How to make money in an architecture or design practice

business vehcile change make more money architecture design

A great business-vehicle with a great driver and lots of fuel in the tank allows you to create more great work.

In the past 15 years as a Business-Life Coach I’ve worked with many architects and designers of all types. Design practices and studios are a special kind of business with special challenges around making money and growing. I’m not entirely sure why that is, but I think it has something to do with the design side of things.

Architects have a profession and a set of skills and their business is often built around that set of skills. In that, they are no different than plumbers, mechanics, bookkeepers and lawyers. Their businesses also rest on a set of specific skills and both sell their expertise to their clients. But architects (and designers) often have a passion for their profession that goes deeper. For many architects, architecture is a calling for them. Architects and designers often want to leave their mark on the world with their work. They live for their art as it were and the commercial demands of business can sometimes feel like they are at odds with their art. Making money as an architect is often considered suspect.


Vincent and Pablo

But it doesn’t have to be that way. Of course, we all know the examples of artists who died in poverty and obscurity only to achieve fame and fortune after their death (Vincent van Gogh for example). But equally there are many examples of  artists who created great art, left a mark and were commercially successful in their lifetime (Think of the greats of the Italian renaissance or Pablo Picasso in more recent times). Great art doesn’t have to be created in poverty, and nor does great architecture and design.

I like to remind my clients that making money is never the point of business, whether the business is a plumbing business or an architect practice. A business must make money, and generate good cash flow, otherwise it’s a hobby. But the reason it must make money is so that it can achieve it’s Mission… So that it can make good on it’s Purpose in this world.

No future

I recently worked with a client who is an architect. He employs 4 staff who are all architects or interior designers. The business has only just scraped by for a few years now. The practice creates great work and my client is excited about the potential for making his mark on the world of architecture in the future. But he has only just been making ends meet for the past few years. As a consequence he pays himself very little, less than his staff even, and worse, he may well lose some of the staff he loves so dearly in the future, because there is not enough opportunity in the practice for them to develop and grow professionally. My client feels caught in a dilemma. Focusing on making money and growing the business, he believes, means the work will suffer, and he can’t allow that to happen. Hence the needs of the business come second.

I told my client to think of business as a vehicle. The point of a vehicle is to take us from A to B. But the vehicle can only perform that function, if it’s in good state of repair, if it’s filled up with fuel and if the driver knows how to operate the vehicle safely.

Fuel in the tank

Business is just like that. The point of my client’s business-vehicle is to allow him to deliver great architecture for his clients and to make his mark on the world of architecture in general. In order for his vehicle to be able to do so effectively, it needs to be healthy, in a good state of repair, he needs to be a good driver and it needs fuel in the tank.  Money is the fuel of business and my client needs to learn what it takes to be a good driver, a good business owner in other words.

The demands of business do not have to be in conflict with what you’re passionate about at all. It is perfectly possible to create great architecture, and beautiful design, while making making great profits and building a healthy growing sustainable business at the same time. As a matter of fact, a healthy profitable business allows you to create great art, if you let it… I promise you.

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How much should I pay myself in my business?

pay myself business owner

how much should I pay myself as the business owner

Why it matters what you pay yourself as the business owner.

Business owners often don’t pay themselves at all, but just draw money out of the business account when they need it. At the end of the year, the accountant adds up all the “draws” and books it to something appropriate in the balance sheet to make the Tax Department happy and it’s all good. Sp why does it matter how much you pay yourself, why should you pay yourself at all and how much should you get paid?

Clearly, a big factor in how much profit your business makes and whether or not the business has the cash to pay it’s bills is how much money you draw out of the business at any one time. If your business turns over half a million dollars and you have 4 employees and an office and you pull out $200K yourself every year there may not be enough money left to pay for Cost of Sales, staff wages and overheads (or tax, for that matter), and if you pull out nothing at all, it might look like your business is enormously profitable. Your wages, drawings or dividends are a significant factor influencing the health of the company.

So wat’s wrong with letting your drawings depend on whether there’s enough money in the bank to pull some out?

As I’ve said many times elsewhere:

If your business doesn’t make profit, it’s a hobby.

A healthy small business ought to make somewhere north of 5% net profit before tax, every year. I generally advise my clients to aim around 10% as a guideline. (10% of revenue… so for every $100 in sales, the business ends up with $10 of net profit). There is no golden rule about this number, but it’s a useful guideline in most cases.

Net profit is the money that’s left after all costs of the business have been paid, and you, the owner of the business are absolutely one of the business’ costs, a major one at that. And you rightly should be a cost to the business, just like the electricity and the rent and the mobile phone bills and the staff. Without you the business can’t function. You are the CEO and general manager, the head sales person, the chief cook as well as the bottle washer. In any other business, all those people would need to be paid and probably quite highly, and so should you. If you do not pay yourself a proper wage, you’re not professional and nor is your business.

