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Then and Now – Architectural Design or Accounting

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On my next birthday, I will celebrate 49 successful years of surviving my yearly journey around a 1.392 million kilometer ball of hot plasma that burns at a temperature exceeding 10,340°F … more commonly known as the sun. In addition, I have been out of college and in the field of architecture for 24 years, 6 months, and 14 days, and a licensed architect for 14 years, 2 months and 3 days … and this weekend, for the first time ever, I worked on determining the utilization rate of my employees and billing efficiency of the projects that those same employees work on day in and day out.

Can you tell I’ve got numbers on my mind?

chalkboard math

So. All weekend working on accounting. I did not like it … but I didn’t hate it either. When I graduated from college with my 5-year professional degree in architecture, I only had three goals, (for the full version, go here – very inspirational) but for those who don’t want to sort through all that, here is the abridged version of those oh-so-important life goals:

It’s been over twenty years since I graduated from UT and if you had asked me then where I thought I would be in twenty years, I don’t think I would have had an answer for you. I only had three goals when I graduated; the first was that I wanted to make $100,000 a year. I chose that number because it seemed outrageous to me at the time, but also because I thought it represented success, which somehow meant that I’d made it. My salary upon graduation turned out to be disappointing $22,000 that year but luckily, things have improved for me in the last two decades. The second goal I had for myself was that I wanted to have a project that I had designed make it into an architectural history book – that’s a lofty goal. In the years after graduating, I amended that goal to simply getting my work published. My third goal was that I wanted to buy a jet ski.

I never did buy that jet ski … in fact, I’ve actually never ridden a jet ski and looking back, I’m not sure why I made that goal. I was able to achieve the other two goals, turns out they weren’t as difficult as I had originally imagined.

So why did I include that previous paragraph? Because “accounting” was not one of my goals. Nowhere in my future did I ever foresee spending my weekend reading financial books and pouring through tax returns and bank statements. I can barely tolerate addition and subtraction so sorting through all the financial data my firm has collected and trying to make sense of it was literally like death from a thousand papercuts. But, I can’t help but acknowledge its importance. This is something that I need to get a handle on and based on my current level of accounting knowledge, I am running an intellectual deficit.

The good news is that we have all the data I need to evaluate where we are and how we can make sure that we are making smart decisions moving forward. When I was coming out of school, I didn’t think owning a firm or running a business … it literally never crossed my mind. Now, those things occupy a large portion of my time. Staffing, cash flow, savings, bonuses, new computers, software license fees … it’s almost paralyzing and it’s easy to either a) ignore it altogether, or b) spend an unhealthy amount of time focused on it. I say “unhealthy” because I don’t really want to be doing it at all and I didn’t go to architecture school to run a business, but here I am.

I like to tell myself that one of the things I am really good at is asking questions. I have collected stacks and stacks of financial data, timesheets, reimbursable expense reports, monthly bank statements, and payroll slips. I have read and reviewed. And then I reviewed and I reread. After waking up from my boredom induced nap, I highlighted figures in yellow, circled entries in red ink, paper-clipped this month of “x” with that month of “y”. After hours and hours of data entry and creating umpteen thousands of excel spreadsheets, I formulated my first question:

“Michelle! Can you come here and help me, please?!”

Bob Borson Devil and Michelle Borson Angel

Which, of course, was the best first question I could have asked because my wife is a lot smarter than I am … and has advanced degrees in Mathematics. Her brain is perfectly optimized to process and organize financial data, so I asked her to help me sort through everything. Within a ridiculously short period of time, she had most of it analyzed and organized … explaining to me what she was doing was the hard part.

But that’s okay. I will get a handle on this because that’s what I do, I learn new stuff and try to make things better. In this case, it’s not design work, and it’s not anything related to the practice of architecture; it’s completely new and unchartered waters for me. My business partner has been at this for almost 25 years and he knows how to do all sorts of financial things that I don’t – but he doesn’t want to do them even more than I don’t want to do them. On the day when he does the billing, everyone in the office hunkers down just a bit lower at their desk and we try to stay out of his way.

Then = Published Architect, enjoying his $100,000+ salary while riding a jet ski.
Now = Part-time accountant/Human Resource and Part-time architect.

Didn’t see that coming … I should have taken some accounting classes.

