Architectural Fees - how to get more $$ upfront?

[Shortnort]

I have been using VW for 2 years now and am still learning, but very pleased overall. One issue that I am struggling with is how do I get/convince my clients to pay more for schematic and design development services?  As you know, there is so much more work involved with BIM production and it sure would be nice to get compensated accordingly. 

 

I have been asking for more retainer than in the past, which helps, but is still way below the amount of work involved.

[Ramon PG]

The AIA has a contract document that I beleive goes into this. There's others that deal with author rights. 

[Jeff Prince]

It depends on your clients, their goals, and project duration.

 

If your client is evaluating potential projects, why would they want to pay more upfront when the project could go away?

From their position, there is no value in paying you for services that may not be needed, such as highly detailed BIM development.

 

If the client is fast tracking a project where hitting a deadline and change management are of critical importance, justification for charging more upfront is easy and using a detailed BIM has many advantages.

 

It sound's like you spending effort following the MacLeamy Curve, which is not how to do it for most projects.

Add detail as a project matures, not from the start.  When you have well defined prototypes, the detail can be added later easily and without added expense.

Every project is different, so your contract can propose a delivery schedule that puts weight on the front end, which then justifies billings hitting earlier.  You just have to educate the client that you are providing more service and deliverables earlier than traditional industry practice.  If they don't want to buy it, you need to adjust your process to say profitable or work at risk, I choose the former.

[Shortnort]

Thanks for the education of running an architectural firm. I have run mine for about 40 years, but only 2 now with VW BIM software.  Having experience with Autocad, Archicad, ARRIS, and Datacad I understand very well the "setup" overhead required for BIM versus 2D.

 

The issue here is competition... Most other companies offer 2D CAD to the clients, which as everyone knows, has very little overhead in the early phases, with some basic renderings as eye wash.

 

My first question is how much time and cost should be entered into the equation. The second is how to convince an Owner that has no idea of the BIM process to expend up front more money.

 

 

 

 

 

[Jeff Prince]

1 hour ago, Shortnort said:

Thanks for the education of running an architectural firm. I have run mine for about 40 years, but only 2 now with VW BIM software.  Having experience with Autocad, Archicad, ARRIS, and Datacad I understand very well the "setup" overhead required for BIM versus 2D.

 

The issue here is competition... Most other companies offer 2D CAD to the clients, which as everyone knows, has very little overhead in the early phases, with some basic renderings as eye wash.

 

My first question is how much time and cost should be entered into the equation. The second is how to convince an Owner that has no idea of the BIM process to expend up front more money.

 

 

 

 

 

You asked a question about how to manage an aspect of practice, not how to do something in Vectorworks.  I guess you have it all figured out, good luck.

[Ramon PG]

2 hours ago, Shortnort said:

Thanks for the education of running an architectural firm. I have run mine for about 40 years, but only 2 now with VW BIM software.  Having experience with Autocad, Archicad, ARRIS, and Datacad I understand very well the "setup" overhead required for BIM versus 2D.

 

The issue here is competition... Most other companies offer 2D CAD to the clients, which as everyone knows, has very little overhead in the early phases, with some basic renderings as eye wash.

 

My first question is how much time and cost should be entered into the equation. The second is how to convince an Owner that has no idea of the BIM process to expend up front more money.

 

 

 

 

 

 

When using BIM or VWs you can promise clients goodies that 2D cannot give, unless going into duplicate effort (SketchUp, etc), like 3D views with shadows and walkthroughs. Of course, if you get a really cheapo client, that won't be appreciated, or paid. 

[shorter]

@jeff prince I must admit I thought the question was from a recently qualified architect not one of 40 years practice. Not sure it warranted that response.

[shorter]

3 minutes ago, Ramon PG said:

 

When using BIM or VWs you can promise clients goodies that 2D cannot give, unless going into duplicate effort (SketchUp, etc), like 3D views with shadows and walkthroughs. Of course, if you get a really cheapo client, that won't be appreciated, or paid. 

Tend to find clients are happy to pay (more) when they can see they are getting a quality service.  I don’t think BIM has anything to do with it. bIM is just another way of getting your work done. If anything they will be expecting a discount because they have probably heard things can be done faster so be careful what you wish for!

[Leon You]

Intereasting question.

 

I believe VW is a tool to cope with clients who wish to pay less and get more.

 

It is always hard to ask a client to pay more upfront, except 30 years ago, my boss told the clients if they paid 5% more upfront, we could use "computer-aided design" to double our design speed than traditional hand drawings.

[MrNoodles]

16 hours ago, Shortnort said:

I have been using VW for 2 years now and am still learning, but very pleased overall. One issue that I am struggling with is how do I get/convince my clients to pay more for schematic and design development services?  As you know, there is so much more work involved with BIM production and it sure would be nice to get compensated accordingly. 

 

I have been asking for more retainer than in the past, which helps, but is still way below the amount of work involved.

 

Don't offer or try to convince them to include this service, it's a part of your design process and your overall fee structure. If you give people an opportunity to pay less they will, even if it hurts them over the lifetime of the project.

 

Best of luck with your business moving forward, your next 10 years will be your best.

