you don’t tell them what your offer is and how it’s relevant and unique.
Architects are in the sales business just the same as any other business owner. Yet many architects adopt the philosophy: ‘do good work and the clients will walk in the door.’ But the most profitable practices devote time, energy and money to nurturing leads, figuring out where the best prospects come from, and really getting to know those they consider potential clients.
Fix: Develop and implement a lead generation and nurturing program, using free software to automate as much of it as possible (see Capterra.com for options)
You sell what you do, not the problem you solve
You may have gathered that I’m not overly convinced about the approach that architects and other professional services businesses take to sales (if they even have an approach!). And the most common of all mistakes you can make in your marketing – whether on your website, promotional material or in submissions – is to focus on what you do.
Well, guess what? Every other practice out there can design. And document. And administer contracts. And apply for building approvals! What sets you apart, and what will have clients wanting to work with you, and even wanting to pay higher fees, is connecting with them through the story of how you can solve their particular set of problems. Most potential clients simply want to know that you’re on their page and that you can empathise with their unique circumstances.
Fix: Reconfigure your marketing to focus on the problems you solve. And use storytelling to connect effectively with prospective clients. (Talk to Ben Morgan at BowerBird to learn how to do this better.)
You think it’s all about design
One of the most common motivations for creative professionals starting their own practice is to regain design autonomy. Often, to recapture the design freedom they had at university. And yes, design is important! It can be critical to your brand and your reputation.
But ultimately, you and your team will be lucky to spend 10% of your time in the creative phase of design. The rest of your time you’ll spend planning its execution and, dare I say it, doing non-designerly things like making your business actually run. Getting this balance wrong, by devoting unrealistic amounts of time to design, might make you feel great, but ultimately it won’t pay the bills.
Fix: Track the time you and your team spend on all tasks and, based on the evidence you collect, ensure you maintain a sensible balance of income-producing time and non-incoming producing time. Practice & Project Management software such as Coincraft or Total Synergy can greatly assist with this.)
You employ cash management, not profit and loss accounting
Right from the beginning, paying the bills is a major preoccupation for any practice. Indeed, in the early days, there’s not just a whole lot of extra business bills to pay, to get the practice established, but there’s no longer a reliable salary to support the bill-paying challenge at home.
Not uncommonly, domestic and practice finances merge into a zombie-world of credit cards, invoices, and cash, just to keep both realms afloat. But isn’t taking cash or blurring the distinction between business and personal expenses more tax-effective? And so, isn’t the daily bank balance the only financial record that really matters?
Well yes, if you’re running a hobby or a creative pastime. But definitely not if you’re running a business! The only way of knowing whether your business is truly profitable, and what the accurate dimensions of that profit might be, is to employ proper financial recordkeeping based around a profit and loss statement and a balance sheet.
Fix: Separate your business and personal finances, seek out a competent small-business accountant, and set up one of the low-cost, cloud-based accounting systems such as Xero, Reckon One, Intuit QuickBooks, or MYOB for your practice.
You don’t prepare or monitor budgets
I’m confident you wouldn’t recommend to a client that they build without a suitable plan. So, I wonder why so many architects feel comfortable trying to build their business without a plan. Indeed, a number of different plans!
Arguably the two most important of these, in terms of profitability, are a financial plan and a resources plan. Or, in other words, a finance budget and a time budget. Setting realistic targets based on known past performance is critical, both at the whole-practice level and at the project level, if you expect to deliver profitable projects.
Fix: Establish an informed time and money budget for every project, including ‘overhead projects’ like marketing, administration and training. Talk to Ryan King at Coincraft about how easily effective budgeting and forecasting can be integrated into your practice.
You don’t track or measure your performance
Of course, without a plan it’s almost impossible to effectively measure your performance – simply because you have nothing to measure it against.
Yet I suspect most practices would probably say they do measure performance. And I guess basic comparative statistics like number of new projects, number of staff, or bank balance are all informative. But none of these bears any causal relationship to profitability. You could have twice as many projects, or staff or a higher bank balance, but your business could still be less profitable.
Not that profit is the only important measure. Other key measures might include client satisfaction, media coverage of your projects, or staff turnover. And in the end, the better you perform in all aspects of your business, the more you will be able to improve your ability to deliver your ‘Why?’
Fix: Establish key measures relevant to your practice, including financial measures and ratios, set relevant targets and make sure you have systems in place to capture the performance data you’ll need.
Your fee proposals aren’t based on all the meaningful evidence
For many architects, fee proposals are a distasteful but necessary evil. To be dealt with and got out of the way as quickly as possible. So, fees are often based on what you quoted last time, or the 10-year old Institute Fee Guide, or worse, some arbitrary, ‘educated’ guess, potentially informed by your finely-tuned gut-level sense of what the market is prepared to pay.
Any of these approaches will almost certainly result in many projects delivering a loss, ensuring you and your practice will keep struggling to make ends meet.
Fix: To build a sustainable business you will need to collect, and base every fee proposal on, three key pieces of evidentiary data:
- how much productive time you estimate will be required to complete each phase of each service you’re proposing to provide (ideally based on accurate time records of recent similar projects)
- your total overhead costs, and total salaries and staff-related costs, and
- the level of profit you’ll need to be able to sustain and grow your business.
You don’t provide options in fee submissions
Think about the last time you bought a car. Or joined a gym. Or even selected a bottle of wine. Chances are the business you decided to purchase from offered a choice of options. Quite possibly a lower cost option than you had in mind as well as one or more premium cost options. And even if you opted for the medium-cost or low-cost version, you felt comforted by the fact that you had a choice.
There is, in fact, considerable psychological evidence to support the idea that people are more likely to commit to a purchase when they are given even a limited number of options to choose from. Yet it’s still relatively rare for architects to propose fees in this way.
Fix: Restructure your fee proposals so clients can choose to receive only the most essential and basic services, or to add a few discretionary but desirable services, or to opt for a full range of high value services. Or consider offering options for the basis on which the fee will be calculated – time charge, percentage of cost or fixed fee – where the client can choose to pay a premium for accepting lower risk.
You’re slow to adopt new business technology
It was amazing to see, during the nineties and noughties, how rapidly the vast majority of architectural offices transitioned to computer-based drafting and design and then, perhaps a little more slowly, to BIM. Architects have been ready and willing to be early adopters of systems and processes that were about ‘doing,’ or ‘making,’ architecture.
But it has been far less common to see those same innovative, leading edge practices adopting new technological advances in business systems. While manual design and drafting is no longer the norm, manual management systems (incorporating shoe-boxes, cardboard folders and perhaps the odd spreadsheet or two) are still prevalent.
The reasons are simple. Most practices:
- See doing architecture as the priority, rather than doing business
- Don’t know what they don’t know, and aren’t prepared to devote much effort to acquiring the data they need to find out
- Don’t believe they have the necessary spare cash to invest in new business software
- Don’t consider they have people with the time and interest to set up or maintain effective business systems
Fix: Firstly, realise that an organised and profitable business feeds the making of great architecture. Second, do the research or engage an advisor to help you identify what new software or systems could really make a difference to the business effectiveness of your practice (see some suggestions in items 4, 5, 6 and 7 above).
So, do any of the above mistakes sound familiar?
If so, I’ve provided a range of measures you can take to at least start the process of fixing them. And if not, then well done! Your well on your way to creating a successful practice!
Ross Clark is the founder of Melbourne-based business advisory service, WhyWhatHow. He has more than thirty years’ experience mentoring and coaching architects and creative professionals so they can start, innovate, or grow their practices.
© 2017 WhyWhatHow