Inspiring Success in Architecture for Small Firms and Sole Proprietor Architects

EA015: Architectural Fees | How To Get Paid as an Architect [Podcast]

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EntreArchitect-Podcast-BadgeSince launching the blog back in 2007, there has been one topic that I have been asked about more than any other. Whenever I write about it, either at the blog or over at the Entrepreneur Architect Linkedin Group (which by the way is closing in on 6,000 members) the comment section lights up. It’s the one topic that, for generations, has been untouchable. We’ve been trained by our schools and required by our professional organization to avoid discussing this topic at all costs… or else.

Well today, right here on the podcast, I am talking about fees for architectural services.

Topics Referenced in This Episode

The Entrepreneur Architect Academy Pre-Launch List

Episode 14 with Emily Grandstaff-Rice

The Passion Profit Cycle of Success

Architectural Fees

Cost Per Square Foot

Hourly Fees

Stipulated Sum Fees (a.k.a. Flat or Fixed Fees)

Percentage of Construction Cost

The Hybrid Fee

The Hybrid Proposal for Architectural Services Course

Collaboration and Encouragement Among Architects

Ask a Question To Be Answered on the Podcast

The Entrepreneur Architect Resource Guide (Free)

Who Is Mark R. LePage (About Page)

Comments

  1. Excellent podcast Mark! As always, I appreciate you taking the time to walk us through every one of your topics- and as you mentioned this one’s a difficult topic for discussion. I’m already using your hybrid fee structure since I downloaded your Hybrid Proposal Course + templates last year and its working very well! You’re right- it’s a structure that makes sense to clients and they seem to truly appreciate the “fairness” of it. Thank you!!

  2. Jane Wilson says:

    I’m just starting out on my own, and 12% of construction seems high for me and my clients. Any thoughts / suggestions?
    Thanks.

    • Mark R. LePage says:

      Jane

      While I cannot recommend what anyone else charges for their services, I can tell you that fees vary from architect to architect and region to region. Even in my region, our fee is intentionally high. What I recommend to architects starting out is to do what we did; start with a fee that you think will get you the job and then with each subsequent propose a higher fee until you feel you have reach the market’s ceiling. Remember that with a higher perceived value (you bring more to the project than your competition), the higher your clients will be willing to pay.

      • Jane Wilson says:

        Thanks …. great response. The talk was very helpful (even if it still feels awkward every time I do a proposal. My fingers have been crossed so much, they hurt!

  3. Hello Mark,

    First off I want to thank you for your passion to the profession. It is admirable that you have took on the responsibility to upload your vast architecture knowledge specific to business. This is rare. There is a plethora of information specific to architecture and design but not many archives for the business aspects. You are helping feel a void that should be address during university. I feel that a lot of my peers have come to the same conclusion that architecture can be a business where profit is seen, and we intended to exploit this missed opportunity.

    At 26 years old and a recent graduate your blog is near biblical for my young architecture mind. I never believed the hype architecture professors were feeding, “Architecture is not a profession where you can make money” This statement seemed hopeless. Your post have confirmed my suspicions.

    I am currently attempting to run a visualization studio and acquire the remainder of my IDP hours working with an architecture company full time. My hope is that by running the visualization studio simultaneously i can do three things. Learn some basic business practices, develop a network of clients and friend within the industry that are separate from those i meet while employed as an intern architect and third transitions the visualization studio into an architecture studio in 2 to 3 years.

    When i do open the architecture studio i am interested in starting with custom residential work and then transitioning into larger commercial projects, libraries, civic centers, museums, ect. My question is do you have any suggestions on how this transition from residential to commercial can be made? One of the problems i foresee is that most if not all of these commercial project require an RFQ. I want to begin my studio with the end game in mind hence the reason for question.

    Hy-bird fee structure is pure genius loved it!

    Thanks,
    Dustin

    • *correction… “Does anybody have any suggestions on how to make this transition”

    • Mark R. LePage says:

      Dustin, Unless you spin off from a firm already providing services for that market, you will need to build your reputation and build your network. Slowly you can take on small commercial projects, one leading to another and grow your market organically. It takes time and intentional planning.

  4. Hi Mark,

    first of all, I’d like to congratulate you for your work and your bravery on touching such a difficult topics within professionals of architecture.

    As you may know in the recent past there used be a list where prices were listed depending on the kind of work ordered. This would happen in europe. Does it happen as well in the US? How have architects been organised with fees in recent years ? ( past century…)
    Thanks in advanced and keep on with this interesting site!

    • Mark R. LePage says:

      That list existed in the past, but was deemed illegal as “price fixing” by the federal government. The AIA was charged with violations of federal anti-trust laws and settled. This event is a major cause of the problems architects face today regarding fees. A deeply set fear has been instilled in every US architect to never discuss fees with another architect. I want to change that.

