Rethinking Fees, Mindset, and Financial Agency in Architecture | 701

0:00Money is an index of agency. Hello, Architect Nation, and welcome back. This is the right place for you if you run an architectural practice. On today's episode, you'll discover why the money beliefs architects carry from school, from culture, from the industry itself, are often the single biggest obstacle to charging what they're worth. The uncomfortable truth about why low fees lead to low salaries, burnout, and why talented people are leaving the profession. A practical framework for setting, raising and defending your fees without compromising your integrity for your design work. Today, you'll hear a live talk from none other than Mr.

0:38Ryan Willard, who is somebody I've known for a while and I can vouch for him in many ways. Ryan gave this talk at the University of Westminster where he shares his own journey from struggling from sole practitioner to helping hundreds of architecture firms around the world build more profitable and sustainable practices. So in this conversation, I'm actually breaking down a lot of the real reasons why architects undercharge, why the mindset shifts can change everything, and a number of practical tools from fee calculators to benchmarking metrics that high-performing firms actually use. And these are tools that we've developed here at Business of Architecture, or we've adapted, or we've collated over years of working with hundreds of different practices.

1:24This isn't theory. It's what we've discovered here at Business of Architecture and what we've learned from our years of experience working with firms around the globe.

1:54Rion Willard: addressing one of the critical pain points for small architectural practices, which is the ability to grow and shrink a team effectively, to be able to handle higher workflow without having to staff up significantly, and also being very sensitive about labor costs. World Teams is built to address these issues. World Teams is a small but mighty company that helps architectural practices build high-performing remote teams quickly, beneficently, saving you the headache of sorting resumes and interviewing underqualified candidates. World Teams operates in your time zone and prioritizes near-native English speakers, ensuring clear and efficient communication with your remote team members.

2:32Rion Willard: They have flexible contracts so you can adjust your team size as your needs evolve. Additionally, you're connected directly with your skilled professionals, which fosters trust and collaboration, and World Teams helps you reduce your operating cost without compromising the quality that's so important to a practice. To download a free guide for building a remote team for a small architectural practice, go to businessofarchitecture.com forward slash world teams. That's one word, businessofarchitecture.com forward slash world teams. Awesome. Thank you very much. Pleasure to be here. I'm going to invite everybody, if you would like to turn on your cameras just so that I can see some human faces, just so I get a little bit of sense of how people are reacting and paying attention or anything like that that would be would be very much welcomed um but i will begin by introducing myself my name is ryan willard and i am there we go look we've got lovely faces there and a little body little person hello um my name is ryan willard And I am a I was an architect.

3:41I'm still a registered architect on the ARB list. I've worked for architectural practices such as Grimshaw and Richard Rogers, RSHP, Peter Barber back in the day. and I then started up my own architectural firm probably around 2011 and went through an experience that lots of sort of young architects who have a kind of entrepreneurial seizure and think that they can go off on their own I had a similar experience to many who have gone before me, which was it was incredibly difficult and a lot of pain kind of arose out of running my own small practice. I didn't have all the creature comforts that I got from working in big practices.

4:34And financially, I think it was one of the most sort of profound moments of my life because it was an experience where I was complaining about how much I was getting paid at these very nice practices and then when I was working on my own the first experience was that of even less money than I had before and this kind of made life very very difficult but one of the good things that came out of it was that I became very committed and interested in trying to understand what makes an architecture business work and I must say that I you know just talking with Alice and Alistair earlier and reminiscing about my part three days and I thoroughly enjoyed my part three studies because it was the first time that I was actually introduced to anything about the business side of architecture and I loved it I was very interested in it I was very interested in marketing and communications in selling and negotiations setting fees the accounting side of it making deals all this became quite interesting and running my own practice gave me an opportunity in a difficult environment as well of like not having any money to try and really understand what is it how do you make an architecture business work so I began a quest if you like to understand this and the first thing I did was I started to interview architects in my in my network friends contemporaries mentors and started asking them all these different questions about how do you run an architecture business?

6:15How do you make money? I also started interviewing consultants and accountants and salespeople and marketeers and copywriters and all these other sorts of periphery businesses and consultants that also supported an architecture firm. And at this point, I started, at some point, I started recording these interviews and these conversations. And I'd seen a person in California who was doing a similar sort of thing as a podcast. And so this must have been about 2013. And I reached out on LinkedIn and connected with Enoch and said, hey, I'm interviewing all these UK-based architects and engineers and consultants about the business of architecture.

7:03and he was running a podcast called the business of architecture and i said can i put my podcasts onto your platform he was like yes absolutely at the time he was going for a very similar experience and was you know running this podcast for maybe a year or so out of his kitchen we jumped online we spoke on skype as it was back in the day and we started kind of comparing notes and exchanging these interviews and developing this platform. Anyway, fast forward now over 10, 12 years, we have grown the Business of Architecture podcast into a full-blown consulting agency. We have around 75 clients internationally, probably 75 % of them are in the US.

7:51I'm in New York right now. My career has completely changed. I never intended on becoming a business consultant. And over time, Enoch and I developed what we call a smart practice program, which is really a operating system to put into architecture businesses that we've developed. We've invested literally hundreds of thousands of dollars in our own, you know, with our own mentors and consultants and learning leadership and salesmanship and and marketing. and we've created a program called the Smart Practice Program, which probably around over 300 practices around the world have gone through. And we've helped them increase their fees, increase their leadership.

8:37We've helped with transition plans. So when one outgoing set of owners brings in a new set of owners, I hope that's a process that many of you will go through. It's a very rewarding and interesting one. um we've been involved in uh the kind of preparation for acquisition we've been involved in um kind of we've got clients who have become architect developers and they've built out new verticals inside of their operations we've had clients who've become design and builders all sorts of very interesting new business models um and really my career has taken a big change in direction where I now I don't design buildings but I help architects design better businesses for them to be able to take more money my mission really is to be able to see the architecture profession become affluent and make more money I think in the the US as I said the majority of my work is in is in the US these days and there's a very different sort of business climate here generally people are more open to business consultation and are an advocate for it selling isn't so much of a dirty word it still is in the architectural circles but there's certainly a lot more pride generally around being a business owner and it's not it's not so shirked upon and also the economy is it's quite different as well in terms of fees but it's opened my eyes up as well being an architect and being a consultant and some of our clients I've been quite amazed at the financial performance of their businesses not to kind of be massively bombastic and to and to kind of show off big numbers but I am a big advocate for wanting to see architects celebrate them architects who earn well and we've had a number of clients over the years who have personally brought home seven figures okay now when i first saw that it absolutely blew my mind i was like there's no way that can that can happen i thought that would happen just in the very highest echelons of starker tech practices where you might have a business owner take home a seven figure pay packet but i was quite amazed to see some very well-run businesses doing great work where the owners were sharing in the upside with developers they were sharing in the upside of of them you know they're making good profit in their businesses and they all of these businesses that have these kind of high uh owners all of them paid their team members well above the kind of national averages for their particular roles so i found that very encouraging and and inspiring um our own kind of community of business of architecture we like to celebrate financial performance and architects doing well and whilst the fees for us you know for us to consult with your firm is not cheap you know the topic that i'll talk today about which is specifically fees and particularly raising fees it's amazing when you have a community of architects all together and they start seeing other architects charging well, that that in and of itself is enough for people to change their fee patterns or the way that they're setting their architectural fees, which then raises the income.

