Want to triple your firm’s profits? Avoid these 5 common mistakes

Discover the five common mistakes that could be affecting your architecture firm’s profits and learn actionable solutions to overcome them for a more successful architecture business.

Image by DC Studio on Freepik

If running your own architecture firm was easy, every talented architect with a can-do attitude would do it.

There are many moving parts to an architecture firm. First, you have to find clients who fit your ideal target audience. Then there are the actual projects, which can take several years to complete. Plus, managing staff, billing, and construction contracts. The list goes on and on, but we won’t bore you with the details of what you already know.

It’s not all doom and gloom, though. With so many moving parts, there are several opportunities for you to make improvements to your bottom line. And while running an architecture firm comes with its unique set of challenges, profitability shouldn’t be one of them.

We sat down with ArchiBiz Chief Mentor Ray Brown to identify five critical areas that may be affecting your firm’s profitability. These are the most common behaviors (read: mistakes) that we see architects make all the time. Just by reading this article, you’ll be well ahead of your competition. If you choose to start addressing them, you’re almost guaranteed to start seeing improvements and ensure long-term growth.

1. Failing to Track Key Metrics Each Month

One of the most significant pitfalls for architecture firms is not tracking key business metrics consistently. Without regular reviews, it’s hard to know whether you’re winning or losing. While the actual architecture is complex, the business itself is relatively simple. At a bare minimum, you should be looking at your Profit & Loss account, revenue, expenses, and profit margins each month.

Solution: Hold monthly board meetings to review these metrics. If you don’t take the time to review simple numbers like your revenue and expenses, you’ll never know how your business is performing. On a project level, examine which projects are the most profitable. Look at your budgeted costs and what you’re actually spending. Is it on track? Do you need to make adjustments to maximize margins? It might seem like an added task on your to-do list, but trust us when we say it will be well worth the effort in the long run!

2. Unbillable Hours Spiraling Out of Control

Architectural firms often grapple with two types of hours: project hours and non-project hours. Employees can be busy, but if their work isn’t billable, it directly impacts your firm’s profitability. When a project is budgeted for 1,000 hours but takes 1,200 hours to complete, it’s almost as if you are putting your profit in an airplane, buckling it in, and wishing it goodbye.

Solution: Be stringent about time utilization and your team’s roles. Implement a robust time tracking system to monitor billable versus non-billable hours. Treat time as your primary commodity, and avoid letting hours slip through the cracks like water in a leaky bucket. Luckily, there are fantastic options for project management software available to help you do this easily and efficiently. Find one that works and stick with it.

3. Hiring the Wrong People – and Not Firing Them Quickly Enough

Hiring the wrong talent can be a costly mistake, yet many firms hire too late or keep unproductive employees for too long. The best advice we can give you is to hire slowly and fire quickly. The focus should not just be on skills but also on cultural fit and alignment with the firm’s vision. You often know right away if someone isn’t a good fit, so trust your intuition.

Solution: Before you set off looking for your next employee on LinkedIn, develop a comprehensive job description and person specification first. Get into the weeds here. If possible, add in percentages of time you want them to spend on different responsibilities. If you plan and budget your hiring needs well in advance, you’ll avoid unproductive employees who don’t last longer than their trial period. Remember: If someone isn’t a good fit, it’s better to part ways sooner rather than later.

4. Being All Tactics, No Strategy

Without a clear strategy, firms often get lost in day-to-day tactics without a long-term vision. Emails need to be answered. Bills need to be paid. Staff keeps asking you for help on certain tasks. With everything there is to get done, it can be easy to get caught up and forget about your long-term goals and strategic direction. For many architects, this shows up when it comes time to make important business decisions. You’re unsure about what’s the right course of action because you’ve forgotten about the big picture.

Solution: Create a clear, motivating vision for the future of your firm. This doesn’t have to be a super involved process that lays out your next 20 years. Simply start with the next year or five years. Make sure your strategy is practical and linked to actionable steps that you can tick off as you go along. And, lastly: communicate your vision to your team! If you get your team on board, you’ll find that accomplishing your goals and making that vision a reality becomes a whole lot easier.

5. Focusing Only On Marketing

Focusing solely on marketing without ensuring the rest of the business is working smoothly can lead to more problems than profits. For years, we have seen architects grow too quickly and struggle to keep up. If your back of house is not running like a well-oiled machine, getting more clients is not the answer. It will only lead to more problems, more headaches, and less profit.

Solution: Rather than turning to marketing as a fix-all solution, adopt a holistic view of your business. Ensure that your projects, people, and processes are running efficiently. When you are ready for more clients, make sure they are the right type of clients for your practice. If you manage your people, time and margins more effectively, you’ll position your firm to handle increased work in a profitable way.

Image by freepik

Improving your architecture firm’s profitability boils down to well-managed processes and consistent tracking of key metrics. Focus on looking forward, anticipating issues before they arise, and maintaining a balanced approach to business management. By addressing these five bad habits, you can steer your firm towards a more profitable and sustainable future.

Looking for a little extra guidance to help improve your firm’s profitability? We could have just the thing for you. Get in touch with an ArchiBiz Mentor today for a no-obligations call where we’ll discuss your goals, challenges, and create a plan to move your architecture firm forward.