Bob-AIA scale figure

Today was the 22nd installment of #ArchiTalks – a blogging event with other architects where I provide a word or concept and let them interpret it however they want. The topic was “Then and Now” and the idea was that I wanted all these different architects to tell their story of what they thought they were going to be doing when they graduated versus what they are actually doing – along with all the twists and turns the journey has presented to them. It should make for some interesting reading and give you an idea just how varied the profession of architecture can actually be. If you would like to jump down into this Rabbit’s Hole and read how other architects responded to today’s theme of “Then and Now”, just follow the links below.

 

Michele Grace Hottel – Michele Grace Hottel, Architect (@mghottel)
then and now

Mark Stephens – Mark Stephens Architects (@architectmark)
#Architalks 22 – Then and now

Matthew Stanfield – FiELD9: architecture (@FiELD9arch)
Where It All Went Right

Marica McKeel – Studio MM (@ArchitectMM)
From Then to Now…Residential Architect

Jeff Echols – Architect Of The Internet (@Jeff_Echols)
Well, How Did I Get Here

Lee Calisti, AIA – Think Architect (@LeeCalisti)
then and now

Mark R. LePage – EntreArchitect (@EntreArchitect)
The Biggest Surprise of My Life as an Architect

Lora Teagarden – L² Design, LLC (@L2DesignLLC)
Then & Now…and the middle

Nicholas Renard – Renard Architecture (@dig-arch)
15 Years of Architecture

Jeremiah Russell, AIA – ROGUE Architecture (@rogue_architect)
then and now: #architalks

Eric T. Faulkner – Rock Talk (@wishingrockhome)
Then-Now: A Schematic Story

Stephen Ramos – BUILDINGS ARE COOL (@sramos_BAC)
Big Ass Buildings

brady ernst – Soapbox Architect (@bradyernstAIA)
Pens & Fizzy Drinks: Or How to Set Measurable Career Goals

Brian Paletz – The Emerging Architect (@bpaletz)
How did I get here?

Michael LaValley – Evolving Architect (@archivalley)
Reflection on My Wonderful, Unexpected Career

Daniel Beck – The Architect’s Checklist (@archchecklist)

Jarod Hall – di’velept (@divelept)
The Joys of Being an Architect

Anthony Richardson – That Architecture Student (@thatarchstudent)
Then and Now

Kyu Young Kim – Palo Alto Design Studio (@sokokyu)
Career Path: Follow Your Heart

Nisha Kandiah – TCDS (@SKRIBBLES_INC)
Then & Now : Still Chasing the Dream

Jim Mehaffey – Yeoman Architect (@jamesmehaffey)
The Reluctant Code Guru

Tim Ung – Journey of an Architect (@timothy_ung)
10 Lessons Learned from a Young Architect

even better stuff from Life of an Architect

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  • Kerry Hogue

    in rereading the comments, there are references to utilization rates and how great they are. I also commented on that, and yes they are great. However, there are different ways to calculate utilization rates and they mean different things.
    for example, you can easily calculate your overall rate, dividing the directed billable hours by the total hours available in a pay period (or choose a period, week, month, etc.). This gives a skewed value. What if there is vacation, holiday, or sick leave taken (referred to as benefit hours)? the utilization rate is artificially low. To give a more accurate assessment of an individuals utilization rate, you should take the total hours available in a period, and subtract out any benefit hours. as an example, take this week, which is perfect because at our office we get Thursday and Friday off as Holiday. So say I worked Monday through Wednesday and put 8 hours each day on my time sheet to a billable project. Under the first calculation, my utilization rate would be 60% (32 hours billable divided by 40 hours available). So in the second example, my utilization rate is 100% ( 32 hours billable divided by 40 hours minus 16 hours holiday, or 32 hours available).
    as you can see the method of calculation has a huge impact on a person’s utilization rate. And there is where or not overtime hours are used in the calculation….

  • Chad Miller

    In the firm that I work at my utilization rate is constantly 90% to 95%, any lower and I’m chastised for not being efficient.

  • Stephen Ramos

    Great article Bob. I realize that I must read your website too much because I already knew of your jet ski dream. I have a feeling you will check that box some day also. My firm is big on utilization rates. Everyone in the company has a goal set for them and we have a neat little app that allows us to track it in real time. The numbers can definitely suck the fun out of the job some times. But like Mark LePage says: “Profit than Art!”