12:10So let's get into the kind of content of today. We're going to talk about fees and in particular raising fees, because my assertion is that the majority of architectural practices, their fees are way too low. And we have found ourselves in a place where we have a lack of financial agency. And us as architects, we often externalize a locus of control. So our fees are not really in my control. They are in the control of somebody else. They're in control of the client. They're in control of the market. They're in the control of whatever kind of economic forces are at play at the moment. They're defined by other architects who are undercutting us.

13:03It's all outside. Now, there's some validity and truth in these, but it's not a particularly powerful place to stand in as an entrepreneur. It undermines us and we all get together and we all whinge and complain about how low our architectural fees are. And then this has this knock on effect of salaries. I find it interesting. There is a conversation that sort of circles around the architecture industry. this notion of the selfish architecture business owner that's keeping all the money to himself and is deliberately paying people very low salaries. I'm yet to meet or interview or speak with out of the thousands of architects I've spoken with anybody anyone who anyway openly admits that they want to pay their team less everybody I have spoken to has the desire to be able to pay their team more money.

14:01And the main reason from my perspective is why salaries are kind of, they've kind of stagnated and are low is to do with fees and our lack of agency in how we talk about fees and the sorts of things that we can do to raise them. So we're going to look at just some of the kind of wider issues that the architecture industry is facing that are relating to fees. We aren't talking about money. So as I said, part three was really the first time that I even came across a financial conversation. And by that time, I would say I'd already had a very long exposure in academia and architectural design. And money is a conversation that's negated throughout that process.

14:51And whilst it's negated or not spoken about, that does have a kind of impact, maybe an indirect impact where either we feel uncomfortable talking about money or we think it's not important. And that's an attitude that I see a lot is that, you know, if I question somebody on why their fees are so low, what are you doing? Or I'm looking at the numbers and, you know, we can be quite brutal. We look at, you know, profit and loss and financial statements of a company and we're looking at why you're not making any cash. And I'll often hear the resonant refrain of like, well, I'm not in it for the money.

15:26And my response is usually, well, your team probably is and you should be in it for the money because it's just completely irresponsible for you to be running a business and you're not interested in making money. If you're not interested in making money, I really wouldn't advise you running a business because it is the oxygen of your firm. It's the oxygen that makes everything else work. And if there is no money in the business, you can't pay people, you can't invest into design, you can't have equipment, you can't do research, you can't do anything. So money needs to be prioritized. That doesn't mean that's different from being greedy and it's different from being unscrupulous with money and doing anything nefarious, which is often the other kind of background shadow belief structure that happens.

16:16It just means being powerful and responsible and financially literate and for us to invest some time in learning how to talk about money. A lack of financial transparency in businesses is very, it's not good. It's not good. I'll give you an example. Years ago on the podcast, I had somebody, a young person, an employee in an architecture firm. And I don't know how they got my phone number, but they listened to one of the podcasts I've been doing and they phoned me up and they were in quite a stressed out panic. And they were exclaiming, you know, my the boss that I'm working for, the architect that I'm working for, he is exploiting me.

17:01he is taking the piss with how much he's paying me versus what he's charging me out at and i was like okay hold on and he goes i've just found out that he's paying me this amount and then he's charging me out at three times more of what i'm getting paid and i was like okay all right so there in just lies a good example of a massive misunderstanding over what you get paid versus why a business owner would be charging you out at three times what you're getting paid, right? Because obviously there's overhead and then there's profit surplus that has to be made by a business. Okay, so the rule of threes, that's quite a popular rule that we often have in business.

17:47But if a business owner is doing that, they are charging you out at three times what you're getting paid. That's normally an indicator of a healthy business. Another example of not talking about money. Okay, so that would indicate to me that the employee did not understand how the business was operating, that there was a need for the business to make profits. So probably nobody was talking about profit. No one was sharing any financial results. Nobody was talking about expenses inside of the business. So there was no financial culture inside of the business, which then led to that misunderstanding.

18:22And that's on the leader of the firm. OK, so that lack of financial transparency and often it's a kind of insecurity around it leads to that kind of culture, which then stresses people out and causes a misunderstanding. I had a client recently we're working with and they were talking to their team about fees and it transpired that the team understood or misunderstood that if they worked more hours on a project, then the firm could bill more money. Now, if you're on an hourly rate, fair enough, that could happen. But for the most part, that's not how it's working. There are fixed fees that have been negotiated, which leads to a fixed amount of hours that are associated with that fee.

19:08And again, we just start to see a lack of transparency around financial communication in a firm. And then we have that massive misunderstanding because the team are quite happy to work and they're working overtime and they think they're doing a good thing. But yet it's stressing out the business owners. So problem number one, we're not talking about money. Low fees equals low salaries equals problems. So all of the complaints that we hear in the architectural industry, I feel that they have got a big part to play in low fees. We're an economically underperforming industry. If I look at just some of the RBA surveys, one from a few years ago that always sticks out in my mind, which is the sort of average take home of a solopreneur or sole practitioner who's running their own business on their own, was taking home£25 ,000.

20:02That is, I don't know, that's not a benchmark that I would aspire to. I know what that's like. I have been there. I've made those mistakes. and it's not good. It really is not a good thing. There's a larger conversation, which could be another lecture about I wouldn't really recommend people running business by themselves in an architecture firm. We work better as teams. But overall, we've become economically challenged and we're lacking that financial agency. The old guard methods of running practice, these don't work anymore. So the attitude that we've had in the past towards salesmanship, marketing, promotion, there might have been a golden era at some point where there was fewer architects.

20:50It was less competitive, perhaps. Maybe there was more government contracts that made the whole thing a lot easier. That doesn't exist anymore. And the old guard method of not talking about money and not being transparent about it, that doesn't work either anymore. We need to be very astute business people in a mature, oversaturated market, which is not just oversaturated by architects. It's been nibbled upon by all these other adjacent industries. We need to be intelligent business people. And architects, when we apply our minds to designing business, can be brilliant, brilliant entrepreneurs.

21:32As I was saying, the profession is financially mute. That gives us a lack of agency. I see this pattern a lot in companies, the feast or famine cycles. That's where a lot of money comes in in one month and then nothing comes in for months afterwards. The whole idea of developing a cash flow cadence in your business and decoupling the way that you're billing away from deliverables and away from milestones, which is very commonplace in lots of other businesses. It's not very common in architecture. in architecture again this is a strategy that i'll work with with lots of companies when they first come to us is just get a nice rhythm of predictable cash flow where you can look ahead six months bang bang bang it's like a heartbeat but we have to prioritize the financial heartbeat of a business the making profit the making surplus otherwise any other design aspiration we have becomes heavily jeopardized and being able to retain talent becomes much harder.

22:32So again, this conversation of the exodus from the profession, again, I would say a lot of it comes from the return on investment is very poor. When I look at other professions, often the ROI of 10 years of study is a lot higher than it is for architecture so the poor salaries in the future and the poor kind of career trajectory in in some circumstances can be enough for people to go well that's is this really worth it for me okay overwhelm stress burnout the fear of growth this is we see this a lot i see a lot of architecture business owners coming to me and they are obviously you know kind of stretched thin they become what we call the bottleneck in their firm all decisions are running through them and there is also coupled with with that a fear of growth a fear of growing a business because if you're doing it on a small scale with a few people it is very hard and then because it's hard of a few people the idea of growing kind of makes it feel like well it's just going to magnify the problems so there is a this culture as well where there's a lot of anti-growth sentiment which i think gets a bit kind of mixed up with other sorts of conversations um but it's again not something that's particularly useful when we're running a business late payments very very common we'll talk about that this later on this is where the architects get leveraged for risk particularly by developers architects traditionally very very agreeable professionals and developers know this i've got numbers of podcasts where i've interviewed developers and here in new york when they actively know that they can leverage an architect for late payments or they can ask an architect to do something for free and it's not going to be a problem and that's a very common uh activity but the late payments i think is very very damaging because it disrupts this cash flow cadence the heartbeat of a business it's going to make paying all your team very stressful and you as the business owner carry a lot of that agony you know i speak to i've spoken to too many architects who have paid the rest of their team and then not paid themselves as a result of a late payment because they haven't got structures in place and negotiation tactics in place and upfront agreements that are robust and and often they're not good at conversational negotiations or handling what we call critical conversations which these are conversations that have a degree of inbuilt conflict in them or rejection okay and there's a bit of a social skill to be able to be good at those kinds of conversations but if we're avoiding them and again money and the heartbeat of the business the financial heartbeat the business is not prioritized we see all sorts of terrible things happening developers won't pay their architects for months and months the architects don't do anything about it um sometimes they'll intellectualize it and and and kind of soften the impact of it but it's a very unhealthy financial hygiene to be maintaining and again low profit margins typically are accepted as the norm lots of firms kind of accepting five to ten percent as being the the normal I've seen lots of firms where breaking even is kind of considered success this is all very dangerous territory to be operating in and the cult of design so this would be a a kind of criticism if you like of the industry where we are willing to make enormous sacrifices at the altar of design we prioritize design what we think of as design over everything else.

26:34And we often use the guise of I'm doing it for good design to have us not deal with the important financial conversations and mechanisms that are needed in the business. So this causes a bit of a disruption and again, a very unhealthy business environment. The problem that I often see with firms with setting fees is that they often only have one tool in the negotiation box, which is to lower the fees. So in order to win a project, I'm going to start lowering my fees. And then this creates the race to the bottom kind of attitude that we end up seeing, which again, it's not healthy. Lowering fees is just one negotiation tool discounting fees it's just one one tool if we've got good prospecting strong conversational selling there's been a bit of training in in how to do that and how to negotiate just mindset and confidence again i sometimes get criticized on this one where people are like oh it's nothing to do with the mindset it's nothing to do with the the psychology of it yet my anecdotal evidence would suggest that it's quite it's quite different because often when people are feeling confident and have got a little bit of confidence in financial literacy and sort of understood about some of their the sort of shadow beliefs that are lurking behind that making us feel insecure about money and we can unpick those then okay great start asking for more money and stand in how much i should be getting paid and i'm actually quite happy and comfortable to deal with objections and it doesn't need to be conflict and doesn't need to be conversations that we should shy away from.

28:29There's a big fear of losing projects if fees are too high. We believe that pricing is the primary reason that clients often choose us. This all leads to chronic undercharging. And when we undercharge, I'd like to make the assertion that actually our pricing is a positioning tool okay so it's not linked to anything moral um but our choice of how much we charge communicates something as a broader sort of marketing dictum all right so if you're going to be undercharging the likelihood is that you are going to attract more price sensitive clients and low alignment clients all right so this is something that, again, I have to kind of work on it on an individual case by case situation with people so we can actually look at what they've got, what kind of clients would be good for their business and for their architectural agendas and the kind of work that they want to do and to balance it with, yeah, we need to be making profit and making money and we want to be getting financially remunerated.

29:40There's often a big mismatch with architectural services when, particularly in the sort of lower ends of the residential market where architects, where we've got a very sophisticated architectural service, which, yes, would be amazing for this type of client, but it's not in any kind of price range available to them, particularly when we're competing against other services. So if we do enter in those sorts of markets, then we've got to be very considered in having tight boundaries around what's involved in my delivery and positioning it much more like a product and have quite tight guardrails around it.

30:21Which leads to us not doing that, which ends up having scope creep and over servicing. And again, architects, notoriously, we haven't been very good with accommodating scope creep and aligning expectations with good scope creep mechanisms at the forefront and also training everyone in the business to get into that kind of rigor and discipline of when we've said yes to something, we need to go away, we need to raise a kind of change order memo or whatever it might be. have some sort of boundary put over how many hours it's going to be in a kind of rough cost estimate to it and then have that approved before we go ahead with the work we don't see that happening a lot particularly with kind of project manager levels and I a lot of business owner clients will complain to me oh the team they're just saying yes to stuff and then they're going away and again that's a problem of leadership and not enough financial transparency and people not understanding the importance of just protecting our cash flow and also having a culture where, yeah, there's a fee that was associated to this project.

31:32That fee gets translated into hours. Those hours are now budget. And you as individual architects and project managers and project architects on the team, part of our role here is to manage that budget of time that we've got to deliver what we said we were going to deliver. and ideally i hope to see project architects and everyone on the who's doing the work they are involved in the fee setting process as well so they can have a say and they can review the numbers and analytics and we can all be more of a a team around it if there is no if there is no no such budget of time uh that then gets allocated to the to the team on how they can do it and this doesn't mean a deadline okay because architects were amazing at having a deadline you know let's say that I've got a deadline between now and tomorrow, we're amazing at being able to find 100 hours somehow.

32:24That's different from having a time budget of like, we've got eight hours and the deadline is tomorrow. All right. Okay. Just manage the eight hours. That's the budget. That's the time budget. Stick inside of that. Then our profit starts reducing. I'm a big advocate for project architects to be profit architects and that there's a level of accountability, certainly in the mechanisms of a business of being able to report on the profitability of projects. Now, obviously, it's not always down to the project architect, how profitable a project is if they weren't involved in negotiations and some terrible things have happened and they've got a bad client, et cetera, et cetera.

33:02But we do want to have that as a kind of mechanism and an awareness that everyone is able to see the sort of run rate of profitability and expected budgets and just that sort of financial back-end discipline, it frees up so much time to spend on the things that we love doing. This then leads into a lack of confidence around fee setting and not having a system or a structure or strategy in order to do this. A lot of architects will base their fees on guesswork or it's emotional or it just felt right or I felt uncomfortable raising my fees. We often do an exercise when we have a new intake of clients and part of my challenges is that in the first few months of working with us just to raise your fees without any clever marketing, repositioning, conversational selling, anything like that, just raise your free you'll raise your fees as much as you feel comfortable with and then go up a little bit beyond that um and usually what happens is that people raise their raise their fees they get over their whatever kind of psychological hurdle was in the way and they can pay for the pay for my fees basically so i feel like i've got my work done done my work it's an easy win um but again it often occurs to us as a real sort of hurdle.

34:35There's no way I can't do that. So reactive pricing is often how fees get set. The possibility I want to sort of present here is that money is an index of agency. And for us to have a very healthy and empowered mindset around profit and surplus, I'm a capitalist and if you're a business owner I would urge you to be interested in the mechanisms of capitalism and what it can do when it works well and that we kind of take that on and be a and be a steward of it for me money is an index of agency i.e it means that when you have money then I have the ability to take action in the world I can make things happen and that's it's a powerful thing to be able to do that.

35:27So being responsible with money, cash flow, cadence, learning about the language of business, marketing, sales, finance, accounting, these are skills that just enhance architecture. If we don't have a grounding in them, particularly if you're a business owner, then the architecture will suffer and the amount of agency that we have, the ability to act diminishes. When we're running a business and you're running a good organization and you've got control over finance, you can distribute it the way that you see fit. Okay, so that's very powerful. You can define people's salaries. When I worked at RSHP, I don't know if maybe there's some people might even be working at RSHP.

36:12When I worked there, they had a very interesting structure where the company was owned by a charity and i believe it was something like that half the profits went to were kind of distributed distributed amongst the team and there was a kind of profit sharing system and the hierarchy that would have been a formula that would have been applied and then the other half of the profits were given to charity and so if you received your annual bonus or whatever it was, it would be matched by the charity to a good cause of your choice. And there were also other regulating mechanisms in place, like none of the senior partners or the chairman would earn more than nine times what the lowest paid architect would be earning.

36:59I think it was things like that. I remember thinking at the time when I saw that, I was like, yeah, but that's loads of money, 10 times more than the lowest paid architect is. And then when you start learning about business and you can and then you start to see how wildly different an owner's revenue can be from someone who's working for them, you start to realize that's a very, very good. Great. If it works for that company in that culture. Awesome. OK, so you have the you have the agency to to do that when we're in control of money and you're running a running a good business. And Peter Drucker, the great management consultant, said nothing happens until somebody sells something.

37:43So. Again, I'm always interested in marketing and and selling and the selling of architectural services and that getting good at selling and making more sales in business. it cures a lot of diseases. In Silicon Valley, you've got this dictum that revenue cures all known diseases. Money can't fix everything, but in business, it fixes almost everything. Everything becomes a lot easier when there's better financial environment for you to be able to do the things that you want to be able to do. So high fees equals agency, fulfillment, and ultimately better design. You've got the resources to create a machine that can sustainably put out a better design.

38:29So my overview for setting premium fees, I've broken this down into sort of six sections.

38:42Each of these topics, I could probably talk to you about for a week. Okay, so they're quite involved. But I'm going to give you a kind of top down scan through all of them and then on the business of architecture podcast i'm actually releasing like a kind of hour-long episode on each of these um pieces uh and these are the sorts of things that we cover in our consulting agency we work with i've worked with firms for in some cases you know five six years and we've gone through systematically installing these pieces in some form or another But the first is that financial mindset and a financial attitude, which then gets reflected in the culture.

39:27And I'm going to take the stance that, you know, our relationship to money is quite an interesting one. There's a lot of emotions behind it. There's a lot of cliches that we inherit from family, our culture, our background, our upbringing. In the UK, it's always interesting because there's still the class system is very pronounced. And, you know, it's just interesting the sorts of beliefs that we hold on to about having money and earning money and what it must mean. And this can very deeply influence our behavior around it. So it's worthwhile doing some work on ourselves and illuminating, constraining belief systems that often, you know, they weren't even our own ideas.

40:19We've just picked them up from ideological perspectives, from family. The architecture industry itself has these kinds of financial attitudes or money scripts or money stories, however you might want to describe them. and it's good prudence to evaluate them, interrogate them, break them apart, intellectually challenge them for your own good so that you can powerfully go out and be asking for money. Because if you're running a business, part of your job is to ask for money. And if you're not comfortable doing that, then we've got a problem. It's not really that complicated. I must say, in general in business um you know you're going to meet a lot of very wealthy people who perhaps aren't as intelligent as as intelligent as you are and the intellectual part of business isn't you know it's not as demanding as the intellectual component required for getting an architecture degree so that's really useful to consider because people can make a lot of money who aren't necessarily intellectually smart but they'll often have a set of different skills such such as being able to talk to people, a high level of emotional intelligence, financial literacy, leadership, being able to sell and negotiate, a comfort with numbers, being able to install systems and processes into production and into a business.

41:51so the financial mindset and financial attitude again the culture of a firm i'll often say it reflects the owner okay because when i work with business owners i have to have the business owner you've got to take full responsibility here for everything that's happening in the business if you don't and you're blaming the team you're blaming other people it's just very difficult and you guys if you're business owners already or if you're you know employees it's a really healthy attitude to adopt is to be like asking myself what can I be responsible for um and be responsible for the for how money is occurring for you and the any complaint there might be around money and start and it also opens up the possibility of well I can start learning about what are high value economic skills so you often hear me talk about high value skills when I say that I mean high value economic skills which are skills which are going to help you make more money okay architecture in itself can be a very high value economic skill, but you've got to talk about it as such.

42:52Otherwise, it ends up just being a high cultural value skill. So money mindset, financial attitude, and the culture of your firm is kind of where it all starts. If we've got an adverse reaction attitude, don't like it, not for me, not what I want to talk about, then the sustainability of the practice is ultimately compromised and then we start seeing all these other problems and then we kind of engender a culture of complaint and it's just not it's not good the second is proactive prospecting now a lot of architects the way that business comes in is just as a result of a referral or working of a particular client and they recommend you on to somebody else now that's great but it's the baseline and when we're talking about rfqs or entering competitions and a lot of institutional work these are sorts of outdated procurement models which don't serve the architect very well they don't really serve the client very well to be quite honest with you um but if we if we just follow those procurement routes and we're not proactively trying to establish relationships or trying to circumvent these sorts of procurement routes same with any other kind of client if we're not actively developing our network and developing thought leadership powerfully positioning ourselves developing relationships understanding what some of the problems and the pains are of the client and in this context i mean the person who is going to pay you right because architects are very good at understanding all of the problems and issues of the wider stakeholders of architecture that's great but we also need to be really prioritized with understanding the pains and the problems of clients and speak it in their language and then actively search out those sorts of relationships and become allies and advocates to these sectors and industries and and individuals this is much more a proactive approach to winning work and it changes the context with which we talk about fees in the in the first place if we just the old sort of architectural dictum of just do good work and the rest of it will will follow this gets us into a it gets us into a lot of a lot of trouble because then we just focus on doing the architecture and we're not being strategic about going off and winning work and meeting the right people, developing relationships or hearing about projects before that they've gone to that more formalized procurement process.

