architecture kpis to track

Architecture KPIs To Track in 2023

When you are trying to get your architecture practice off the ground, it’s imperative that you know the most important numbers at all times.

KPIs are key performance indicators that help you measure the success of your practice. Some KPIs we’ll list here are relevant for architectural practices of any size and are a must for tracking. Others are optional since they are more tailored to enterprise-level architectural firms.

Why use KPIs

KPIs help you structure the data about your business. You could try and track the performance of your practice without any KPIs, but you may get overwhelmed by numbers that are not that important, at the same time missing data that directly affects revenue.

This article will give you several ideas for numbers that are good indicators of the health of your business.

Lead vs lag KPIs

First and foremost, there are lead KPIs, that is, numbers that deal with the events that will happen in the future, and lag KPIs, figures that describe the past. 

The number of submissions you get through your website contact form in a month is an example of a lead indicator, since it only precedes any work or revenue. 

On the other hand, monthly revenue is an example of a lag indicator since it deals with something that already took place in the past.

You need a healthy mix of lead and lag KPIs to see the full picture.

Financial KPIs for Architecture firms

Revenue

Basically, that’s the monetary value you bill each month, everything that comes into your account. You can have that number handy in PlanMan since clients can pay your invoices directly with Stripe or GoCardless and it’ll all be reflected in your project management dashboard.

This is a great ballpark figure to track; you obviously want to see the number go up – and then it gets nuanced with the next financial KPIs for architects.

Profit and profit margin

You must both track your profit as an amount of money you’re left with after paying everyone, and your profit margin as a percentage of all the revenue your practice gets.

You want your profit margin to be as high as possible, because that means you’re getting the most ROI on your time and working as a truly valued professional, rather than a service reseller.

There are two major ways to increase your profit margin: reducing your costs or increasing the amounts you charge your clients. 

Reducing your costs will make sense to a certain extent. For instance, using proper architectural project management software and hiring assistants are effective measures to cut costs that you need to adopt to grow.

However, ensure that your services’ quality does not deteriorate because that will backfire in the long run.

If you are branding yourself right, specializing in the right trends, and focusing on marketing, you will be able to charge premium pricing. Remember there are always clients willing to pay a premium for quality work by renowned professionals (or, rather, brands).

Monthly expenses

Sometimes called overhead rate – this is the amount you need to produce your work. Rent, office space, software, stationery, printing services – all overhead.

Tracking your monthly expenses and overhead rigorously helps find hidden costs to running a practice that you can optimize, thus increasing your profit margin.

Write-offs

This concerns the number of expenses above the project budget or the gross contract amount. You can’t bill these to clients, so write-offs come from your revenue.

Ideally, These should not exist, but if they do, track them to pinpoint the budgeting and quoting issue and eliminate write-offs!

Work in progress / unbilled work

This KPI deals with the revenue you’re entitled to but has not yet billed to your clients. Knowing this number will give you an idea of extra profits to expect in the period.

Project KPIs

These are the actual architecture firm-specific KPIs that every major company tracks.

These will vary depending on the size of your architectural practice and the number of employees, but when you hire several helpers, you need to start tracking these KPIs.

Overhead multiplier

This is the cost of all expenses, not project-related, taken as a share of total direct labour costs.

The formula for the overhead multiplier is total indirect expenses / total direct labour. Generally, if the overhead rate is above 175% that indicates a serious problem you should resolve ASAP.

Utilization rate

This is the percentage of hours your employees have spent on billable projects vs the total number of hours they have worked. 

This KPI is essential if your company is billing clients by the hour and indicates how productive your staff is and how well you are allocating your resources.

If an employee has worked 30 hours a week and only 15 are billable, the employee’s utilization rate is only 50%.

Utilisation rate shows if there’s room for growth – and how effective your employees are with their time. At the same time, a low utilisation rate may indicate problems in management or overstaffing.

Effective cost rate

This KPI shows how much your employees cost by using a comparison between actual hours worked and hours billed.

The formula is (Actual hours * rate) / total hours billed.

Net revenue per employee

This is a very useful metric for evaluating your growth retrospectively. 

If you’ve been hiring new employees and signing on more new clients, have you really started making more money? 

Dividing all revenue by the number of employees will help you see that.

Sales and marketing KPIs

Number of inquiries per month

Here you can track phone calls, website contact form submissions, and Instagram direct messages – your potential clients contacting you in any way. 

These inquiries don’t necessarily end up as clients – but they give you a good idea about the potential future business in the pipeline.

The number of inquiries also tells you how successful your marketing activities are. 

You can track enquiries by channel too and combined with the conversion rate you will be able to determine which marketing channels are the ones to double down on.

Conversion rate

This is the percentage of all inquiries that become your prospects and get a proposal from you.

The number is important because it helps you better understand your inquiries’ quality. 

If the conversion rate is low, the marketing channel may bring in inquiries from people that don’t match your offer, pricing, or services.

At the same time, there may be an issue in sales or communication if the conversion rates are too low or dropping.

Are you starting to get serious about measuring, automating and delegating on your way to growth? Get ahead by switching to PlanMan, the project management software suite designed for architects and with architects’ help. Sign up for a free trial now!