  • markdstephens

    Let’s hear it for the smarter better halves – yup that’s me too. I wouldn’t be where I am if it wasn’t for my much smarter (and prettier) partner in business and life.

    • let’s not leave “tolerant” off that list.

      • markdstephens

        Yup, very, very tolerant 🙂

  • Kerry Hogue

    The failure of many architecture firms is that they do not understand business. Our firm has always been in the business of architecture and considers ourselves a business centered practice. As such financial management has always been a requirement of our project managers and principals in charge. For the past almost ten years I have had financial management responsibility for our largest practice sector. Excel as become a way of life, as has a mastery of Deltek Vision. Tracking utilization rates, effective multipliers, accounts receivables, and other metrics is part of my daily routine. Never in my wildest dreams had I envisioned this is the route my career would take when I graduated from UT 40 years, five months, and 25 days ago. (okay since you where exact, I decided to be as well.) and I have been an architect for 38 years, seven months, and 17 days. Wow, see want a firm working knowledge of numbers can get you? who would have thought after all these years….
    the point is that once architects realize they are a business and want to succeed, then the financial management aspect is acknowledged as a critical part of the practice of architecture.

    • maybe it’s time for you and me to have another lunch …

      • Kerry Hogue

        cool. I will contact you to set up something in December.

    • It’s understandable that during an architecture student’s time in college, they’re usually too busy to take some business classes, but since (and I don’t have time to look the number up right now) a majority of firms fall under the ‘small business’ classification, it really would be beneficial to understand how a business operates. Most smaller firms don’t have the overhead to hire someone to be strictly a business manager/accountant/etc, and that’s why people like Bob have to wear so many hats. At AIA Columbus, we started a “Mastering the Business of Architecture” series last year attempting to shed some light on a lot of these topics for practicing architects and emerging leaders. We’re in our second year of offering it and I think it’s getting more focused, so hopefully, fewer principals and managers feel so overwhelmed by trying to understand the operations side of the firm if we can continue to open this sort of discussion up to more people.

      • Kerry Hogue

        yes we have a CFO and that is indispensable with a firm our size. I had no business classes in school yet somehow seem to be able to grasp the principles. the short of it is if you cannot make money you cannot properly serve your clients. Oh, and stay in business too.

  • Mark Mc Swain

    Back when I had more time to hang out with TSA, I remember some gripe-er, jam sessions, where we pondered just what was _in_ the nearly 200 credit hours an architecture degree represents.

    Was mor than a small amount of consensus that we all should have been pushed, by elective, or by stricture of curriculum into at least a couple Small Business classes. Most of the PE’s I know feel similarly–and those worthies are pushed out into the cold with no blanket and a broken plate even earlier than we in Architecture.

    I had a boss who fulminated (he was good at fulmination, and well-practiced at the art, too) that “An Architect Who Cannot Estimate Is Nothing But A Decorator!” Mind, there probably a lesson in how CRSS organised their firm and put a lawyer at the helm and let the Architects architect. (Allthough that’s subject to some review.)

    Being a small business owner is no easy task, I can tell you from personal experience. Made me wonder if I should have just gotten an Accounting degree instead. Sometimes. But, for those who can, then six-figure salaries can be expected.

    • Our firm is almost successful in spite of itself. Nobody took any business courses so this has all been trial by fire. The good news is that my partner – the one who has been at this for a long time – doesn’t make many stupid mistakes. What we are missing out on is the lose revenue that would be available if we put ourselves in a position to recognize those opportunities and then act upon them.

      I think that’s the real trick to finding financial success.

  • AndrewM

    1. Weld Coxe ‘Managing Architectural and Engineering Practice’ – long out of print but available for next to nothing on Amazon. 2. Buy and implement a Management Information System – many available to suit small practice. 3. Have a Partner’s Management Meeting once a month to see how you are tracking. For one day a month stop being architects, be business owners instead.

    • I’ll check that book out – add it to my “growing” collection. I recently bought “Financial Management for the Design Professional” and found it painful, but helpful, to read.

      It seems pretty reasonable to be “business owners” at least one day a month.

      Cheers

  • Jwkathol

    Great topic. Many years ago, I wasn’t much interested in “bean counting” either. However once I had a real stake in my company, I seemed to start enjoying that side of things more and more. I’m on the construction side, not an architect, but every 6 months or so I seem to get obsessed with every facet of how my company works, drilling down deep into adding up every receipt, every hour, every mile, every thought process, in order to get a clear picture of what each job actually costs. At first, the results were quite disturbing, but over time that database of knowledge gets larger and larger, and my ability to find weaknesses in the bottom line gets better and better. The result of all that optimizing can result in money found for a new tool, or a new computer, or maybe one months facility rent, or maybe over time a new work vehicle, or even enough to hire another worker.