 

N

[Shortnort]

Thanks for the great responses!!!

 

I will continue my new approach - MORE RETAINER FEES.  

Speaking of which, how much do most of you charge, if any?  Mine used to be a nominal fee when using 2D cad due to the limited upfront time investment.  I am now asking for about 15% to 20%, which of course is ALWAYS negotiated down. That keeps the client "happy". Just yesterday I lowered the retainer on one project $1,000 which made my client extremely pleased.

 

The comment about owners thinking fees should be lower when using BIM...  That is funny...  I had one that actually said "All you have to do is push a few keys now." So he, a builder, hired a CAD operator to do his small projects.  He learned very quickly about pushing a few keys to get the jobs done.  It is now costing him many times the amount that I charged.  Hilarious!!

[Jeff Prince]

2 hours ago, Shortnort said:

Just yesterday I lowered the retainer on one project $1,000 which made my client extremely pleased.

Looks like you are missing a digit or two on that retainer 😉

[Samuel Derenboim]

@Shortnort

 

This is always a game of time spent vs money earned. Right now i am going through the tedious process of evaluating the general work time needed for various types of projects and their respective square footage's. Once you assess the time required for various projects and their respective phases you then create a ballpark in relationship between the square footage project cost and general architectural fee. Given you will have various blanks in between different square footage costs, i then started to experiment with average rate of increase in between 2 projects with various square footage's (you can then deduce the percentage of the project cost with reference to the architectural soft costs to determine your own unique rate of return)

 

Once that is evaluated, and the respective phases (degree of work in each phase percentage wise) are determined, your biggest element of return would be how quickly you work. Libraries and shortcuts are extremely crucial in saving time in the future - and would have a high degree of cost to you up front. But in the long term if it saves you 40% of the time to produce a set of documents, it is well worth it. 

 

Shortcuts include

1. Standard details based on wall types below (see next line)

2. Standard wall types / floor types / roof types etc.. - with accurate information like R-values / U-values, STC values, UL values / UL reference, ASTM reference is needed

2a. Standard material database that would be the composition of all of your standard wall types - with component weight, k-values, cost, manufacturer name, spec link, etc...

3. Standard drawing types and worksheets to be used parametically with standard record bases that can be called out. For example

- records for calculating zoning, building, energy code, etc...

4. Standard components / objects / symbols with parametric information to used on plan for takeoffs. Can include everything from light fixtures to elevators to vehicle lifts, railings, soffits, gutters / leaders, furniture, hvac / plumbing components, etc...each one also with their own respective spec links, descriptions, costs etc...

 

These elements I think would be the bulk of the hardest work for your standards, then the question - whether to BIM or not to BIM would be eliminated.

 

As for your retainer...I agree with @jeff prince, its missing a zero 😉

Edited July 1, 2023 by Samuel Derenboim

[Shortnort]

@Jeff Prince, I wish it was missing a Zero.  You must not do convenience stores...  Very tight budgets, to say the least.

[line-weight]

I know it's not a luxury everyone has, and I operate at a quite small scale, but I simply try to avoid the kind of client who says things like "don't you just push a few buttons now" or who tries to negotiate fees down, especially if the basis of their negotiation is an argument that this is how much time they think is necessary to do something. I make my judgement of how much time it's going to take. I know better than them because it's me who does it every day. I make my fee proposal. If they think it's too much, fine, they can try someone else.

 

I'm quite aware that there are certain types of job where someone else will quote a much lower fee than me to do the "same" thing.

 

I know they won't do the same thing though. They won't allow time for a design process that lets a client consider and reject a few options before settling on something. They will use various of the shortcuts mentioned above - standard details, template designs and so on, which probably will not in the end provide the client with the best design for their particular brief.

 

There are certain types of jobs where my approach simply isn't necessary - and I just tell clients that - I could give you a fee quote but it'll be more than you'll be given by XYZ CAD services, and XYZ CAD services are better suited to what you want to do (quick, cheap, off the peg drawings for something very standard).

 

I don't exactly understand the question in the OP - I don't quite get what is being asked. What's meant by "schematic and design development services" and how does it relate to BIM? And what is meant by BIM? Genuine BIM workflows to do with exchange of information with other members of the construction team, or just drawing more in 3d?

 

 

Edited July 3, 2023 by line-weight

[Shortnort]

Thanks, @line-weight.  

 

To be honest, I did not intend my post to create a debate on the practice of architecture.  I am old school and perhaps the method that I deliver projects is out of date and old fashioned.  Perhaps someone can "enlighten" me as to what is in Vogue these days.

 

I typically prepare Schematic Designs based on the owner's needs/wants/desires. These are more than bubble diagrams but not detailed either.  The intent is to insure rooms sizes, relationships, building configuration, circulation, etc. meet all/most needs, including code requirements.

 

Once this is approved I prepare Design Development documents.  These include more detailed floor plans, ceiling plans, building and wall sections, exterior elevations. And this is the major part that my original post was asking for suggestions about.  Since VW is essentially BIM based, or at least that is how I use it, much more time and effort is expended to create these documents.  What may take one day to create in 2D may take 3 or 4 days in VW.  I find the use of "Spaces" as a great tool and create them from the start. I have developed many Space prototypes, which saves time, but it still requires input not provided by 2D cad users.