45:43I had years ago, I had, it was the business development team for MoMA and it was interesting. And like RSHP and his other firms, there's often a team of people allocated to going off and finding projects and OMA they had a this this team and they were working in Southeast Asia and you know they were making lists of all the politicians they're making lists of all the contractors they're making lists of all the developers they're making lists of where all the land acquisition big land acquisition events had been happening and then they were systematically reaching out approaching and starting these kind of networking conversations positions uh in ahead of you know publicly tendered pieces of work um and the good the good firms again when we're talking about raising our fees you've got to be doing this right it means that you've got to be proactively positioning and prospecting and developing relations and meeting the right people in order to be able to set a powerful context to raise your fees powerful for positioning this is a marketing aspect of being able to be seen as a specialist a little diagram that I'll often use with clients is this is a value pyramid okay at the top of the pyramid you are perceived to be worth more money at the bottom of the pyramid you're not you're perceived to be less money okay at the bottom of the pyramid i say are sales people okay we never want to be seen as sales people there's a lot of very bad sales people the majority this is why selling gets such a bad rap and why we're so averse to it because 90 of people who are sales people never got trained in it don't do it very well give it a bad name and if someone senses that you are a salesperson then this lowers our value i would actually make the argument that a lot of architects don't want to be salesy and in their search not to be salesy they end up being really salesy the next is being the generalist okay this is the master of ones i.e you've got one project here we do a bit of this we do a bit of that we do commercial we do residential we do affordable housing we do high-end luxury housing we do tree houses we do you know community work we do high rises okay we become a generalist this devalues our market perception above a generalist is what we call a specialist and that's somebody who has declared themselves a specialist in a particular sector and you can be a multi-specialist firm right which means that you've got carefully curated and considered what we call like a sales funnel from the point of contact with the client all the way down to the signing of a contract which is being curated specifically for a particular client avatar so this is a client who might be I was talking to someone this morning and they wanted to specialize in aviation okay great that's a good specialism to get into um we can position them as being a specialists in aviation first thing they can start doing is just learn about the vocabulary of that client okay what are the words that they use how are they talking about their their operations great that helps um okay and this is before portfolio and website stuff okay because the traditional way that architects like to sell is here's my website here's a picture of the work that I did beforehand.

49:34When we're being proactive here, we can engage in conversations further up front with decision makers if we understand a bit about their vocabulary, their business agendas. So it means understanding a bit about the bigger business plans, the industry that they're operating, and most importantly, the pains and the challenges that those people are dealing with and trying to solve, of which architecture will eventually become a solution to. So again, positioning yourself as a specialist and, you know, you can, I often say to clients, you can choose one or two specialisms to start with and, you know, maybe spend 80 % of your time in one specialism and 20 % of time on something else.

50:23And then over time, you can add specialisms as you clarify and automate your marketing funnel for this one specialism. But a specialist, being a specialist, it's a perception thing and it's a marketing funnel that you need to create for a specific client type or sector. Above specialist is what we call an expert. And the expert in this context is a specialist who has got a little bit of fame to them. okay and they're often considered the expert or the specialist who trains all the other specialists i.e they've written the book okay so this is when we position ourself as an expert this is often we have kind of signifiers of status or signifiers of of marketing and this this can include thing like a book these days podcast is very very useful it's very low cost to be able to to produce but it's got to be a it's got to be a podcast that again is kind of relevant to the client okay so not necessarily a podcast which is talking to other architects that that can be useful but i like it when people are talking to their clients or they're producing content and information to their clients about their sector and how that they're a thought leader or an expert in that so books podcasts um content lectures you know when you're starting to become visible as a thought leader this is what starts to elevate you from specialist stage to expert and then the top for better or for worst is what we call celebrity and celebrity is a bit of a funny one in our culture because you can have experts who become so famous in the architecture world if you like or within that niche that they go beyond their niche and they become somewhat of a celebrity like i don't know like caesar milan springs to mind for some unknown reason the um the dog whisperer guy the dog trainer okay so that's a very niche thing to be very good at you know the dog trainer i don't know if he's the best dog trainer in the world but if anyone thinks about dog trainers you think of season milan okay so the expert goes beyond their kind of traditional boundaries and has a kind of wider status wider knowledge we can think of the stark attacks if you like um and that puts them into celebrity status which means that the fees that they can command can often be a lot a lot higher in our culture we have this sort of weird thing as well, where you can be a celebrity of anything.

53:10You can be a celebrity in one domain and then sell a product in another domain that's not really related to you. So if we think about when this sort of started to happen in the 80s and you had Michael Jackson was being sponsored by Pepsi. What did Michael Jackson and Pepsi have to do with each other? Not a lot, really, or intrinsically michael jackson has this extraordinary following of adoring dedicated fans and him being associated with all that kind of all the love and adoration that people have for his music just associating that warm fuzzy feeling with a drink suddenly means that drink now has those emotions and those feelings and it will sell better okay so it's a kind of emotional thing here but it's interesting to sort of observe and it's important it's important for us to understand that our ability to be able to command higher fees it goes through this sort of pyramid if we find ourselves stuck down here and often we're inadvertently being like this because we're trying not to be sales people and we don't have any selling skills then this is where we get put into a box with our fees and it becomes very difficult.

54:25So that's kind of powerful positioning. Conversational closing. This is the art of being able to close a deal through speaking and talking. I see a lot of architects who will negotiate via email and get very hung up on like deliverables and all of these sorts of intricacies of what is and what isn't in it without establishing an agreement face-to-face with a handshake. So conversational closing, this is really, really powerful. If you get trained in being able to do it, think about the language of developers and what developers are doing and how they're negotiating a lot of different deals with different people and getting commitments and agreements and there's a sort of fluidity around it.

55:26It's one of people and communication and talking that this is very powerful. I'll go into a little bit more about this in a moment of just some of the sort of frameworks you can use. Next is actually knowing your numbers. So I know someone in the chat box popped up about knowing your fees, how to set your fees. There is a science as well to being able to set your fees. And it starts with the basics of being able to know how many hours are being worked on a project. A lot of any financial measurements inside of a business and being able to use data to project fees becomes seriously undermined when we don't have good timekeeping systems in place.

56:21one product that I recommend to all of our clients is a product called Memtime. And this is a piece of spyware that sits on your desktop. Now, it doesn't mean that the business owner can see how many hours you're working. It's meant for the employee. But you have this piece of software Memtime. And at the end of the day, it gives you a printout and it shows you what windows you had open, what bits of software you had open when you weren't away from your desk. And it gives you a printout of how long you were engaged and active in each of those things. It's very detailed, but it really improves our ability to be able to start tracking time with a high level of accuracy.