  5. Tim Barber says:

    Mark,

    Really enjoyed this episode! Bravo!

  6. Chris Harris says:

    Hi Mark,

    We regularly find final bids come in 30, 40, or 50% higher than the initial SD pricing estimate. Do you base your 12% fee on the SD pricing or some assumed multiplier of the initial estimate.

    • Mark R. LePage says:

      Chris, we base our fee on the Schematic Design estimate. Our SD drawings are very well developed and we do include a design contingency ranging from 10% to 20%. Final bids are typically higher, but usually within 10%. If the design increases scope during the DD or CD phases, our fee is adjusted accordingly.

  7. Well, I’ll be the first to share what we charge. I run a small, young firm in Houston, Texas, specializing primarily in residential design. Our fee structure has continued to evolve over the years and I do see it eventually becoming a hybrid system similar to Mark’s. However, currently we charge $95/hr with a guaranteed maximum price (GMP) for design deliverables only. Meeting time is charged by the hour and has no cap. The GMP is determined internally depending on the project and is based upon 5-10% of the anticipated construction costs, $5-10/sf of the anticipated area, and $500-1000 per sheet of the anticipated construction document set. If our GMP does not fit within all three ranges of these categories, we’ve missed something in our meetings, notes, or proposal scope. We’ve found that our competition is in the 10-15% range and will not cap the amount. If they charge less, they are not delivering the same value we do. When we’ve flirted with charging more than 10%, our proposal acceptance rate goes from 80% to 0%. One day, just not today…

    • Jane Wilson says:

      Thanks for the frank comment, Spencer. I’m finding very similar results. I guess it takes a few years and more completed projects than I currently have to be able to get a sustainable amount of word of mouth contacts so I can pick and chose my clients. Every happy client brings in multiple referrals. When that amount is reached, price / hour or project can be raised. I use a hybrid model (flat fee for schematic, then fix DD/CD/CA fees) as it allows me to ensure that we all understand the project before putting in large amounts of work….

  8. Great podcast. (just one of many)
    The concern I have with connecting the fee to the project cost is that we can, maintain or reduce the project cost via good design. Not to mention the possibility of the increase in value i.e. higher rent or sales price.
    How are we compensated when our services reduce the project cost?

    • Mark R. LePage says:

      Great point Ken. What if we added an incentive clause? If we bring the project in for less that the estimate, we are compensated additionally based on the difference. Sounds complicated and my approach it always to make it as simple as possible, but what if…?

      Thanks for your thoughts.

  9. Kurt Krueger says:

    Fantastic podcast, Mark. I hope this opens up a larger discussion in the profession.

    I purchased your hybrid proposal, which I would recommend to everyone. A couple of things however, were a bit unclear for me:

    1) Is the Architect’s fee based on a percentage of the estimated hard cost only (labor and materials) or does it also include the contractor’s overhead & profit? From Terms & Conditions page, it seems to include both. If so, I’m curious to know if this is standard for percentage based fees? Depending on how high of a percentage we charge as architects, we could come close to (if not exceed) the contractor’s fee. Perhaps that’s okay and we have been incorrectly trained to believe that our costs should never come anywhere close to the contractor’s.

    2) Where do you draw the line between Architectural Services and Interior Design as an additional service? It seems like quite a bit of overlap. Under Design Development of the Proposal it states that “The Client shall select hardware, finish plumbing fixtures…” etc. Does this mean that the client selects all the finishes, and hardware themselves for the architect to coordinate?–and if they elect to have the architect select everything for them, this is an additional service?

    Thanks

    • Mark R. LePage says:

      Thanks for the questions and the endorsement of the Hybrid Proposal course.

      To answer your questions, 1. Yes. The construction cost includes the GC’s profit and overhead. That is typical for percentage based fees. It’s how construction cost is defined in the AIA documents as well. 2. Yes. In our proposal, the fixtures and finishes are the responsibility of the owner. We offer that additional service, as Interior Design Services, to every client, many of which hire us to do so.

      The beauty of writing your own agreement, is that it can be anything you want it to be. You can propose any arrangement you want. If a client doesn’t agree, you can always negotiate and modify the agreement to work for both parties. Most residential clients have never experienced an architecture project, so they don’t know what to expect. They assume that whatever is in your agreement, is the way it is done everywhere. Since that is the case, rarely do we feel any pushback on anything in our agreement.

  10. I have been catching up on previous podcasts. This one hits a home run!
    We are a very small firm doing good sized commercial and retail projects.
    We recently completed a 90,000 sf retail center for a total fee (including MEPS) for a little more than 2%. We got totally soaked but knew that going in (2009 negotiations).
    To the point, our fee was so low that the client never respected our work. We were simply so cheap that we did not matter. Project is open and quite successful, for everyone else.

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