Today I want to share with you a simple 3-step strategy for calculating design fees that I’ve used with signature ‘star-chitects’ and sole practitioners alike!
I’ve also included a list of accounting software and design fee benchmarking resources to help you with the process. So let’s get started:
Calculating Design Fees - 3 Step Strategy
Step 1: Estimate your cost to complete the Work.
You may be surprised to hear that, according to a recent UK workplace study, the average office worker is only productive for 2 hours and 23 minutes per 8-hour workday.
So as a starting point, it’s essential that you have a realistic idea how long it may take, and therefore how much it may cost you to complete the project.
Your cost estimate should include your time, overhead and profit. When it comes to estimating your time don’t forget to include a healthy contingency to cover inefficiencies in the workday.
For example, time lost to answering phone calls, taking breaks, attending meetings, communicating with coworkers, and social media distractions, to name a few… don’t forget, you’re only productive for 2 hours and 23 minutes per day!
(Note: To help you calculate your design fees we’ve created a free Starter Kit packed full of useful resources):
Make sure you record the information in a spreadsheet so that you can compare your original estimate against the end result once the project is completed. You’ll also need to refer back to your estimate should you face heavy design fee negotiations.
For details on how to set-up and complete a resource cost calculation please see the following eGuide which is included for free in the Starter Kit: The Design Professionals Guide to Fees + Contracts.
Step 2: Compare your estimate against previously completed Work.
Yes, successful firms keep an account of how much time each team member dedicates to each project.
This approach not only helps track the financial success of the project but also helps provide valuable data to help guide future proposals.
If you’re not currently doing this, it’s time to start. Here is a list of some of the most common Architecture and Engineering accounting software programs available on the market:
· BQE ArchiOfffice
· BQE BillQuick
· BST Enterprise
· Clearview InFocus
· Deltek (Axium) Ajera
· Deltek Vision
Step 3: Compare your estimate against industry benchmarks:
There was a time when many Institutes around the globe published indicative fee scale charts. These charts gave both Architects and their Clients an indication of how much Design Professionals should charge for their design services.
Sadly, in many locations, these publications were deemed anti-competitive and have since been abolished.
All is not lost however, here is a list of organizations that publish financial/fee data that may be used to assist you when reviewing your fee estimates:
Design Fee Resources:
American Institute of Architects (AIA) Compensation Reports:
Architectural Institute of British Columbia (AIBC) Tariff of fees for architectural services:
UK Fees Bureau:
The South African Council for the Architectural Profession (SACAP):
Once you’ve successfully completed all 3 steps above it’s time to review the results. Hopefully the initial design fee estimate (calculated in step 1) lines-up with the numbers derived from steps 2 and 3. If it does then your work is done. If it doesn’t then you’ll need to go back to step 1 and check your calculations.
Keep tweaking your estimate until you are satisfied with the results. Once again if you need help setting up your estimate check out the eGuide provided for free in the Starter Kit (Click Here).
Let us know what you think:
Do you know of any other design fee publications that other Design Professionals may like to hear about? Let us know in the comments section below.
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Ready to Improve your Fee Proposal skills?
This has been a very quick look at how to estimate design fees for design services. The next step is to learn how to version your services so that you don’t offer just one fee, but instead, you offer Clients a range of different fee and service options.
There are many benefits associated with fee and service options that are discussed in detail in the Design Professional’s Guide to Pricing Design Services. However, we’ll also be taking a detailed look at the strategy of fee and service options later in the series.
The following resources are available right now to help you become your firm’s best fee proposal writer:
• How to Respond When Asked to Lower Your Design Fee (Blog):
• Design Professional’s Guide to Fees + Contracts (eGuide):
• The Ultimate Fee Proposal Workshop (CE/CPD points available):