57:10But not knowing our numbers, not knowing the basics of how many hours we're working, this really undermines any ability to just get the intellectual component right of setting our fees. There's the psychological component where we're going to create additional value, but it's got to be built upon this intellectual component of just getting the numbers right. And something that you're willing to stand behind. And then the next part is actually benchmarking basics. My assertion would be that we don't really have good benchmarks of what is a good performing business. At Business of Architecture and the consulting agency, we have a number of different performance metrics.

58:00Some of them are quite stretching, but they are what we consider to be a high performing business. It's based on a lot of evidence that we've collated over the years of client data. We've also worked with companies or we've kind of used some of their data, companies like Monograph, which is a financial project management system where they're able to use the kind of back end to get non-client specific. It's anonymous data, kind of financial reads in real time from their clients. And we've seen a lot of the same sorts of numbers of high performing businesses. Again, a lot of my data will be skewed for the US, for the US market, and the US numbers tend to be quite considerably higher than the UK.

58:53I'll talk about this diagram very quickly in terms of, we'll just dig a little bit deeper into each of these components. Let's go into a little bit of depth into each one of these. the money mindset the financial attitude there's a wonderful book called rich dad poor dad i've been recommending this book to architecture students for years uh often at the shock and horror of academics when i give this when i give these sorts of lectures um it's a a book written by a property developer who who's who's kind of illustrates the mindset shift between It's what wealthy people do versus what non-wealthy people are doing.

59:48And it's written out in a very engaging manner. It's written as a story. And he kind of tells the story of his father, who was like a PhD academic, but never made any money. And then the story of his friend's dad, who he found to be a really good financial mentor, mentor, who was an entrepreneur. and he talks about the different belief systems that both those men in his life had and kind of compares them and breaks them down. And one of the kind of tools he has in this book is something called the cash flow quadrant. And he talks about how there are four ways for you to be able to make money in life.

1:00:27None of them are better or worse than in others. And you can make an enormous amount of money in all quadrants. You can lose an enormous amount of money in each of the quadrants, but it's very good that we kind of understand what each of them are and how much of our total revenue or income we want to be having from each of them. So very wealthy people often have revenue streams from all of them, from all four quadrants. Most human beings have a revenue stream from just one of them. And he presents this idea of just straight employment as somewhat risky. So as a business owner, someone who's taken that entrepreneurial leap, you've set up your own organization.

1:01:08Let's have a little look. So in this quadrant, we've got being an employee. And the mechanism here for being an employee is that you are selling your time to an employer and they're giving you money back in return for that hour. If you want to increase the how much money you get for that hour, well, then we learn skills. We get specialized training, technical compliance, and we just develop ourselves. We go to university, we get degrees, et cetera, et cetera. That was the common wisdom anyway. Things might be changing over the next 20 years. But the idea is that you get educated and you can now charge more for that hour of time you give.

1:01:52self-employed in this quadrant is often someone who was an employee and they're frustrated or they have that kind of entrepreneurial seizure like i was describing myself at the beginning you think yeah i can do this by myself or i can set up a business and before we know it as an architect as well you've set up your own business you've left a company or maybe conditions happened you've got let go you've got fired whatever um and the easiest way or lifestyle you want a certain type of lifestyle and you think i'm going to set up my own business we move into the world of self-employed the difference between being self-employed and a business owner is that the self-employed person now basically owns a job so that means that you're working doubly hard for the same amount of money in many cases sometimes less and you're a specialist you've got all these specialized skills, but now you have to do all the admin.

1:02:47You've got to do all the business development. You don't like or do those things. You don't have any fluency in them. You're reluctant to do them. And you have a whole load of legal responsibilities. Now you own your own job. You've got to do different kinds of reporting. You have different responsibilities, et cetera. So we end up finding that this quadrant usually is the hardest quadrant to exist in because you're now spending an enormous amount of time making loads of decisions, getting decision fatigued, burnt out, worn out, and the money isn't particularly good. The difference between being self-employed and the business owner is the business owner starts to realize that, ah, I can sell other people's time and have more money as a result for it.

1:03:36But in order to do that, the business owner has to take some risk they might have to put some of their own money into a business at first they need to be good at these skills leadership sales financial literacy marketing communications they need to be able to go off and confidently bring in work and in exchange for somebody else's time they provide a job security of a paycheck that's coming in each each and every month and in order to be able to do this well, they need to have processes and systems that can be repeatable and scaled without them being there. So the big sort of difference between a business owner and self-employed is that if you're self-employed and you walk away from the business, the business stops.

1:04:25A business owner can walk away from the business and the business continues to make a profit. Okay, because we're using leverage through systems and processes and created an environment where we're getting people to work together and you can sell other people's time like we were talking about at the beginning you know three times as much as what you are paying them because then that gives you money to be able to invest in all the overheads and all the other kind of bits of infrastructure that the business needs and then there's profit and then you can choose to do what you do with that profit In some businesses, if the employees get skilled with this sort of stuff, they can start to share in the profit.

1:05:10Or if you're a business owner, you can distribute that profit however you feel. So that starts to make a bit of a difference where we've got a business owner or someone who can walk away from the business and it carries on making money. The final quadrant is that of the investor where they are using money to make more money. because we live in capitalist society and money in itself is a commodity, but it has a certain energy to it and we can deploy it in someone else's business so that they can build out that infrastructure. They might have to take an agreement with you as the investor. You expect a return.

1:05:49There's a lot of risk involved often for the business owner who's investing money, who's asking for money, and also there's risk for the investor as well. OK, so but this is where money can compound and where you can make, you know, often these two quadrants is where a lot of wealth gets gets built up. Just to make an example of this, and this is kind of in the sort of higher stratifiers of enormous wealth. If we think about the business like the CEO of Coca-Cola, they're probably on a twenty five million dollar annual compensation package. right crazy extraordinary money right but they're effectively still an employee i suspect that they've got shares and own other assets and when you're earning that kind of money you can invest in all sorts of other things but ultimately that 25 million is coming in as a salary right it's an extraordinary salary but it's still coming in as a salary let's look at warren buffett who is the shareholder of coca-cola he doesn't do anything except for own it and he bought a whole load of coke he gets paid all the money the dividends that he receives from coca-cola is often more than a billion okay so just even at that scale the difference between the employee and the business owner we're interested in in being owners of things okay so this is a quite important it's a quite an important book it will really sort of shift your mindset around around money i love watching our clients get into this and then they start being inventive with their business model and becoming developers or participating in the upside we've got a client at the moment who has raised her fees considerably a she's run a good business and she's put herself in a kind of confident position where she can she can take a risk and then she's been negotiating fees with developer clients where she gets paid a base salary up to planning approval and then she'll get a bonus based on each of the approved on the number of units and she's very she does her due diligence she knows what risks she's taking the base salary is the minimum amount the developers love that kind of deal making it takes a little bit of skill to be able to negotiate it in the first place developers are often very open to it she's recently completed a project where they've done very well with how many units they got through planning and now she's collecting on a fee which is between two two and a half times more than what she would have normally charged for if she wasn't taking any risk so this this kind of mindset starts to position us into different ways of negotiating and setting up deals

