The costs of doing business for a small architecture firm can threaten to blow the profit margin of even the most lucrative projects.
If these costs are adding value to your clients’ projects, you should be passing at least some of those costs along to them. Here are five cost centers that can be easily turned into profit centers by passing a portion of them on to your clients.
1. Software Rental Costs. The software industry is rapidly moving toward a rental model, with many manufacturers offering rental options if not dropping “perpetual” software licenses altogether. Last May, Adobe Systems abandoned updates of its Creative Suite products and boxed software in favor of Creative Cloud, a $29.95 monthly subscription service that now controls its entire portfolio of graphic design, publishing, and video/audio production software. Adobe, at the time, said they were surprised by the success of the then-one-year-old Creative Cloud and decided that rather than develop a new version of Photoshop and its other popular applications for the next Creative Suite, as well as one for Creative Cloud, why not just put all of the updates into the subscription version?
For small businesses, there are good reasons to rent software rather than buy perpetual licenses, especially for small, agile architecture and engineering firms that move quickly from one project to the next. With a flat monthly fee, small firms can minimize upfront costs and take advantage of included upgrades and support. They can also “go dark” on their rental licenses/seats in between projects and opt back in as a new project starts.
But the highlight here is that renting software opens up the opportunity to pass software-access costs to clients by including them in project estimates. Case in point: 3D design options from Autodesk—such as the AutoCAD Inventor LT Suite and AutoCAD Revit LT Suite—are currently available for a monthly rental.
2. Costs Outside of Building Design. Does your firm ever help clients negotiate land deals for prospective projects? Congratulations! You’re a real estate/land-use consultant! Long-term business planning, relocation planning, interior design, space-use planning, facility-maintenance programming, and green/LEED consulting are all services your firm can bill for outside of your design fee. If you receive a real estate license, you will automatically have access to information about available properties that other competitors do not. Consider interior architecture, a practice in which most architects take part in some way. Unless a client has hired a separate interior designer, the furniture, carpet-shading devices, cabinets, and other interior elements specified are adding value to your project that can—and should—be billed separately. Discuss this at the outset of your project with the client, and do not give these services away for free.
3. Building Information Modeling (BIM) Management. This burgeoning new service is growing so rapidly that it bears mention outside of the other non-design services above. Many projects now require coordination early on between an architect, a client owner, and a construction manager using a 3D Building Information Model to eliminate construction errors. Managing that parametric model, which can be detailed down to every nut and bolt, is a herculean task that most owners will hire an outside consultant to perform rather than take it on themselves. Your firm will already have to design the building, why not take on the responsibility of sharing the information with your construction-manager partner? As most clients stipulate that the final BIM model is the property of the building owner, who better to manage it for them, at a cost, than you? The architect is the one professional who has the education, training, experience, and vision to guide the project from design to completion.
4. Marketing Costs. The first Principles of Practice adopted by the American Institute of Architects in 1909 barred architects from using even the simplest forms of marketing. They could not advertise or even put their names on a sign in front of one of their buildings during construction. Times have changed drastically, but many architecture firms still struggle with how to market themselves or how to best use their marketers. Your marketing department need not be a cost center. Small-firm architects are in the business of creating brands for their clients—they design spaces geared toward communicating the client’s specific message to the world. If you are coming up with branding and promotional materials to accompany a building project, you need to charge for those separately from your design fee. A project website or creative effort for an advertising campaign should be costs passed on to the client. Basing your marketing plan on client needs can lead to extra fees as well as more business. A recent discussion on ArchDaily.com took on the issue of marketing for clients.
5. Continuing Education. Have you taken on a project that requires use of a new material such as high-density concrete? Designed your first project according to the stringent anti-hurricane requirements of the Dade or Broward County Building Codes in Florida? The cost of your staff’s education for these projects would normally fall on your shoulders as an expense, but not if your employees gained this knowledge just to complete this client’s specialized project. Feel free to pass the cost of AIA or ASHRAE continuing education on to the client in certain situations where you were entirely qualified to perform the work, but some staff members just needed extra accreditation for that specific project. The AIA continuing education system gives information for education providers and firms on the licensing requirements for every jurisdiction in the U.S., if your staff is taking on extra education credits to work in a new state, bill clients for it.