Today I want to review the number one cost to your business and 5 ways small Architecture and Interior Design Firms can achieve more profit.
Let’s start with a review of the data.
According to statistics published by one of the world’s leading, online, architectural publications, Arch Daily (“Reframing the Stats About Architecture”, Jenn Kennedy, 1/17/12), approximately 1 in every 5 Architects are self-employed, making architecture one of the most self-employed industries of our time.
Small Design Firms:
Chances are that if you’re working in the Design Industry, then you’ve probably thought about, or are thinking about, becoming self-employed and running your own small design firm.
Before making that leap, you’ll want to give some thought to the costs involved in running a small design firm and the type of fees you can expect to earn.
In Episode 19 we covered the right (and wrong) way to calculate hourly charge-out rates so today we’re going to look at some of the resources available to help small design firms earn more profit.
When it comes to earning more profit there are really just 3 schools of thought;
1. Design Professionals can increase their design fees and hope that demand remains constant.
2. Design Professionals can reduce their service costs, maintain their design fees, and hope that demand remains constant, or
3. Design Professionals can activate a combination of both strategies via a new, more efficient, pricing model.
Most of my posts typically focus on option 3 by discussing new, more efficient, pricing strategies that allow Design Professionals to increase design fees and reduce service costs via a new pricing model.
However, today I would like to delve deeper into option 2 So, let’s get started:
(Note: To help you with your fee proposal and negotiation strategy we’ve created a free Starter Kit packed full of useful resources):
As one of the founding fathers of the United States, Benjamin Franklin once wrote:
“A penny saved is a penny earned!”
The Most Expensive Cost to your Small Design Firm:
Ask any Design Firm owner and they’ll tell you that the biggest cost of doing business is by far labor. According to information published by Paycor (“The Biggest Cost Of Doing Business: A Closer Look At Labor Costs”, 8/7/18), labor costs can account for as much as 70% of total business expenses.
Why is labor so expensive?
The reason labor can be so expensive is that there are so many costs involved with hiring the right people. For example, in many countries like the United States, employers are responsible for paying a whole range of fees on top of the employee’s salary requirements.
This includes; social security payments, unemployment benefits, Medicare fees, workers compensation insurance, healthcare coverage, dental plans, and disability insurance.
There is also the added cost of providing employees with a place to work including computers, desks, chairs, telephones, software licenses, office space, and utility requirements.
Plus, employers must manage their full-time employee(s) effectively by keeping them busy for approximately 40 hours per week, while allowing for holidays and vacation time.
The need for good management can consume more of the employer’s time, and cost more money than first anticipated.
So before hiring anyone give some thought to how you can address the number one cost to your small design firm. Here are our recommendations:
#1 Virtual Assistant (VA)
If you think you may need assistance to run your small design firm why not leverage your western dollars and start by hiring a virtual assistant?
VA’s are a great way to address tasks that aren’t location specific but still need attention. For example, we’ve hired VA’s to help us with, researching, writing, marketing, social media posting, and many other business development activities.
VA’s can be a great economical solution because typically they:
1. only charge for the hours used,
2. provide their own office and equipment, and
3. can be very economical typically only costing a fraction of the equivalent local hire.
The success of any VA hire hinges on the employer’s ability to communicate the tasks clearly and effectively. So be sure to start with small, simple tasks, and only increase the workload once the initial commitment has been completed to your satisfaction.
VA’s can be found online with a simple google search, or through a freelance platform like www.upwork.com.
#2 Telephone Answering Services:
It’s the 21st century which means that many of your Clients won’t be using their phone as much as they used to. As a small design firm, paying someone to sit at the front desk and answer the phone may not be the best use of your financial resources.
Instead, sign up to one of the many online telephone answering services that are now available. This is a great and affordable way for small design firms to avoid surprise phone calls while managing their time more efficiently. Plus all your calls will be answered, 24 hours per day, 7 days per week, without any interruptions.
Plans start at around $1 per day depending on the number of calls you receive and the type of information the answering service collects. We work with both answer4u and Answer America, however, there are many service providers available, so be sure to shop around before choosing your service provider.
#3 Office Sharing:
Trust me on this one, (We learnt this lesson the hard way) office space can be very costly for small design firms and usually requires a large financial commitment upfront in the form of a 12-month contract and deposit.
Plus, you’ll have to furnish the office, and (being a Design Professional) that won’t be cheap! You’ll want the best, high-end, designer furniture, that money can buy, costing you valuable time and money.
Rather than enduring the hassle and financial burden associated with finding, renting and furnishing your own office space, why not sign-up to an office share scheme like WeWork, Industrious or Your Alley.
Not only will the set monthly fee give your finances more stability, but these office share schemes can be stunning plug and play environments, that scale to your business needs.
They usually include flexible leasing terms, a range of office space types and sizes, and (most importantly) an on-demand social network to help you though those lonely, early days, of self-employment.
If you’d prefer something a little less corporate check out Craig’s List, Gum Tree, or Google for a list of office share schemes near you.
#4 Outsourcing Specialized Work:
You’re probably familiar with the concept of outsourcing, but have you ever tried it? We have, and we found that outsourcing visualization work was one of the best ways to ensure a high-quality, cost-effective solution, delivered in a timely manner.
Not only does the work get completed overnight (in most cases) but it’s also much more economical than having the work completed in-house. In fact, our firm was so successful at outsourcing visualization work that this service became its own profit center within the office.
Once again UpWork is a great place to start your outsourcing journey and don’t forget to include your management, overhead and profit costs when pricing outsourced visualization work for potential Clients.
#5 Calendar Automization
As a sole practitioner you’re going to want to automate as many parts of your business as possible so why not start with your calendar. By using calendar atomization software services such as Calendy you can automate the booking of meetings and phone calls, and sync them with most business calendars including Google Calendar and Outlook.
This, along with a telephone answering service, will help you avoid the costly expense of hiring (and managing) a dedicated company receptionist or personal assistant.
Although the Architecture and Design Industry has long been a very traditional place to conduct business, times have changed.
For the modern firm to thrive they need to be able to adapt and participate in a very fast-moving and highly competitive business environment.
Part of this change requires shrugging off traditional office norms and utilizing the latest technology and amenities to streamline the delivery of design services.
Let us know what you think:
Do you; have a Virtual Assistant, use a telephone answering service, belong to an office share scheme, outsource specialized work, or have an automated calendar? Let us know in the comments section below by saying “Yes” if you do, or “No” if you don’t.
Don’t forget to Like, Subscribe and Share:
Please share this post with your coworkers by using the share buttons below.
Ready to Implement a multi-fee Pricing Strategy?
Cutting costs and saving money is one of the steps required to run a profitable design firm, however, creating a multi fee pricing strategy is still the most important step of all.
The following is a list of resources available right now to assist you with creating your own multi-fee pricing strategy:
1. Design Professionals Guide to Negotiating Fees + Contracts:
2. The Ultimate Fee Proposal Workshop (Continuing Education Points available):
3. Mini Video Series: