Other professions vary their prices depending upon skill level, why
don't we? Why do we use standard billing rates when we design projects
that use differing levels of professional skill? Shouldn't we vary our
pricing based on the skills required for a particular project?
Doctors charge a higher rate for surgery than for an office visit.
Lawyers charge more (a higher hourly rate) for difficult litigation than
for a routine real estate sale. Other professions and service
businesses also base their prices on the skills used. Even the local
beauty salon sets prices based on the type of service performed, not on
how long it takes to do the job.
A/E projects also require varying skill levels. The added-value of
"special" services will differ with each discipline, but there will
always be a range of potential services.
When you initially discuss a project with your client (or review the
RFP), you must determine the skill level that the client wants in the
project, and prepare your proposal accordingly. The client's needs may
not be totally defined at this point, but if you have prepared your
definitions of service skill levels, the appropriate level for that
project should be fairly clear.
This approach is helpful in negotiating the contract. If your client
wants a lower fee, you can point to the skill level required and offer
to drop the complex features for more routine ones in order to lower the
fee.
Monday, April 29, 2013
Monday, April 22, 2013
Spending Too Much Time Collecting Money?
We know one young East Coast practitioner who seems to spend more
than half his time chasing clients to collect money. Sound familiar? A
talented designer and architect, he is quick to point out his
frustration with the system and the process. He’s tried various
approaches to reduce the time spent collecting money in an effort to
devote more time to design-related activities.
No method is full-proof – some clients are just impossible to squeeze money out of – but here are a few strategies – both preemptive and during a project – to try if you’re wasting too much time chasing clients.
• Carefully review the scope of work with the client. You and the client need to be on the same page about what you’re doing and getting paid for. Are the client’s expectations and budget in line?
• Review the contract in person with the client. Do not send it in the mail. Carefully review all aspects of the contract including phasing, process, schedule, and expected deliverables. Above all, review the fee and payment terms expected of the client.
• Get a retainer from the client of at least 15% of the total fee. Explain to the client that the retainer is held in escrow and applied to the last and final invoice. Be sure the client understands this to avoid any misunderstanding of the terms and conditions for payment.
• Bill by task in lieu of a traditional thirty-day billing cycle. Make sure you review this with the client.
• Include a stamp-only provision in the contract. Payment of all outstanding invoices is due and payable before documents are released for bidding and construction.
• If there are delays in payment, stop work and advise the client in writing of the action to avoid any future legal claims by the owner. The client needs to understand that the schedule will change because of this action.
• Get on the phone and ask the client if he has received your invoice and ask when you can stop by and pick up your check.
The key to collecting your money rests with the client having a clear understanding of his financial obligations. Additionally the design professional needs to take on a business attitude and be proactive when it comes to collecting fees due for services provided.
Design professionals are not in the banking business and therefore it is necessary to pay attention to the business aspects of the practice. This is particularly critical to young and small firms that have limited capital.
No method is full-proof – some clients are just impossible to squeeze money out of – but here are a few strategies – both preemptive and during a project – to try if you’re wasting too much time chasing clients.
• Carefully review the scope of work with the client. You and the client need to be on the same page about what you’re doing and getting paid for. Are the client’s expectations and budget in line?
• Review the contract in person with the client. Do not send it in the mail. Carefully review all aspects of the contract including phasing, process, schedule, and expected deliverables. Above all, review the fee and payment terms expected of the client.
• Get a retainer from the client of at least 15% of the total fee. Explain to the client that the retainer is held in escrow and applied to the last and final invoice. Be sure the client understands this to avoid any misunderstanding of the terms and conditions for payment.
• Bill by task in lieu of a traditional thirty-day billing cycle. Make sure you review this with the client.
• Include a stamp-only provision in the contract. Payment of all outstanding invoices is due and payable before documents are released for bidding and construction.
• If there are delays in payment, stop work and advise the client in writing of the action to avoid any future legal claims by the owner. The client needs to understand that the schedule will change because of this action.
• Get on the phone and ask the client if he has received your invoice and ask when you can stop by and pick up your check.
The key to collecting your money rests with the client having a clear understanding of his financial obligations. Additionally the design professional needs to take on a business attitude and be proactive when it comes to collecting fees due for services provided.
Design professionals are not in the banking business and therefore it is necessary to pay attention to the business aspects of the practice. This is particularly critical to young and small firms that have limited capital.
Monday, April 15, 2013
Culture is King: Don’t Sell Until You Ask
Has someone offered to buy you out? Before you start talking numbers
and giving away your firm’s financial information, talk at length with
the potential buyer to understand how he or she operates. If you do
sell, the result will be something like a merger, at least for a few
years. You’ll likely end up staying around working for the new owner, so
you need to make sure there is a cultural fit.
Remember, too, that your employees have been doing things a certain way for a long time; you want to make sure they’ll be happy in a possibly new culture with new rules. Otherwise, the deal could collapse of its own weight.
Before dealing with finances, deal with culture. PSMJ suggests you ask the potential buyer these questions:
Remember, too, that your employees have been doing things a certain way for a long time; you want to make sure they’ll be happy in a possibly new culture with new rules. Otherwise, the deal could collapse of its own weight.
Before dealing with finances, deal with culture. PSMJ suggests you ask the potential buyer these questions:
• What is your definition of growth?
• What effect does your ownership plan have on growth?
• Why is growth important to you?
• What talent do you need that is not present in the firm?
• How do you nurture and sustain future leaders?
• How do employees gain ownership in your firm? How long is the typical process?
• What criteria do you have for owners? For leaders?
• What is your firm’s mission statement?
• Why are you successful?
• How do you manage branch offices? Are they individual profit centers?
• How do you market projects?
• What is your success rate on RFP type submittals?
• What image does your firm currently project, and how will that change by merging with us?
• Describe your “bull’s eye” or ideal project.
• What type projects do you pursue, in order or priority?
• What constitutes good service to your clients? Exceptional service? How do your clients perceive your firm?
• How will you enhance our value? How will we enhance your value?
• How do you recruit employees? How do you determine salaries and bonuses?
• How would you rank these five character traits when hiring an employee: loyalty, experience, integrity, intelligence, ability?
Monday, April 8, 2013
14 Ways PMs Can Generate Cash Today
1. Start asking for cash up front on all small jobs (fees under $10,000) and do not credit the client until the final invoice.
2. Send statements and invoices at different times each month.
3. Send separate invoices for reimbursables and fees to avoid a $50,000 payment being held up over a $3.21 phone charge dispute.
4. Call clients seven days after sending an invoice. A friendly call always hastens payments.
5. Send self-addressed envelopes so clients won’t have to do their own.
6. Attach a sample copy of your invoice to every contract so clients aren’t surprised.
7. Make collections part of the project manager’s job.
8. Preprint an interest clause on each invoice even if it is not in your contract. Visibility counts.
9. Weight the front end of contracts more than the back.
10. Pay payables only when they are really due, but don’t jeopardize relationships by paying late.
11. Offer small discounts on government and institutional work. Most clients are mandated to pay
discounted bills first.
12. Stop work for non-payment if you have the right to do so contractually.
13. Do not stamp drawings until all client bills are fully paid.
14. Simplify hourly work. One architect charges a flat per hour fee no matter who is working on the job, including drafting and secretarial personnel.
2. Send statements and invoices at different times each month.
3. Send separate invoices for reimbursables and fees to avoid a $50,000 payment being held up over a $3.21 phone charge dispute.
4. Call clients seven days after sending an invoice. A friendly call always hastens payments.
5. Send self-addressed envelopes so clients won’t have to do their own.
6. Attach a sample copy of your invoice to every contract so clients aren’t surprised.
7. Make collections part of the project manager’s job.
8. Preprint an interest clause on each invoice even if it is not in your contract. Visibility counts.
9. Weight the front end of contracts more than the back.
10. Pay payables only when they are really due, but don’t jeopardize relationships by paying late.
11. Offer small discounts on government and institutional work. Most clients are mandated to pay
discounted bills first.
12. Stop work for non-payment if you have the right to do so contractually.
13. Do not stamp drawings until all client bills are fully paid.
14. Simplify hourly work. One architect charges a flat per hour fee no matter who is working on the job, including drafting and secretarial personnel.
Monday, April 1, 2013
6 Strict Rules for Harnessing Social Media
Perkins & Will has over 23,000 Twitter followers. HKS has over
12,000. AECOM has multiple Twitter accounts, each with its own focus,
and each with tens of thousands of followers. People in the A/E industry
aren’t following these firms just because they’re big and well-known,
but because they are incredibly active with their social media, have a
lot to say, and are well-connected themselves. Ignoring the whole ROI
argument about social media, our industry has reached the point where
firms who don’t have an online presence in the form of Facebook,
Twitter, or LinkedIn – or all three at once! – are dinosaurs. As Woody
Allen said, “80 percent of success is showing up.”
Your firm doesn’t need to be a giant in order to maintain a vibrant online existence. If you follow these six rules, it’ll uplift your social media program and increase your online connections.
1. Know your audience. This sounds obvious, but it’s not as clear cut as you’d think. Are your online “followers” mostly past or current clients, are they young tech savvy A/E professionals, are they senior managers and firm leaders, or are they an amalgamation of all of these? You must create and share content that your audience will actually care about.
2. Post frequently. Many small A/E firms think it’s enough to just set up a Twitter account or a Facebook page and then hope that people will connect with you. Wrong! Social media requires regular, consistent attention. You should be posting or sharing two to-five times per day. Look into something like Buffer.com, where you can pile up many day’s-worth of postings in one sitting.
3. Use hashtags and locations. No one is going to find your Facebook page and Twitter account on their own. Make it easy for them by tagging things. In Twitter, you can use or create hashtags (i.e. #architecture, #engnews, etc.) and include them in your tweets. In Facebook you can add location tags to your project or offices.
4. Loosen up. Engineering firms aren’t typically known for their good humor, and architects tend to be a bit “particular” about things (if you know what I mean). Show some personality in your postings. Of course, share photos of your completed and in-progress work, provide information about upcoming events; but it’s OK to be fun and colorful – even silly – as long as it’s appropriate.
5. Engage. Connect. Share. Don’t just post your own material. That’s egotistical and counter to what social media is all about. On Facebook and LinkedIn, “like” other postings, and ask a lot of questionsto generate dialogue. On Twitter, “retweet” interesting things, and thank your “followers” when they “retweet” for you. Social media is intended to be social.
6. Get out of the way. If you don’t personally use Facebook and/or Twitter on a daily basis – if you’re not intimately familiar with the lexicon and dynamics of social media – then you have no business sitting in meetings discussing your firm’s social media plans. Many firm leaders are guilty of this, making proclamations about what works and doesn’t work online, with no data or familiarity of what they’re talking about. Get out of the wayand let your staff members who understand social media lead this charge.
Your firm doesn’t need to be a giant in order to maintain a vibrant online existence. If you follow these six rules, it’ll uplift your social media program and increase your online connections.
1. Know your audience. This sounds obvious, but it’s not as clear cut as you’d think. Are your online “followers” mostly past or current clients, are they young tech savvy A/E professionals, are they senior managers and firm leaders, or are they an amalgamation of all of these? You must create and share content that your audience will actually care about.
2. Post frequently. Many small A/E firms think it’s enough to just set up a Twitter account or a Facebook page and then hope that people will connect with you. Wrong! Social media requires regular, consistent attention. You should be posting or sharing two to-five times per day. Look into something like Buffer.com, where you can pile up many day’s-worth of postings in one sitting.
3. Use hashtags and locations. No one is going to find your Facebook page and Twitter account on their own. Make it easy for them by tagging things. In Twitter, you can use or create hashtags (i.e. #architecture, #engnews, etc.) and include them in your tweets. In Facebook you can add location tags to your project or offices.
4. Loosen up. Engineering firms aren’t typically known for their good humor, and architects tend to be a bit “particular” about things (if you know what I mean). Show some personality in your postings. Of course, share photos of your completed and in-progress work, provide information about upcoming events; but it’s OK to be fun and colorful – even silly – as long as it’s appropriate.
5. Engage. Connect. Share. Don’t just post your own material. That’s egotistical and counter to what social media is all about. On Facebook and LinkedIn, “like” other postings, and ask a lot of questionsto generate dialogue. On Twitter, “retweet” interesting things, and thank your “followers” when they “retweet” for you. Social media is intended to be social.
6. Get out of the way. If you don’t personally use Facebook and/or Twitter on a daily basis – if you’re not intimately familiar with the lexicon and dynamics of social media – then you have no business sitting in meetings discussing your firm’s social media plans. Many firm leaders are guilty of this, making proclamations about what works and doesn’t work online, with no data or familiarity of what they’re talking about. Get out of the wayand let your staff members who understand social media lead this charge.