Include Skill Level In Your Pricing

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.

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.

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:

• 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?

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.

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.

6 Tips for Getting Paid Now – Not Later

If your invoice goes unpaid for more than 45 days, something is wrong! Get on the phone, go visit the client, send an email, DO SOMETHING! But don't let the non-payment issue continue. If there is a problem, address it immediately, and ask the client to provide a firm date when your invoice will be paid. The longer you wait, the harder it is to collect your money.

Here are 6 proven strategies for motivating your delinquent clients to pay you, and quickly:

1. Stop work! If non-payment of invoices exceeds 60 days, stop work and notify your client of this action in accord with the provisions of your contract. Refer to article 9 of AIA Document B101-2007 for guidance.

2. Don't design for free. Limit the amount of concept designs you will prepare under basic services. Stop designing "till you drop." Most projects will sustain two concepts. On selection of the preferred design, develop it and move on to the next phase. Be sure to get a written acceptance and sign-off by the client. To make this work, be sure you understand the specific needs and scope of the project. Good upfront listening is the key in making this requirement work.

3. Get a retainer up front. Hold the retainer throughout the duration of the project and apply it to the last invoice. In many ways this helps guarantee that final payment will not be held hostage for any disagreements, real or unreal. Also consider holding the retainer until you've received final payment, all final paperwork, guarantees, warranties, maintenance manuals, asbuilt drawings, and other traditional deliverables.

4. Review the contract with your client. Do it in person! Pay particular attention to billing procedures and timing. If the client has any specific requirements or format for billing and payment, review and understand them. Review the information with your accounting department as well. Be sure that you and your client understand Article 6 of B101, "Cost of the Work," as it affects your billing and project costs. Don't leave money on the table because you didn't include all project costs.

5. Adjust your billing rates. If the project is of a long duration – more than a year – be sure to allow for adjustment of hourly billing rates. Raises, benefits, and other overhead factors can easily strip away profits if not monitored and adjusted. Understand what your overhead factors are. Many state and federal agencies limit overhead costs, and specific items such as marketing costs are deleted from the calculations.

6. Learn to put your pencil down. Designing, changing, and constant tweeking will guarantee that you will loose money. Once the client has signed off, proceed to completing the documents in a most efficient manner. If any changes are instituted by the client after signoff, or because of other factors such as code revisions, get paid for your work efforts.

You might be better off working on your strategic or business plan than taking on a commission or project on the cheap! Fee shoppers will keep dragging your fee down. Do you want to be known as the "cheapie" in town? Better still, do you want to stay in practice? Learn to say no! Be fair, be honest, and get a proper fee for your work; and stay away from the shoppers and fee cutters.

Sweating the Small Stuff: Controlling CA Costs

PSMJ Resources recommends the following techniques for controlling construction administration costs resulting from contractor requests.

•  Charge the contractor for copies of electronic drawing files. One of the problems PMs often encounter is when construction contractors request digital (CADD) files to make it easier for them to prepare shop drawings. In most cases, design firms simply provide these files at no cost. However, many firms have been successful in charging contractors for this information, and the success has been with both public and private sector clients.

•  Include a clause in the specifications that you will charge the contractor, at normal billing rates, for time spent evaluating requests for substitutions. These charges will be deducted by the owner from the contractor’s progress payments and paid from those funds to the A/E firm. 

•  Add a clause to the specifications limiting the number of shop drawing reviews to one resubmittal per shop drawing package. Time spent by the A/E team on additional resubmittals will also be deducted by the owner from the contractor’s progress payments and paid from those funds to the A/E firm.

•  Build in restrictions on how often you will inspect punchlist items. If team members need to travel numerous times to look at an item, there is a serious problem.