The Architect/Designer’s Paradox
Which approach comes first for you?
Business Strategy #1: This is how we work, therefore this is what we should get out of it.
Business Strategy #2: This is what we want to achieve, so how should the practice work, to get there.
What’s the difference?
In business strategy #1 you unintentionally but systemically set up limits on what you can do (and that’s all you will do) and you are rewarded accordingly with outcomes of narrow bandwidth. You’re playing the Short Game and it’s unsustainable.
In business strategy #2 you set out what you want and build a practice capable of delivering it. This is your Long Game and it’s more demanding.
90% of small practices play the Short Game
They focus on business strategy #1.
Why? Because it’s easier to react than invest in setting your agenda, the expectations are lower and it requires less time thinking about how to overcome ‘stuff we were never taught’ like how to run a business, its financial management, quality systems, resources management, marketing, sales – it’s easier, less challenging, comfortable and offers the opportunity of martyrdom* at any social gathering.[martyrdom* – a display of pretended or exaggerated suffering to obtain sympathy]
What about the other 10%
They continually improve and grow (either size and/or capabilities) because they apply their design thinking to the other skills they need but were never taught. They set out to develop an understanding of what they don’t know, then create the systems and processes needed to deliver their desired outcomes and make them a reality. They create value through synergies between those systems.
Time paradigms – everyone’s stumbling blocks
Small practices view their projects in two separate time paradigms.
In one paradigm, their fee agreement sets out the services they will provide, in return for a defined fee (a finite amount of money) as compensation for the time, skills, experience and knowledge being provided.
In their other paradigm, they will spend any amount the time necessary to provide the best possible service. That’s their promise to the client and their project.
Here’s the problem
Both paradigms operate independently, there is no dynamic synergy between them. Neither learns from the other.
There’s no common denominator that can link them. Because neither uses an accurate model to convert percentage or fixed fees into hours (this excludes work done at hourly rates). Therefore, time spent on projects can never be measured against the fee, so during the project the practice has no idea whether they are over committed or under committed.
At the end of each month (or a stage), they look at the time spent and guesstimate what they can invoice the client for. Then they look at the bank balance and pay the bills that must be paid and hopefully there’s something left over, so they might be able to pay themselves. It’s the Short Game and is not a sustainable business – it’s business strategy #1.
What’s the alternative?
Migrate to Earned Value Management
It’s a project management technique for measuring project performance and progress in an objective manner. For architects/designers it’s measuring time and services performance by comparing four key values.
- Planned Value – the fee for each service stage turned into hours available.
- Actual Cost – how much time has been spent on each stage.
- Earned Value – how much of the required service has been completed in the time spent.
- Forecast to Complete – how much time is required to complete any incomplete stages.
There’s a solution for your migration to controlling your practice
There is a simple step by step process for creating a dynamic report on your Business Sustainability, for those pursuing business plan #2. It only requires you to use the information you already have – your time tracking of your people, projects and financial invoicing and outgoings. It will calculate and apply your common denominator (your Universal Hourly Rate UHR) which converts your fees into hours.
It’s not a guess, it’s calculated on your data. It’s also dynamic, so if there are changes to your data then the UHR will reflect it.
Your Universal Hourly Rate is central to establishing your Earned Value Management solution.
The Offer – your opportunity
As a business coach for architects and designers, we offer the ‘Business Sustainability’ workshop as a stand-alone event.
Some of what’s covered includes:
- Principal’s salary package performance
- Monitor and control of provisional expenses
- Meaningful management accounts
- Clarity on revenue streams
- Real time ‘Earned Value’
- Forecast practice sustainability
- Establishing your Universal Hourly Rate
- Performance of your team
- Real time performance of each project
The workshop is over 2 hours via Zoom which includes:
- Pre-workshop task (collecting your data on existing projects, staff and your expenses and invoicing).
- ‘Business Sustainability’ workshop
- Post-workshop tasks
Outcome: Your Business Sustainability KPI report (containing pre-set algorithms) that you can update weekly with data you currently collect and will accurately establish your Earned Value position.
This workshop can be done as a stand-alone event or extended into ‘Your Next Level’ Programme.
On going support and mentoring is available.
The next workshop is Wednesday 22nd March, 2023 9:30am (AEST)
The cost is $1190 +GST
Contact Simon here for a chat, if you wish to set yourself up to monitor and control your Business Sustainability.
Footnote: Beware of the ‘mirage’ of Hourly Rates
If you are charging ‘Hourly Rates’ to complete any project stage (or part thereof) you will be making a profit on every hour charged out.
Beware, the inherent ‘hourly rate’ profit often disguises failing Earned Value performance. What should have been a windfall, quickly becomes a struggle to break even.