Master the Business Side of Your Architecture Firm

Architecture firm principals are the Chief Financial Officers of their firm, whether they want to be or not. Sure, they may delegate that authority to someone who knows more than they do about balance sheets, income statements and financing, but a firm's principals are ultimately responsible for the decisions made and actions taken in their organization.

For many small architecture firms, principals don't have anyone to guide them for financial and other business matters. In some instances, firm owners use other employees to assist with day-to-day operations.

Jennifer Pullinger writes in the "Architect Magazine” that Belmont Freeman, FAIA, of Belmont Freeman Architects in New York City, "delegates some of the firm's financial management to individual project architects.” Freeman also explains in the article that he creates "processes that allow them to continually examine key metrics for their firm. It's good to have an associate in the office to discuss the finances of different projects, how to staff them and how to push them forward."

As Freeman demonstrates, principals don't have to feel lost when navigating the business-side of an architecture firm. Here are some key areas that a principal must work on to get a better handle on the firm's day-to-day operations.

1. Project Management

Software programs such as ArchiOffice are able to create reports that show different metrics, such as utilization rates and profitability, for each project phase. While “Analysis”, "Design" and "Development" are three of the more widely-used terms to identify different project phases in the architecture industry, you can be creative with how you identify each section of a project's assembly line depending on the software program your firm uses.

The value in tracking projects in this much detail is looking at each phase as a "mini" project. While the overall project may come in under budget, there may be one or two phases that didn't meet expectations. Managers can then zero in on these particular areas to see what areas need improvement.

2. Staff Allocation

After a project's original scope has been agreed upon by both you and your client, the task of assigning certain tasks to specific employees can begin.

For managers, it’s important to know which employee is working on which phase of a project. In ArchiOffice, you can allocate underutilized staff to projects phases that may need more man-hours. Also, you can give permission to inexperienced staff to work on certain phases and tasks but not others.

Employees find it very helpful to organize all the project phases and tasks on their current to-do-list. Now, time is spent on actually doing billable work rather than trying to track down a supervisor to find out which projects should have priority.

3. Financial Planning

Tom Lenchek, AIA, principal of Balance Architects in Seattle, says the secret to his firm’s success is continual monitoring of several financial metrics, including gross billings per month, gross income per month and salary and wages expenses.

“I track a few key indicators that give me an indication of where we’re heading, how we did last month, where we are probably headed next month, and I just track those every month,” Lenchek says in Pullinger's "Architect Magazine" article. “Over a number of years, I can get a feel for where things are at.” Like Freeman, Lenchek also creates processes that let others in his firm easily crunch numbers and quickly analyze data.

Furthermore, don't let your lack of business or management experience hinder your firm's success. By making use of reports on project profitability, staffing, and finances, you can gain more knowledge about your firm’s daily operations in order to improve its financial health.

If you would like to learn more about ArchiOffice or schedule a walk-through demonstration today, please call us at (855) 687-1028 or email us at sales@bqe.com.