Small Firms Ideas Exchange

Hey, ok, I get it, I guess - but does this really work?

Great idea, but will this work over the long run?

I was hoping to obtain hard dollar figures for design services (hourly) by current fees.

I work on an hourly basis because my typical clients can relate to it more easily. Most of my clients are brought to me by builders and are not hugely wealthy. I seem to spend a disproportionately large amount of time on low budget projects. I tell people to estimate x% of the construction budget although my fees are almost always lower than this. Individual projects and clients are much too different to be able to provide an estimate up front. I do add a small percentage (1 to 2%) of construction cost on new homes and more complicated projects. This comes due after pricing and before construction and serves as my performance bonus.

I do quote an "hourly rate for comparison..." but for CCA I quote a fixed fee "per trip charge," not hourly. So if I want to/need to stay around a while longer to really figure out what's going on, I can without the owner constantly looking at his or her watch because I'm on the clock! So far it's well received; clients like knowing it's X dollars per site visit. They can tie that to the construction schedule and choose when they have me visit.

Bud is SO right ! For the small firm, charging hourly gives the wrong impression. Our firm only charges hourly for CA and uses fixed fees for other phases.

Interesting conversation!!

I, too, dislike charging hourly as it implies that the only thing I have to sell is time. While what I really want to sell is the value of how a well designed project improves the client’s life, etc. So when a prospective client asks, “How do you charge?” my reply is that the fee will be value based rather than an hourly rate or some arbitrary percentage of construction. Of course, this inevitably blows the prospective client‘s mind so a little explanation is in order.

For example, we’ll talk about the investment that they’re about to make and how, for most of us, our home is our single largest asset. This leads to a discussion about how we’ll want to “get it right.” We’ll want to explore options and possibilities rather than settle for the first thing that comes to mind. Part of this discussion is to talk about their living patterns and how these living patterns will change over time. And how we’ll want to explore how their home (I only work on single-family residential projects) can accommodate these changes. And I’ll explain that there’s an integral relationship between budget, cost and design. I’ll explain that design is a series of decision-making activities and that it’s my job to offer potential solutions at each juncture and identify the relative pros and cons of each solution. I often find that the client opts for the solution that makes the most sense for them, not necessarily the solution that costs the least amount of money.

And yes, there are those (prospective) clients who think that this is all “fluff” and a way to drive up costs. To these folks you have to explain that the design decisions have to be made sooner or later and that it’s better to make the decision when they’ve got time and have more control over the outcome.

I tend to like invoicing more frequently than less. This way I’m not playing catch up. And a few years ago I started to accept credit cards for payment. Though there is a fee for this, it can really help with cash flow (and the fee can be built into the fee the cient pays). Most people e-mail me back that it’s okay to charge to the same credit card within a few hours of my e-mailing an invoice. I’ve toyed with requiring clients to provide credit card information up front and that the invoice will be charged to the card if I don’t receive a check in the allotted ten days. I just haven't done that yet. And the side benefit to the client is that they get points by paying with a card!

Hey Susan, I like the "streamlined project schedule." When I'm working on a residential project (or a small, tenant fit up commercial), I typically have two or three client interactions/milestones (i.e., "Pay Me" meetings) only. First at project kick off (Concepts & Retainer), second at 50% CDs and third at turn over permit documents. I still "do" DDs and full t-up for CDs but I don't spend the time to pour over all those details with clients. You're right, they do think it's a lot of “fluff” that they might want to omit (paying for). But to create architecture, I think it's really needed. How can you not do/think about the issues? To span the gap between what they "see" at our meetings and where I am in the design, I might fax or e-mail some unspecified progress work that I need their input before continuing on. For the situation you describe, I’d be tempted to add a (small) section to your proposals reminding/reinforcing the additional value you bring to the table – in short, why good design is worthwhile. In the canned “firm info” sheets I give to prospective clients, I remind them it’s easier to consider many options to come up with the best one on paper before it’s half-way built and then realize that the wall really needs to be moved 36” that way. I also try to steer away from justifying my time estimates on how long things will take. I typically give a fixed fee for the whole service. If a breakdown is asked for, I’ll give “Design, Const Docs, CCA” even though I have 5 milestones I use internally.

Bigger question: how do you execute your work to stay on track and not exceed your fixed amounts?

Thanks for your remarks, Louis...and thanks to you for creating the topic, Lisa!

I agree with you, Louis, and I tend to price my proposals from all three too: 1) amount of time, 2) degree of difficulty, and 3)overall size/scope of the project. Often I'll calculate hours, then compare my estimate against a percentage of project cost.

I also have a bit more streamlined project schedule than the traditional 5 phases: basically I divide my services into Schematic Design, Construction Docs, and Construction Administration. The client doesn't know or care whether I have 5 phases of work, and I think the average homeowner/client is less intimidated by so much "process."

Since I work from my home, my overhead costs are very low, and my fees tend to be a bit lower than colleagues. I have worked in both BIM environments and AutoCAD (currently in AutoCAD), and am trying to move myself back into the BIM world (ArchiCAD) which will require a re-learning curve on my part...all while working alone and trying to be productive from a billable hours standpoint.

I'm wondering where you are located Louis? Here in Florida fees tend to be lower, as are salaries, and the builder is king....architects are often seen as unnecessary in the residential realm, (builders hire draftsmen who then have engineers "plan stamp"...yes, it's illegal, but very common in the residential market). So I have to compete with that, which tends to make my fees lower than most architects...but higher than the draftsmen. I do a great deal of historic renovation/preservation work, so that helps because it's not a common specialty around here, and the projects are often too difficult for the average draftsman.

With the tightening economy, people are really thinking twice and looking hard at my proposals, so everyone's input is greatly appreciated! :)

I use hourly fee calculation as a worst case scenario. I really dislike it because I use a BIM program to generate the design and documentation (Vectorworks 2008). It is much more efficient IMHO than Autodesk products. I can often do things in half the time they would take in plain vanilla Autocad and 25% less than Architectural desktop. (These are my estimates. Your mileage may vary. Results made on a Mac.) So if I work really hard and really efficiently, I get less money. Or, I can conversely drag the job out unnecessarily and get more money but lose some integrity.

Therefore, I try to base my fee determination on the value I create, not on the time it takes to create it. This means I have to do careful tracking of the scope to make sure I get compensated for scope creep. I try to include an allowance for minor scope creep into the initial numbers so I can be a nice guy. Can't give away the farm though.

So what is the value of my work? In the past I have thought of it as a percentage of the construction cost and adjusted based on the level of detail required in the project and its overall size. Larger projects had lower percentages and smaller projects had higher percentages. Now I am of the opinion there must be some other way to assess the value I create for the client. I hope it leads to larger, not smaller, fees.

I suspect that it will fall somewhere in the realm of creating a continuing service package with regular retainer fees so that the client is always engaged and the revenue stream though smaller might be continuous. So lifetime services get defined and built into the contract as a final ongoing phase. If any one else is doing this, let us know how it's working.

In my ideal scenario the client would pay more because design enriches their life. I try not to laugh when I say that because too many people see architecture as a commodity bundle of services now. Good design is not a commodity to be priced down. It is a natural resource to be treasured and appreciated.