profit planning for architects

Profit Planning for Architects

We all work to make money, and aiming for maximum profit seems extremely obvious. 

Exactly for that reason, most beginner architects don’t take profit planning seriously – it’s the type of activity that seems too basic to dedicate time to. 

As a result, thousands of architects don’t earn as much as they can – and face challenges like cashflow issues.

Let’s go over the basics of profit planning for architects.

Profit planning for architects

Profit planning helps determine a set of actions necessary for achieving your profit goals and targets.

Profit planning is rather an art than a science, – there are no laws set in stone. Each architect will need to develop a profit planning process that works for them and their business.

However, there are certainly best practices and strategies that make sure you are always on track with your profit goals and know where you stand. Let’s go over them.

Set clear profit goals & make them high

Profit goals and objectives are central to your profit planning process. You need to have a clear picture of where you are going.

The general rule of thumb is to set ambitious profit goals.

Once you target really high, falling short may seem like underperforming, but in the end, you still get paid a decent amount.

Most often you will have more info to work with after your first year as a standalone architect. 

If you are just starting out you can set your expectations by working with numbers like the average architect’s salary, your dream income, and your peer’s income. 

This article on how much architects make can help you navigate the market.

Know your expenses well

Make sure to include all of your expenses in your profit plan.

That includes contractors, software tools you are using, computers and devices, gas for site inspections, and everything else that needs to be accounted for. 

Your taxes are also your expenses, which means you may take over a year to get to know your real numbers.

Things like payment processing can also eat up their share, so always try to optimize that too (we offer GoCardless and Stripe integrations for making payments from architecture clients as easy and cheap as possible)

Know your main cash cows

This concerns both services and client types.

Architecture is not a linear or uniform activity. Different types of clients bring you different levels of earnings, the same goes for services.

Understanding what brings you the most money will help you make sure you are focusing on the most profitable services and niche markets.

While doing profit planning for the next year you can decide to niche down and pick a better market for your services. 

Niching down helps you get to bigger money faster because you build up your expertise and workflows for a particular type of project, and new clients pick you because you specialize in exactly what they need.

PlanMan helps sync your FreshBooks accounting and Sage invoicing for a clear picture of all things that make you the most money.

Know your margins – and always work to increase them

It’s essential to know your profit margins like ABC. Margins are the amount by which your revenue exceeds all your expenses.

Most architecture firms worldwide have a margin of just 6%, but you should aim to beat that. In fact, structure your business in such a way that your profit margin is as high as possible.

There are two main ways to increase your profit margins – one is to charge more and the other is to minimize expenses.

If you set increasing your profit margin as a goal, you will be able to find a lot of techniques for that – e.g. using smarter software tools, outsourcing as much as possible to remote assistants and freelancers, being smart and strategic about your hourly rate and billing, and a lot more.

How long does it take to become profitable?

It’s pretty obvious that you need to maximize your profits as early as you can, so you need to be profitable fast.

However, the reality is that 20% of businesses fail in the first year, 45% in the first five years, and 65% in the first ten years. The danger of making bad decisions is absolutely real, which makes profit planning even more important.

Ideally, you need to be profitable from the start. You can’t afford to run around looking for funding and loans in an economy this bad. The best option would be to start lean, focus on boosting revenue, and be smart with your expenses.

PlanMan is the tool that will help you take care of all architecture project management tasks, including document management, assistant, client, and co-consultant communication, bookkeeping, and sales. This allows you to focus on the big picture and scale your operations.

The subscription to our platform is going to save you a lot of money in the future, so go ahead and sign up for your trial today!