The Business of Design

The business of running an architectural practice requires ongoing focus from business leaders, yet is often neglected in the process of servicing clients and delivering projects. Management for Design addressed these issues recently in a series of monthly webinars for the Association of Consulting Architects.

Rob Peake investigated the main elements that make up an architectural business. Rob simplified the complexities of business management across people, strategy, business and financial management, legal, brand, systems and delivery. The webinars were presented as a 3 part series and we covered the first two foundations to building a successful architecture practice in the Spring issue of this eMag. We’ll continue to deliver content from the webinars throughout the year, encouraging business leaders to take a closer look at the foundations of their businesses and to implement some of these insights on an ongoing basis.

Links to the webinar slides are available at the end of this article.

The 10 foundations to building a successful architecture practice are:

1. PURPOSE & PLAN

2. LEADERSHIP

3. SYSTEMS

4. FINANCIAL CONTROL & PROFITABILITY

5. TEAM

6. MANAGEMENT

7. MANAGING RISK

8. MARKETING, COMMUNICATIONS & BRAND

9. DESIGN & DELIVERY

10. SUCCESSION!

Let’s take a look at Sessions 3 and 4

Session 3: Systems

Your business is a set of inter-dependent systems and your systems are “how we manage around here”. Regardless of the size and the state of your business you will currently have processes for handling most of the following operations:

• How do we manage our time?

• How do we ensure we deliver great design?

• How do ensure we deliver our scope and make a profit?

• How do we manage our projects?

• How do we ensure we are developing our people?

• How do we ensure we get paid on time?

• How do we keep track of clients, prospects and contacts?

• How do we ensure our people are fully utilised?

• How do we ensure our people and suppliers are paid on time?

• How do we manage our internal and external communications?

• How do we manage our submissions and tenders? How do we manage our financials?

As a business leader, you need to make a decision on what type of business you want to build — are you building yourself a business or creating yourself a job?! The effectiveness of your business systems will determine how your business is managed and controlled and how sustainable it is. Work out ways to get things done effectively through systems. Try to think of your business as the real product of your work! Don’t only design your projects but design your business and deliver great business outcomes along with great project outcomes.

The more you grow, the more your business will rely on systems — they are a foundation for your business and how well your practice works is directly proportional to the effectiveness of the systems you put in place.

What are the essential systems to control and build your business? Systems that:

• Align your strategic objectives

• Manage multiple marketing activities to generate work

• Attract, retain and regularly communicate with clients

• Control financials and monitor performance

• Manage projects and resources efficiently

• Keep track of clients, prospects and contacts

• Manage your business operations

• Facilitate the design and delivery of quality work

• Manage the numbers with regular reporting

Systems are the key to making your business stand out from other architectural practices you see everywhere. Prosperity, happiness, having a life outside your business depends on how well your practice functions.

And as Principals — you need to set the example — you can’t delegate this to an ‘office manager’. There is an up-front time commitment involved in setting up your business systems. Without committing the time to systems, your business will struggle to grow and has the potential to quickly move away from your key business objectives.

How do you start?

The systems required for your business can easily be identified by breaking your business into comprehensible parts, for example leadership, management, financials, business development, communications, design, delivery etc. Ask yourself how things should be done. What is our ‘way’? And develop the systems around this: the rules, the how to’s, the processes. Involve your key people throughout this process to ensure that the entire team understands the purpose behind your systems. Remember that you don’t have to re-invent the wheel. Take advantage of a number of systems that will handle project control, financial management, client management, document control, resource management and other key processes to make your life easier.

Benefits that can be achieved:

• Work is more consistent

• Less re-work

• Less time/on time

• Improved profitability with increased efficiency and scope control

• Less frustration

• More attractive and more likely to retain great people

• More effectively manage and assess performance of projects and people

• Systems create time for the leaders to be entrepreneurs

• Allows others to take responsibility for different components of the business

• Improved and consistent client management

• This is where you build the primary value in your business

Session 4: Financial Control and Profitability

How well is your business controlled? Profitability is a great indicator of success and 20% profit margin should be the minimum benchmark. Strong financial management and performance gives the business the ability to say no, to attract the best people, and also the ability to invest in marketing, technology, growth, training and other areas that contribute to faster business success. At Management for Design, we have worked with businesses that implement this strategy and achieve sustained profit greater than 40%.

The ability to understand a company from financial statements is one of the primary differences between small and large businesses. Think about how and where you will attain this capability? As a minimum you need the minimum financial controls — income statement, balance sheet and cash flow statement, and all of these need to be reviewed regularly. Business and Project Financial Control are equally important — one leads to the other. Surround yourself with experience and expertise and review your financials on a monthly basis — get into a routine and make your director meetings non-negotiable.

Your business MUST have a project costing/accounting system. The system you choose can be basic or sophisticated, but you need to know fees, costs and profit by project and monitor this regularly. Plan your projects by stage with resourcing and monitor and report your performance on a regular basis.

Project Managers, today, want to take responsibility for the financial performance of their projects — fees and resources — so develop and implement a system for this and train your staff to use the system. If you want focus — then measure it! Winning work with low fees places significant pressure on profitability, quality and cash flows and ultimately on the ‘brand’ — don’t put yourself or your business in that position. Work generated and ‘opportunity pipeline’ are great indicators of future workload.

Here are some sample Key Performance Indicators we track at Management for Design:

• % Profit

• Expenses/revenue as a proportion of revenue, e.g. technical salaries, IT, marketing, plant and equipment

• Cash at Bank/Safety Bank Balance

• Debtor Days

• Staff Utilisation

• Fees/Chargeable Hour

• Direct Labour Multiplier

• Revenue Growth Revenue per technical person

• Work Generated

• % time on Submissions

• Backlog (Work in Hand)

Downloads

You can download full slide decks from the webinar series at the following links:

Webinar 1 (foundations 1 and 2): http://bit.ly/1F5L9w3

Webinar 2 (foundations 3, 4 and 5): http://bit.ly/1KBLTED

Webinar 3 (foundations 6–10): http://bit.ly/1SLkWHZ