From XU Magazine, 
Issue 21

There are 150 architects in the room

On the big screen in front of them is a simplified annual income statement and a summary of timesheet data for an imaginary 3 person architectural practice. The room is asked a simple question: “how much does 1 hour of the partner’s time cost?”

What should be a 5 minute exercise takes the room, working in teams, over 30 minutes. The event has been organised by Business of Architecture UK. There are expert guest speakers – come to impart their wisdom on running a financially sustainable practice. Even the experts are struggling.

Eventually all the answers are submitted. The teams are also asked to provide a level of confidence in their answer. Their answers are plotted on the big screen.

The results are staggering. This is a room full of professionals, who have each spent 7 years at university and many of whom now run their own practices. They were given exactly the same financial data, yet the answers range from £5 per hour to £90 per hour.  Even more worrying is that over 80% of the answers undercost their time, most by more than half!

The exercise has been run by Fresh Projects in collaboration with the Business of Architecture UK. They are on a joint mission to educate architects on the fundamentals of running a business – skills that most architects and engineers will admit they don’t typically have. Creative professionals are typically motivated by creating, designing and problem-solving – and often ignore the financial fundamentals that underpin any business. Architects and engineers are forever bemoaning the fact that their services are undervalued and their fees too low – yet, as the above exercise showed, they are typically unequipped to determine and manage their fees correctly in the first place.

The size profile of engineering and architectural practices is interesting. Over 80% of all firms employ less than 10 staff.  As a consequence most firms typically do not have an in house financial expert – so the financial management typically falls on the technical directors, who rely on (often sparse) financial reporting provided by an external bookkeeper (who in turn relies on often sparse and sporadic input data from the firm’s staff). The issue is further compounded by the fact that engineers and architects fundamentally sell time (hour by hour) on a project by project basis – yet traditional bookkeeping focuses on income and expenses (dominated by a single salaries journal)  at a company level. So it is almost impossible to report comprehensive costs vs fees at a project level using traditional accounting tools.

Fresh Projects solves this dilemma through a number of ways:

Focus on simplicity and ease of use – so that non-financial architects and engineers can create budgets, fee proposals, invoices and track project profitability with minimal input. Given that creatives are usually allergic to administration, Fresh Projects aims to allow users to complete each of the above tasks in seconds.

Project based accounting – all timesheet entries, expenses and invoicing are always linked to a project (and a project stage) so that project profitability is automatically reported. Further dimensions (such as client, sector, region, etc) make financial reporting a breeze.

Powerful integration to Xero – so that control of the statutory accounting is maintained by a financial professional – yet the project / practice finances are controlled by the business itself.

Affordable, pay-as-you-use subscription model suited to the cash-flow constraints of SME businesses.

Fresh Projects is a niche offering aimed at the built environment sector (includes architects, engineers, quantity surveyors and construction project managers). There are  a number of peculiarities to the industry, like the way fees are calculated or the way that projects are split into stages, that off-the-shelf offerings struggle to address.

However, the single biggest benefit to the architectural and engineering owners who use Fresh Projects is that they don’t have to worry about the intricacies of financial calculations and reporting. They only need to provide a few minutes of their precious time per week to keep.

Why leave it there?

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