Dribs and Drabs for the boss

I recently started working with a client in an architecture business. The client has 4 staff plus himself and he pays his staff and all his other costs, but he only gets paid in dribs and drabs when there’s money available. He showed me his P&L and proudly pointed to the net profit his business made last year. But when I asked him how much the business was paying him, it turned out that he just drew out some money every now and then and that his drawings didn’t show up in the P&L. In effect, if he were to pay himself as much as his lowest paid staff member, he would have made a loss last year. In other words:

My client wasn’t running a business at all, he was running a hobby.

My client has now implemented a weekly minimal wage for himself, run through the books as a wage, showing as a wage in the overheads and we’ve updated his business targets to be in line with the new reality. The business is not out of the woods yet, but there is a new air of professionality in the practice and my clients is learning to think like a business owner rather than a hobbyist.

How much then?

The second question therefore is: How much should I pay myself?

Again, it may seem that there is a certain arbitrariness to this question. But the answer is actually quite straightforward:

You should pay yourself as much as it would cost you to pay someone else to take over from you.

Assume you want to go on sabbatical for a year and bring in a CEO to run the business for you… Doing everything you do for the business now… What would that cost? $80K, $100K, $120K? Whatever the answer to that question is, that’s what you ought to pay yourself.

This may well be unachievable right now, (it is for my client… He can only manage about $60K right now), but it’s certainly something you should work towards over the next year or so. It will put the business on an entirely different footing and every time I introduce this discipline with my clients, the business starts to change completely… guaranteed.

Would you like to download my free 12 Question Cheat-sheet to help you find your next Coach? Click here.

AYP Business Coach for Professionals

Architects, Designers, Creative

Agencies, Professional Services

Watch this quick video in which I talk about a couple of the unique challenges that come with building a business based around creating beautiful things: buildings, websites, logos, photography, videos, etc.

I have worked with many architects, designers, and owners of creative agencies in the last 11 years. I love the passion that designers have for their profession and their craft. There is a special set of challenges in marrying business with the design mindset.

“Roland helped me put my work into a bigger context which defined the purpose of my business and brought clarity to my decisions.”

(Michael Hill, Lightwell)

Does this sound like you?

These are some of the things I often hear architects and design professionals say:

  • “I love creating amazing buildings (websites, offices, brochures, brands), but clients rarely want to pay for the time it takes to create… Good design takes time.”
  • “My clients expect me to be at every meeting and to personally design every detail of their project, they insist on speaking to me personally instead of my staff.”
  • “I don’t know which projects I make money on and which lose money.”
  • “My staff earn more money than I do.”

architect designer agency

  • “Nobody in my practice has a clue what it costs to run this business.”
  • “Clients use me as a free consultant and then they go shopping for the cheapest quote.”
  • “I don’t seem to be able to move away from small alts and adds/ little websites… etc”
  • “I’m always waiting to get paid”
  • “I run around from crisis to crisis all day.”
  • “I’m a designer, not an accountant.”
  • “I just seem to be managing people these days instead of designing amazing buildings/ websites/ brands.”

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Building a design agency that is founded on your passion and creativity can be especially tricky at times. Your clients come to you for your creative reputation and they often resist dealing with your staff. And turning a design practice into a profitable business while being true to your principles is a constant balancing act.

“Roland helped transform my business daydreams in to a practical, pragmatic and actionable plan… And then we made it happen”

(Adrian Black, Blackline Retail Design and Management)

What you can expect:

How I’ll help you build a business that stands the test of time:

  • Implementing better bookkeeping, workflow management and project management systems. Your fingers on the pulse of all the key indicators of the health of your business, as opposed to keeping your fingers crossed.
  • Developing absolute clarity abut the Purpose of your business; the reason your business exists and why anybody else would care about that. Know where you’re going and how you’re getting there.
  • Building relationships with the right people. Referral marketing is the most powerful way to build your business.
  • Developing marketing strategies that mean you get to build your business with the right type of clients. Clients walk in the door, wanting to do business with you.
  • Developing and implementing Quality systems that allow you let people get on with things confident the work will be consistent. Make your agency or practice run like a Swiss clock.
  • Developing better approaches to managing and engaging your staff consultants, so that you won’t have to stand there and watch them all day.

“Working with Roland transformed me and my business. It now flows. It’s less stressful and more enjoyable.”

(Geoff Anderson, Sonic Sight)

Five Steps to Discovery

If you recognise some of those statements above and you’d like to explore how I can help you overcome some of those everyday struggles, click here to book in a free Discovery Coaching Session now as part of my Five Steps to Discovery Process, designed to help you discover and build your own Beautiful Business and Life.

More reading, books, surveys, webinars

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