Guide to Architectural Fees
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While an architect is rarely confused for being a salesperson, running an architecture firm is fundamentally owning the title of business person. A bit of showmanship is a natural part of the process.
In your design studio you spend hours solving tangled, complex problems with beautifully crafted solutions—be proud of your work and embrace it. Capturing that pride in an authentic way is crucial when you pull up to the table to discuss finances with a potential client.
Table of contents
- Promote Your Value as an Architect
- Set Client Expectations
- Choose an Architectural Fee Structure
- Use Transparency (expenses, proposals)
- See Project Examples
- Remain Flexible and Creative
Promote your value as an architect
You are an expert. A professional. Solving spatial problems in multiple dimensions, understanding the constraints of code, organizing deals with material suppliers, getting drawings through the city…the list of architectural skills is endless.
Before answering the question "how much does an architect cost", you need to take stock of your own value as an architect and how you provide that value for a client. Be specific, identify instances where you have saved a client money, time, or won an award with their project.
Keep those moments as concrete evidence of your value and refer to them often while initiating any conversations with clients.
Set client expectations
As a trained designer, the siren song of an interesting project can be frustratingly alluring.
Hold that daydream back. Before imagining how amazing your portfolio will be once you finish that project, set some basic guidelines for a minimum client engagement.
Take your time to set hard baselines, what are the go/no-go conditions that will allow you to take on a client? A few different factors to consider:
- Relationship with the client
- Quality of the client
- RFP competition
- Client's primary problems
- Client-Project-Firm Fit
- Timing for your firm
- Differentiation of your firm
Once your conditions for accepting a client proposal are set, make them known across your firm's leadership. This is important to establish for marketing, sales, and the employees' own perception about the office brand.
With a set of guidelines for acceptable projects, it's important to maintain those standards before falling in love with a client or project. Nothing is worse than getting two parties excited about working together to only end up having an awkward conversation about fees that ends up revealing the initial discussion was a waste of time.
Instead, we recommend being more forward with your clients. Explain your minimum requirements early in the process that way expectations are upfront. For clients with limited budgets, they'll appreciate the honesty and you can often recommend another firm that is more aligned with their budget which in turn builds trust with that client (for future projects or introductions). For the clients able to meet your go/no-go factors, you can quickly shift into talking about the details of the project.
Once you've decied the client has potential, try to meet in person. Too much chatting over email or the phone is not recommended. Projects can and do go on for years so build that relationship right away— get that coffee/cocktail/dinner and make sure the partnership is mutually solid!
Choose an architectural fee structure
While there are 100s of building types, there are only a few ways to actually charge to design any of those types of buildings. Outside of a more nuanced or complex project types, most architects use a set of typical contract frameworks when engaging with a client.
The simplest and perhaps most widely used by small firms, for every hour you and your team work, you bill the client. Filling out a timesheet and invoicing your client at the specified intervals (typically monthly) makes accounting fairly straightforward.
Often a client with an unclear scope of their project will start with an hourly engagement to get a sense of working style and deliverables before commissioning a project for completion. Other clients with smaller projects will be interested in hourly for basic drawings and architectural tasks.
Additionally, it's common to use a fixed fee for Concept, SD, DD, CD then switch to hourly billing for Construction Administration (CA). In CA there tend to be too many unknowns, and hourly billing helps cover unforeseen costs
With an hourly contract, most clients will want to set a max cap (also called GMP contract) to be sure they aren't committing beyond their budget. No one wants a project to get to the end of the budget with way too much work to finish, so invoicing and providing updates on consistent financial or calendar milestones is imperative with hourly billing.
The best way to work hourly with a client is automated updates. With improvements in technology your client can access your thinking in a Google Doc, drawings and Revit models in Modelo, and construction coordination in PlanGrid. While many architects stress about out allowing their client into the process, collaboration is paramount in building trust. In fact, transparency in the design process creates more room for a client to trust you with difficult or risky decisions!
Since every project is different, it makes the process of pricing more of an art than a science. For this reason, architects tend not to use a fixed-fee for the entirety of a contract and instead work in conditions for unknown scope.
We don't recommend settling on a fixed-fee until you and the client have a tightly defined scope and also place contingencies and deadlines for any changes.
Charging a fee for scope creation is incredibly valuable for both parties: the client gets an educational understanding of the project and the architect learns about the problems the client wants to solve.
Once the scope is agreed upon, you can then break down the time and price allocation to come up with a fixed-fee contract for the client.
There are also scenarios where an architect has done a project typology many times and are confident in their expertise that fixed-fee pricing offers a straightforward option. Clients get the benefit of having a seasoned team on the project and knowing exactly what they will pay.