1:08:48in a business i'm interested in people having some form of transparency you guys as in if you're working in a firm and i know one of the wonderful things about doing your part three is you start getting interested in contracts and depending on what kind of firm you're working at you know you'll quickly find out how much transparency there is and how much financial data that you can that you can have a look at but i advocate to business owners that they should share the net operating revenue with the firm with the rest of the team like how much money are you bringing in that is being used to run your organization a thing called the performance ratio which is the net operating revenue divided by how many uh employees you have okay that gives us a kind of very useful mark i'll talk about that in a moment share profit margin share the fees with the team okay so this is and get the team being involved with uh the setting of fees because it starts to have everybody more concerned uh about the final financial health of the business i like esops in many cases because esops everyone has now a bit more of a vested interest in how the business is performing financially so they get they start to talk about the fees and the numbers and people become more instinctively interested in okay right there is a limit on how many hours we can be spending on this project so let's work it out let's start it as a budget and we can create accountability structures inside to be able to do that we've even had clients i'm not sure about this one i'll i'll leave it to you guys you can tell me um but we have had clients in the past who have been transparent with salaries i think it takes quite an enormous amount of emotional maturity for people to be see how much everyone else is earning and you know people get upset and distraught about it but i have seen companies who have been transparent with their salaries and it has been well it's been it's been received well and works well within their company culture okay so as i said we spend a lot of our education not talking about money it is so so important to start developing our own financial literacy educating yourself about the commercial aspects of architecture and what it sits in the more that you get fluent in the financial language of architecture it starts opening doors it becomes a skill in itself it becomes a very valuable thing to your clients you can present design in a much more powerful way when we can speak the language and the financial language of the clients that we're talking about there doesn't need to be so much so much conflict um the final the financial attitude i'll often encourage us all to sort of practice and cultivate is one of being indifferent but respectful to money and to understand that money is not emotional we are that we have a lot of false beliefs that we've picked up from the industry about fees and money i asked us to be in a an abundance mindset so we're always thinking not out of scarcity and that if i make money it means you don't make money that has us be very limited in our understanding and understanding that money is somewhat of a social construct and that we do our best to remove this idea of the impoverished artist.

1:12:25So many money problems, they come from mismanagement. Take a screen grab of these. These are some beliefs that we often see architects have. And my invitation is for you to go through them, see if you've engaged with any of them as being real and start picking at them. Take another screen grab of this. I'll give this whole talk as a PDF to Alice at the end so you can go through it in more detail. some positive financial attitudes to cultivate and to practice and to again intellectually argue them through with yourself right that's really the best way to um sort of do these and you should start to see that they have an enormous impact on our ability to set these proactive prospecting and pipeline building richard when we used to go and play um softball in hyde park i remember him recounting the first rule of architecture is to win the work and then he would say the second rule of architecture is to charge a high fee proactive prospecting we've got a framework here that i'll often teach architects to use doing good work is the bare minimum and this little reminder is the framework it's called Ian agrees this means that you identify for the eye who is your target avatar understand their demographics define the t their tiers in terms of what would be the best kind of client for your for your firm research individual clients research the industries that you're focusing in.

1:14:19I often ask people to become obsessed with their clients. It makes running a business a lot easier when you're really interested and being an advocate and an ally for particular types of clients. And if you're as well kind of part of the wider stakeholder community of people that will be experiencing architecture, then of course we can integrate that as well. But we want to be making sure that we've got the foundation of communication with the people that are putting money in our pockets set up and that we understand because it positions us to be able to charge higher fees. So effectively, we identify who our ideal clients are.

1:15:00They can be individuals, they can be businesses, they can be sectors, and we build a big list, right? So and you can go on to Upwork or World Teams or whatever it is, and you can hire someone and they can build a big list of lots of names with phone numbers and we jump on the phone and we start getting into contact with people. Approach, that's the reach out aspect of it. There's all sorts of fancy digital marketing techniques that we can use. Probably the best is just to get introductions to other people through your existing network. The second best is pick up the phone, call it up. We have a script that I give to our BOA clients to begin with.

1:15:41The beginner script is simply, hello, my name is. Okay, it sounds like a horrible thing to do. And people have all sorts of mental rackets and complaints about picking up the phone. I don't wanna be a cold caller. And we often do a training session where we have a three hour session and I have a whole load of clients on a Zoom room and you have a list of people and then everybody just phones different contacts, connections, developers, general contractors, they just jump on the phone and say hello. And it's amazing. So many people have never ever done that before. And usually what happens is we get a handful of people that have all generated a lead or a project out of that simple, simple activity for a few hours.

1:16:25Okay. So again, it doesn't need to be overly complicated. It does take a little bit of getting over yourself to do it. But again, it positions higher fees, in a very good way follow-up campaign nurturing very useful this is how we follow up with clients and then finally the agreement part is a system for agree for agreeing again there are different ways of prospecting and raising fees through having bits of what we call diagnostic consulting services first again this will be around circumnavigating uh kind of traditional procurement routes and getting into a strategy of positioning yourself as a strategic advisor, not a commodity.

1:17:16Okay, so this is something that we fall into a lot is that we're positioned as a commodity. We want to be positioning ourselves as a strategist. Your ability to be inventive and create diagnostic services where you're understanding client problems, this can be really really powerful and again it will be able to protect um your fees very well okay brydenwood very good example of that company positioning i've already done that little triangle so i'll leave that for now conversational closing this is the framework that we're often use to train people in a sales conversation where we want to be able to go through with a client sit them down face to face walk them through what the pains are what their problems are and then you present your fees face to face to them and then knowing your numbers

1:18:17this is where we start to figure out how much you're actually going to charge your projects so in order to be able to know how much your fees should be you're going to have to have some data we need to we need to have keep time sheets you're going to have a good back log of it if you don't have any data then you've got to be good with this okay because you are going to have to negotiate negotiation you are going to have to sell the ability to continue selling throughout the project you are going to have to sell and negotiate a mechanism for scope creep if you have got it grossly wrong right this is why the whole i've seen it in the comments there's a lot of questions like how much do we charge how do we know to charge and there's this sort of mechanism here of like well okay we can have data we can keep timesheets we can know all of our costs and our margins our utilization if we've if we've got good records of all of that then it starts to give us a lot of confidence in being able to analyze how much resource is going to be put onto a project okay so we use a thing called a project fee budget calculator the one that we actually used was developed by a guy called steve l wintner and it's a spreadsheet where you simply break down on a project we put up the team members you put their names in etc we use their hourly chargeable rates okay now there's a whole sort of backstory which we need to have data on to be able to define what their hourly chargeable rates are but let's just say you're you're basing hourly rates off a a kind of hunch that you have at least that's something to start with because it will help us add up how many numbers uh it will help us add up how much we should be um charging the client so we could we could probably work out a chargeable rate just by using that multiplier of three that i was talking about right so so this is just a an example of another tool that we have a spreadsheet that we have that helps us work out chargeable rates and what kinds of multipliers that we could be using based on what our expenditure is.

