

Today I want to share a quick 3-Step Guide for calculating hourly charge-out rates for Architects and Design Professionals.
Let’s start by reviewing the annual salary requirements for the average Architect.
According to America’s Bureau of Labor and Statistics, Architects earn a median salary of $79,380 per year (May 2018).
So what would be the hourly rate for self-employed Architects (or Interior Designer) who wants to maintain an annual salary of $79,380 per year?
There is a common misconception in our industry, that to calculate an hourly charge-out rate all you need to do is take your annual salary and divide it by the total number of working hours.
For example, if you’re earning $79,380 per year and you’re working a 40-hour week, then you may believe that your hourly charge out rate will be:
Unfortunately, this calculation fails to take into consideration two very important factors; the cost of doing business and the number of billable hours (not workable hours).
So, let’s calculate the cost of doing business and the number of billable hours:
Start by adding up all your business expense costs including rent, furniture, utilities, services, equipment, supplies, accounting fees, legal fees. I.T. fees, software fees, industry membership fees, insurance costs, professional membership fees, certifications, advertising/marketing costs, and taxes (Don’t forget that company and payroll taxes could be significant depending on your legal structure and location).
For the sake of this example, let’s say your business expenses equate to a very modest $20,000 so your total cost of doing business will be:
Should you need any assistance estimating these costs try consulting with either your tax accountant or a self-employed, industry peer who is willing to share their business costs with you.
Make sure you discuss your tax requirements with a qualified tax professional. Tax costs can be significant so it’s important that you understand how significant as early as possible. Also, don’t forget to add a percentage to cover profit. This could be any amount but for this example, I’ve chosen 15%.
(NOTE: To help you get paid more for your time, effort, and ideas we’ve created a FREE Fee Proposal Mini-Series. Click the image below to learn more)
The next step is to calculate your billable hours. Billable hours are the hours worked after you have deducted for non-billable activities such as; vacation days, sick days, public holidays, and inefficiencies in the workday.
So, the total hours you can invoice will be 2,080 hours less the 240 hours you’re not working.
This equates to 1,840 billable hours. Unfortunately, however, you still need to consider the time required for; coffee breaks, lunch breaks, bathroom breaks, answering phone calls, respond to emails and attending meetings.
So, we also need to consider an efficiency factor. Let say you’re only efficient for 60% of the time you’re working:
Now that you know that the total cost of doing business is $114,287 and the total number of billable hours per year is 1,104, you can calculate your minimum hourly charge out rate:
Therefore, the minimum hourly rate that a self-employed Architect would have to charge to achieve an annual income of $79,380 would be $104 per hour.
Please note that this is a minimum, you’ll want to consultant with a your tax accountant about your tax requirements as they can be significant and will effect your hourly rate.
When calculating your hourly charge out rate it’s important to be aware of what is happening in your industry both locally and globally. So be sure to compare your estimate against the fees charged by competing professionals. This can be achieved by:
• Asking peers in your industry
• Checking online salary surveys
• Researching average salary information publications
• Checking freelancing platforms
This has been a quick look at how to calculate your hourly charge out rate.
Although hourly rates are important… it’s even more important to learn how to price your design fees.
We’ve developed a Fee Proposal Mini-Series that’s currently available FREE of charge. During the mini-series, we’ll show you how not to price your design service and our recommended approach. We’ll be discussing the 3 biggest mistakes that Design Professionals make with their fee proposals and how to fix them.
To learn more visit: https://blueturtlemc.com/fee-proposal-mistakes/
Our team of experts will create a one-of-a-kind, custom fee proposal template based on the specific needs of your firm and your clients.
The custom template will be delivered in either MS Word or InDesign and you’ll have fully editable rights. You may use the document on all your future fee proposals.
Building a design business can be a lonely journey… you don’t have to do it alone.
The Mastermind Meetings are a great opportunity to:
Helping you build a strong and financially sustainable design business as quickly as possible.
Once we’ve completed our 15-point check on your fee proposal we’ll confirm our findings in writing.
We’ll then issue you with our report highlighting our findings and how to fix them. Once we’ve reviewed the report with you (via zoom) we will set about creating your new custom proposal.
Our team of experts will review your current fee proposal strategy to see how it stacks up.
We’ll check it against our 15 criteria and find out where your strengths and weaknesses lie.
We’ll show you what you’re doing right, what you’re doing wrong and where you can improve your current approach.
The Live Q&A sessions are where you can ask questions, and get answers from our team of Fee Proposal experts.
The Live Q&A is conducted via Zoom Webinar, every other week, and is available to all registered Workshop members.
Each session is also recorded and made available to Workshop members.
The Coaching Calls are a great option for those Design Professionals who would like the benefit of a fee proposal expert on their team without the cost of hiring another employee.
During these weekly Coaching Calls we will check your progress, answer your questions and provide accountability – helping you to stay on track and achieve your goals.
Your Starter Kit is on its way! Check your inbox.
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USA:
1 AIA LU / hr (9.5 total),
9.5 IDCEC HSW CE hrs (suitable for ASID, IIDA & IDC Members & Registered Interior Designers in states that require HSW CE hrs),
1 AIBD Primary Credit per hr (9.5 total),
Canada:
9.5 AIBC Core Learning Units,
9.5 Structured Learning hrs,
9.5 IDCEC HSW CE hrs (suitable for IDC Members).
UK:
9.5 CPD hrs for Registered Architects,
9.5 CPD hrs for Interior Designers: BIID Approved.
New Zealand:
90 NZRAB CPD Pts.
Australia:
1.0 Formal CPD Pt / hr (9.5 total) for Registered Architects
For other countries, professions or memberships please contact Emily: emily@blueturtlemc.com
Put the lessons into practice!
The Template Package includes:
✔️ Multiple Options Fee Proposal Template
✔️ Small Works Fee Proposal Template
✔️ Sub-Consultant Agreement Template
✔️ Non-Disclosure Agreement Template
✔️ Joint Venture Agreement Template
Templates are delivered in MS Word format and come with a multi-use license – no annual renewal fees. Offered at a 20% discount when purchasing with your Fee Proposal Workshop registration.
Don’t want to take your own notes? The eGuides provide a detailed summary with additional studies and examples. Great for sharing what you’ve learned with colleagues, or referring back to as a refresher.
The eGuide Package includes:
✔️ The Guide to Design Fee Psychology
✔️ The Guide to Design Fee Negotiations
✔️ The Guide to Pricing Design Services
✔️ The Guide to Writing Effective Fee Proposals
✔️ The Guide to Fees & Contracts
Offered at 30% discount when purchased with the Fee Proposal Workshop registration.