 

So, do most users of VW just eat this additional front end cost anticipating being paid at a later date for it, or do they fee beef up the retainer or SD/DD fees?

 

I have learned the hard way that anticipating completion and payment at a future date is a big gamble...  I had one project that took over a year to get paid and another where I never got paid.

 

Based on previous posts, for now I will just beef up my retainer and be done with it.

 

 

[line-weight]

If it's quicker for you to produce in 2D, then why not stick with doing things that way? It's perfectly possible to use VW for a purely 2D workflow.

 

A few years ago I transitioned (within VW) from a purely 2D workflow to one where I produce a 3D model and then generate my 2D documents from this. To start with, things that I was well practiced in doing the old way, took rather longer, but as I became more familiar and comfortable with the "new" way, I found that there were many drawings I could now produce more quickly. Certainly, the process of making changes to a design, and updating multiple drawings, is now *much* quicker and less painful.

 

 

[Jeff Prince]

On 7/3/2023 at 5:56 AM, Shortnort said:

I wish it was missing a Zero.  You must not do convenience stores...  Very tight budgets, to say the least.

...

I have learned the hard way that anticipating completion and payment at a future date is a big gamble...  I had one project that took over a year to get paid and another where I never got paid.

 

 

They aren't that tight.  I've done a bunch of small commercial work over the years and the architects are getting paid well.  The people who don't charge enough go out of business, usually because they get burned or burned out by cheap clients.  Things are really starting to feel like past recessions, the last one left a lot of people getting stiffed on fees.  That's why you bill against a retainer with new clients and replenish it once it has been depleted...

 

 

Edited July 5, 2023 by jeff prince

[Shortnort]

Thanks for the input, @jeffprince.

 

I do not know your background or your participation in determining fees, etc.  I am self employed, Registered Architect since 1982, do a wide variety of project types and sizes.  Perhaps architects have generous "fees", but what I have been encountering since Covid, MEP costs have skyrocketed.  At one time their fee would be about 1/3 the total fee.  Today, their fees have increased substantially to at least 1/2 or more.  Structural fees have remained relatively the same.  I have raised my fees some due to the MEP impact, but not enough to regain lost revenue.  

 

With the decrease in my share of the fee, and the additional upfront load of VW, I am constantly searching for ways to streamline my efforts.  I have established many standards, symbols, reports, spaces, etc. to help, which they do.  In Georgia, large firms get 90% of the great projects and fees leaving the remainder with the kitchen scraps, so to speak.  As one of my Convenience Store clients told me once "You have many repeat projects and your fees should be going down."  I explained to him the cost of doing work these days and it is like him trying to pay his mortgage by selling lots of bubble gum.

 

I am not crying or whining, just trying to see how others cope with our many challenges. Since COVID, the local plans reviewers have become tyrants, hide behind their computers, never return phone calls or emails, etc. thus adding to the frustrations and time consumed. I have a project in one county that I submitted in mid April and they still have not started a review...

 

So, I am stepping off my soap box and getting back to the salt mines.  Thanks everyone for your input.

 

[Jeff Prince]

I wouldn’t consider myself a business expert, but I’ve had a pretty broad set of experiences working for myself, firms from 2 to 1000+ employees, and even a government agency.  I’ve also lived and worked around the US and abroad where I was responsible for developing clients and fees for projects of all sizes from small local to international mega.  In recent years, I have evaluated the purchase of a few small firms to develop opportunities in other regions.

 

What I have learned?

Across the board, small firms with aging leadership have the greatest self imposed difficulty with raising fees.  Most younger firms do not have that issue and throw their hat in with the big firms on large projects, especially if the founders left big firms.  Big firms adjust their fees nearly every year and have multiple rates, kind of like hotels 😉 They have accountants and economists on staff to advise on such things, not architects.  Chefs and Architects generally make the worst business managers, that’s why you need a numbers expert on or advising the team.

  

Why do older smaller firms have this problem?  It is just psychological.  As we age people generally think things are getting expensive, when in reality they have just failed to adjust for inflation.  Look at car and house prices from the beginning of your career compared to today.  Then look at the fees you are charging.  Ask yourself why are you charging 1990s prices in a 2020 ‘s market.  the quicker you can adjust your perception of your value, the better.
 

Generally, we fail to raise prices out of fear of losing repeat clients to the competition.  That may be valid and you might lose some work when raising fees, but those are the relationships you probably don’t want anyhow.  Why?  they will trap you from growing your business and you will end up pigeonholed into a type of work.  Plus, if a client doesn’t want to pay the fee needed to execute the work properly, how is that going to work out during construction?  They are going to burn your time with uncompensated CA most likely.

 

Based on what you said, your MEP consultants have figured this out and adjusted their rates.  You are getting pinched as a result.  You likely want to keep working with the same engineers for efficiency and good relationships you have likely formed… so rates need to go up on your end.  If you compare your fees to the industry standard % of built project cost, I’m guessing you are woefully underpriced.  It should be an easy fix if you can convince yourself of these things.