1:20:47So this is just getting more granular. Again, let's start with the three times rule multiplier that works for most businesses. Okay. If it's not working for you, there's probably like a big expense that you're that you're carrying, but it's a good rule of thumb to start with. And then we've got some benchmarking basics. So once we start getting some financial clarity and we're looking at numbers, there are some good kind of rules of thumb for financial performance. We have a thing called the 200 Club. And then this is in US dollars. And the 200 Club is any company that is bringing in$200 ,000 per full-time equivalent employee, this is billable and non-billable staff, that is the hallmark of a high-performing business.

1:21:39That translates to about£160 ,000 per full-time equivalent here. Now, when I show this, particularly this number in the UK, people look at me as if I'm utterly crazy. I have seen businesses in the UK who are doing this. We have got clients in the UK who are doing this number. So it's slightly more aggressive because of the US-UK kind of economic difference. But it's a good benchmark for us to be looking towards as a high performance organization should be bringing in this per full-time equivalent employees okay so that's a good benchmark other numbers that i would like people to kind of keep a close eye on one is what i just said the performance ratio the second is just how much money are you bringing in and there should be a target for the end of the year and we track against that target pretty basic it's amazing how many people don't pay attention to it don't look at it aren't cognizant of it.

1:22:44Profit margin, we should be setting a profit for 20 % to 30%. Again, 30 % would put us in that three times multiplier range. 20%, we're going to be slightly less than that, three times multiplier, but 30%, that is a really good start. Full-time equivalent employee, this is how many people you've got working in your business. It's not bums on seats. is calculated by how many hours are actually being worked. So for example, if you are, let's say that 40 hours is the working week and you're an architect and you're working 60 hours each week, you are not one person, you are classified as 1.5 people.

1:23:28Likewise, if you're working 20 hours, you'd be classified as half. Okay, so we normally take 40 hours in the US. I think, what is it in the UK? 37 and a half hours per week is one person. I use 40 because the math is easier. Expense benchmarking. This is another good number for businesses to be tracking, which is what's the cost? What's the total amount of your expenses per full-time equivalent employee? Some ranges here,£60 ,000 per employee is pretty good. Anything above 120 or 120 is not so good, It means that we're very leaky as an organization. Utilization, this is a very useful number for business owners to be looking at.

1:24:11We like to have an office average utilization of between 80 % to 85%. We like to have the business owner to be at 50 % utilization. Utilization means how many hours are you working, which can be billed to the client, divided by the total amount of hours that you are working in the office. Okay, so that's what we call utilization. So 50%, we like it to be lower as management and senior people because they should be doing more overhead work. They should be doing more prospecting and marketing and selling and business functions to make sure that the business is working. Pipeline, this is a pipeline of prospective clients.

1:24:59and we like to keep a list of all the prospective clients. We like to have a target set for how much should be the value of all the leads that's in your pipeline at any given time. We pay attention to it. When the pipeline drops because you've closed something, then we want to get out there, market and advertise and sell to bring in more projects into that pipeline. OK, so that this is the value of prospective work that you are in conversations with. Realization rate. This is a really important one. This is. How much are you actually billing versus how much work you've actually done? So let's say that you worked 100 hours on a project one week, but you only billed for 50 hours worth of work.

1:25:48That means that your realization rate would be 50 percent. This is really eye-opening when we look at firms over a six-month period. The benchmark should be 100%. Often we're seeing it way lower. And then finally, if you can't see it, is your accounts receivable over 30 days. So accounts receivable is the total amount of money that is owed to you. It's the total sum of invoices. And anything over 30 days, I'm going to classify as late. my preference is that we don't have such long wait times and that we get paid up front on things again that's another strategy that we have with clients is that they start to learn how to get paid up front we have a process called invoice alchemy it's very good the amount of payments that are late should be below 15 of your total ar architect if your design software is collecting digital just while you're buried in admin work you're not alone you're in admin hell failed delegation isn't just stealing your weekends it's robbing you of the meaningful design work that fueled your passion in the first place the delegation roadmap smart practice tool is your 60 minute blueprint for identifying energy draining tasks and creating bulletproof systems to delegate them successfully one architect cleared 20 hours from their weekly schedule using this tool what masterpiece could you create with that time get this tool 100 free by going to www.businessofarchitecture.com forward slash delegate.

1:27:15Rion Willard: A while ago, we began to hear reports of a company that was helping some of our clients build remote teams. We looked into it more closely and discovered the company World Teams that was helping small architectural practitioners build remote teams that were both capable and qualified. We were intrigued by another business that are addressing one of the critical pain points for small architectural practices, which is the ability to grow and shrink a team effectively, to be able to handle higher workflow without having to staff up significantly and also being very sensitive about labor costs. World Teams is built to address these issues.

1:27:49Rion Willard: World Teams is a small but mighty company that helps architectural practices build high-performing remote teams quickly, beneficently, saving you the headache of sorting resumes and interviewing underqualified candidates. World Teams operates in your time zone and prioritizes near-native English speakers, ensuring clear and efficient communication with your remote team members. They have flexible contracts so you can adjust your team size as your needs evolve. Additionally, you're connected directly with your skilled professionals, which fosters trust and collaboration, and World Teams helps you reduce your operating costs without compromising the quality that's so important to a practice.

1:28:26Rion Willard: To download a free guide for building a remote team for a small architectural practice, go to businessofarchitecture.com forward slash world teams. That's one word, businessofarchitecture.com forward slash world teams. As a reminder, sponsorship is not an endorsement and you must do your own due diligence before entering into any business relationship. Go to businessofarchitecture.com forward slash world teams. Thank you to our recent listeners who left reviews for the podcast on iTunes. Your reviews help others find this podcast so the raising tide raises all boats. To be honest on the show, open the podcast app on your iPhone, search Business of Architecture.

1:29:05and after clicking on the show, scroll all the way to the bottom to leave a review. Today's episode of the Business of Architecture show is sponsored by Smart Practice TM, the world's leading step-by-step solution for architectural practice owners that want to structure their existing practice so the complexity of business doesn't get in the way of the architecture. You see, it likely isn't your architecture skills that are holding you back. It's the business aspects of running a practice, managing projects and people, dealing with clients, contractors and money. So if you're ready to quit being a glorified administrator and get back to architecture again go to smartpracticemethod.com to discover the proven simple and easy to implement smart practice method that is revolutionizing firm management for owners and teams if free advice was enough everybody would be already crushing it the truth free advice going to take you so far the breakthroughs come when the advice is designed around you hey ryan here and i want to thank you for joining us today remind you that the views expressed on the show by our guests do not represent those of the host and we make no representation, promise, guarantee, pledge, warranty, contract, bond or commitment except to help you do your best work and be handsomely paid for it.

1:30:11Carpe diem.