Architects are not business savvy and there is no correlation between winning work and profitability, says a new report
The research by Colander Associates - based on the findings of the 2013/14 RIBA Business Benchmarking Survey - also revealed that only 13 per cent of partners and directors of architectural practices were women.
All RIBA members are asked to complete the comprehensive, yearly survey which provides an accurate snapshot of how the UK’s practices are operated.
Worryingly, the survey uncovered that 60 per cent of the practices, a third of which are in London, did not have a business plan and only 15 per cent planned beyond one year.
The report added: ‘Forty per cent do not set annual budgets for income or expenditure and 20 per cent of the practices with fewer than five people do not monitor their cash flow.’
What’s more, according to the survey, there was ‘no correlation between success at winning work and profitability’.
‘Practices are chasing and winning projects at fees that are too low, or worse, they are doing large quantities of speculative work, with no fee at all: more than 60 per cent of practices kindly undertake speculative design work for their clients,’ said the report.
And when it comes to generating cash flow it also seems that bigger is best. ‘Those with more than 50 people generate more than 40 per cent of the profit achieved across the survey,’ concluded the report.
The same practices also had the highest proportion of high earners, with 40 per cent of partners and directors banking at least £100,000 a year in salary. However, in practices with fewer than five people half of their big cheeses took home a salary of less than £25,000.
The average salary for a mid-ranking architect is £33,000 plus just over £2,000 in add-ons.
The report concluded: ‘To run a successful architectural business someone in the practice needs to focus on a strategic vision and have both the skills and the passion to develop the business side of the venture.’
Other survey findings:
1: practices with 50 or more people generate over 40 per cent of the profession’s profit
2: practices with more than 50 people employ more than 40 per cent of the 28000 people working in architectural practices
3: of those with equity in Chartered Practices, only 1 per cent are non architects
4: only 13 per cent of Partners or Directors in Chartered Practices are women
5: the larger the practice the better the salary – at all levels of seniority
6: there remains no correlation between success at winning work and profitability
7: more than half of the new projects are won without a competitive process
8: more than 25 per cent of new work is won through fee bids where money is the only criterion
9: 20 per cent of Chartered Practices are working on projects outside the UK
10: 30 per cent of overseas income is from the Middle East; 20 per cent from SE Asia; 20 per cent from Europe
11: on average Chartered Practices work in 4.4 different client sectors
12: more than 50 per cent of Chartered Practices have fewer than 5 people
13: over 40 per cent of Chartered Practices’ income comes from private corporate clients
14: public sector accounts for 20 per cent of practices’ income – same % as contractor clients
15: the domestic market accounts for 13 per cent of practices’ income
16: for business success being a good architect is not enough
17: more than 60 per cent of Chartered Practice still don’t have a business plan – where’s the vision?!