Percentage of construction costs
Another architect fee you'll find firms using is the percentage of construction cost calculation. Assuming construction happens in a timley manner, the main benefit of this fee type is that it aligns the project cost risk for both the client and the architect since pricing is based on the building being produced.
For example, a large hospital project needs specialized equipment and planning which would mean a bigger budget and thus more time for and expertise from an architecture firm. On the other end, a small house remodel would have a much smaller cost and associated architecture fee.
Ensuring that your client understands the construction costs is an important first step before agreeing to terms. Ideally the client has an experienced general contractor already on board, and the GC has vetted the expectations of the client.
The most common fee for architecture projects is a slightly different take on the percentage-based process called design–bid–build.
In this scenario the client will hire an architect to design and produce the bid documents then use those drawings for contractors to bid on. The design service fees tend to be 5-20% of the overall project budget, not just construction costs.
Once a contractor has been selected, the owner enters into a separate contract with the owner and the architect continues on with permitting and any change orders.
Setting rates as a professional architect
Pricing is a tricky business.
If you've spent time trying to decipher the best rate to charge, you're not alone. Architects are not allowed to talk about rates! The AIA was taken to court in the early 90s and told that they weren't allowed to suggest fees since that would be considered price fixing (if only the court could have seen all the unpaid invoices).
So architects were left on their own to solve the already difficult job of setting rates. There are a few ways to figure this out for your own firm.
Less than ideal, but bottom-up pricing is by far the most common way for architects to figure out rates.
It's a simple addition problem: add up all your costs and layer on a profit margin. For costs, you will need to consider several things like employee salaries and benefits, overhead (like marketing and printing), and office space. Most firms set rates by role (principal, pm, senior architect, intern) but don't include non-billable team members like HR or office admin. And don't leave out the support team, they help the office run and function to keep everyone focused and working hard on billable client work.
Every year you should revisit your rates to be sure you're accounting for inflation, cost of living changes, and salary increases.
As for project management, bill for that too! Most firms undervalue the management aspects of their expertise: coordinating consultants, suppliers, owner demands, etc. is an incredibly taxing job. Charge and charge justly for it.
Depending on your location, types of projects and years in business, rates vary pretty widely but see below for a few example firms and projects.
Top-down or value-based pricing
Not the first or the last time you will hear about the power of value-based pricing, but it's a lot easier said than done.
The first step is to take pride in your work and believe in your firm's value in producing wonderful architecture.
While that sound may like useless fluff, a strategy that works well is to set an aspirational hourly rate. If you look 10 years into the future with an amazing portfolio of built work, how much would you imagine that future firm charging? $500/hr? $1,500/hr? $5,000/hr?
No one is going to value you or your firm more than you value yourself.
Set that aspirational rate as a mental guideline for any future interactions with clients. Start negotiations higher than you normally would then offer discounts for clients you're really interested in working with.
Size of Project: 2,500 sf custom home in Raleigh, NC
Project Budget: $650k
Size of Firm: 8-person firm
Using hourly fee with bottom-up pricing
Size of Project: 15,000 sf medical center in Culver City, CA
Project Budget: $12.5M
Size of Firm: 20-person firm
Using design-bid-build with value-based pricing
Value-based proposal abstract
Our firm has executed on over 5 award-winning medical centers within LA county. The most recent project came in 3 months ahead of schedule! Our fee aligns with our unparalleled expertise and will be 15% of the project budget $1.875M.
In the first point of a formal engagement, you want your proposal to outline your team's qualifications and also fully explain the benefits and risks. Clients appreciate receiving an explanation of the full breadth of a project and a heads up on potential pitfalls. Rates, hours, and everything clearly laid out is also a better way to interact with a client. Show as much context as it takes to give them the full picture.
Keep track of billable expenses and be judicious about markup. Building relationships with reputable suppliers is a very valuable service but marking up client purchases can confuse or turn off some clients. So be sure to express your markup clearly and explain your value add with supplier curation and specific knowledge about the products. Helping a client select a product that doesn't leak or lasts several years is a big value add, so be sure to articulate that well.
Every client likes to get invoices in their specific way, so engage with your client to figure out what the best invoicing strategy is, and how much detail is enough. Show how much you have previously billed, the rate, and any additional notes for one-off costs.
Remain flexible and creative
One final tip to consider in the pricing process: remain flexible and find creative solutions. There will inevitably be projects that are not within your firm's fee limits which can provide outsized marketing gains from exposure and design quality. Find other ways to offset the financial delta by trading skills, building a case study, or agreeing to introductions to future potential clients.
- Take stock of your value as a firm
- Set up an aspiration rate
- Define your fee limits
- Architectural Fees: What's Your Time Worth?
- Budget 20% Net Profit
- Choose an Architectural Fee Structure