It’s all about focus.
Making your architectural practice more profitable is actually quite simple. All you need to do is focus on the right kind of projects, the right kind of clients and ensure your employees are productive in the right way.
Sounds easy, but determining what “right” is for your practice profitability has not always been easy nor obvious.
However, if you did have the answers to these 3 questions, you would be able to make quick and accurate evidence-based decisions that would drastically improve profitability.
The good news is that you don’t need specialist financial skills. Nor do you need to sink hundreds of hours into analysis. You simply need the Fresh Projects Financial Management software, which will give you the real time answers to these questions (in just a few clicks):
- What projects are profitable?
- Which clients drive growth?
- Are employees working effectively??
The proof is in the profit
Knowing the answers to these fundamental questions will give you and your practice the opportunity to focus on the projects, clients, regions and sectors that are most profitable. Equally, you can easily identify and cull loss-making ones.
Let’s explore how.
Key Question #1: Which projects are profitable?
Every practice has its natural strengths based on the skill and aptitude of your staff. Which means that certain kinds of projects will suit your practice better than others. For one practice, residential work might fit and flow easily, but for another, commercial development may be better suited to their structures.
The proof is in the profit.
For example: when a practice generates their Project Profitability report (via the Fresh Projects software), they’ll quickly see that whilst commercial development fees may seem most attractive, in actual fact they lose money on these types of jobs as they require greater effort (i.e. cost) to deliver. Conversely, their residential projects, despite lower fees, show a healthy and consistent profit margin. Armed with this insight, the practice can take the decision to focus more on residential projects and grow their overall practice profitability.
Key Question #2: Which clients drive growth?
We all know the situation, the loudest squeaking wheel or the client with the biggest budget is the one that demands our attention. But that is no indication of how profitable the client is nor if they are driving practice growth.
Again, the proof is in the profit.
With a single-click Fresh Projects customers can generate a Client Profitability report and instantly see which clients are profitable and which clients the practice is in fact paying the client to work for. Such insight empowers a practice to stop working for profit draining clients, becoming instantly more profitable. This frees up (loss making) resources to allow you to focus on growing repeat business from profitable clients.
Key Question #3: Are employees working effectively?
This isn’t about knowing who is working the longest hours. It’s about understanding if staff are working optimally. Since time is the most valuable resource for any practice, knowing how people spend their time is essential to navigating better profits. In fact, staff utilisation is probably the most important driver of profitability - and the easiest way to erode profits if not monitored effectively.
You guessed it. The proof is in the profit!
Fresh Projects customers generate an Employee Utilisation Report (based on timesheet data) and instantly identify employees that are not working effectively. Of course, different roles will have different optimal utilisation goals, but it’s crucial that your fee-earning staff are in fact spending the majority of their time on fee-earning work (and are not bogged down with admin!). This real time view enables practices to reassign tasks and optimise employee utilisation before profit generating time is lost.
Focus on profit to become more profitable.
It’s a jarring sentence to read. One that doesn’t comfortably sit within the architecture and design world. But the truth is unless practices are profitable, the opportunity to continue doing what we love is short lived.
Hundreds of architecture practices, managing over 60 000 projects across 4 continents, are optimising their profitability via the Fresh Projects financial management tools. Through using a single integrated system for pipeline management, project budgets and fee calculations, timesheets, expense tracking, forecasting and billing- these practices are reducing their administrative burden and improving their profit trajectory.
If you’d like to explore how Fresh Projects can make a difference in your practice, please book a 30min online demo here.