    • That seems to be the catalyst for many people – once they have a stake in the company. I suppose that would account for so many “employee owned” companies doing so well – everybody cares about the bottom line.

  • Gene

    An issue with architecture schools and the curriculum is that it is almost totally geared to the Architect as designer, and seldom show or teach the many other facets of what is needed to produce good work and to be a successful business.
    My talents run toward the design end so I gained much in school. I don’t recall one course having much to do with the business side. Without some business knowledge you have no idea whether the firm(s) you may work for are going a good job of making sure the business is succeeding and will grow. Then if you are developing your own practice how to do exactly that. If you can’t or don’t have the skill on the business side you need to know when and who to hire to fill that role.
    It is not an easy profession because there are so many activities that go into producing successful work and staying in business at the same time. So don’t be like the architect who wins the lottery and is asked what are you going to do now? That replies “practice architecture until it is all gone”.
    A little incident comes to mind. I was visiting a fellow architect a couple years after we graduated, and we went out for some drinks to a local bar he knew. There was a very good band playing and there was someone running around doing al sorts of tasks for the band. Then the band went on break, and this guy then sat down and did a fantastic set on the drums, much better than the drummer. I ask who he was and my friend that knew the band said, “Oh he started the band”. I became clear to me that success may push you out of the job you love. So like a good architect PLAN AHEAD!

    • This seems to be the consensus among people who have an opinion. You have to have some skill at business side of things if you really want to take advantage of the design side of things. It’s been a while since I checked the curriculum at my alma mater so maybe things have changed, but business courses (beyond the typical professional practice course that seems so ubiquitous these days) should be encouraged.

  • Bob, loved the post. Do you think that as you’ve gained more experience over your career that you’ve been naturally pushed toward the ‘business’ side of the practice? Or do you think that it just comes with the territory of owning a business in general?

    • There’s no question that I’ve gained experience over time if by no other reason than I’ve been around the conversations. Now that it has a direct impact on me, I can’t be passive about it anymore. It’s a necessary evolution to the practice of architecture if you are somehow associated with a small practice.

  • TIna C

    As an architect and an owner representative for a large government organization – I routinely find that Architects are notoriously bad at sending us their progress billing. For my org predicting project cash-flow accurately is important and architects have to be routinely reminded to bill us!! Engineers are significantly better at this, though also far from perfect. I understand that Architecture schools are not where you go to learn the practise of architectural business. but considering most architects usually want to someday start their own firm… that is rather self defeating for the profession. its not something an intern will learn at their jobs, since the finances are always guarded secretly (perhaps with good reason). what are your thoughts? Should the practise of business not be part of architecture schooling or internship in some formalized way??

    • it should definitely be included – I doubt you would ever hear something to the contrary from someone who is actually in practice. In my office, we don’t have an issue with billing, and I’m not sure that my partner would think that we are doing a poor job of financial management. What we struggle is that we don’t really do anything will the mountains of information we have available to us and as a result, we can be slow to react to how things are evolving in the office. Things like utilization and the realized cost/benefits of some of the things we offer are not studied. We don’t ask people to work overtime, we pay for just about everything (AIA, conventions, charitable causes, etc.) without ever really evaluating the true impact to the firm’s resources. Our motto is that we try to do what we think is right without considering if it’s actually the financially responsible thing to do. So far everything has worked out, but the firm is growing and we need to make sure that we are prepared for what’s to come.

  • Lora

    So, with this newfound knowledge – do you think business courses should be required for architecture degrees?

    • even without this newfound knowledge, I thought business courses should be included in our curriculum. Considering the statistics that supports that most practicing architects will be in small architectural firms, this seems like an imperative for our industry’s preservation.

My “Serious” Disclaimer

The complimentary advice provided on ‘Life of an Architect’ is based on an abbreviated examination of the minimal facts given, not the typical extensive (and sometimes exhaustive) analysis I conduct when working with my clients. Therefore, anything you read on this site is not a substitute for actually working with me. Following my casual advice is at your own peril … if you want my undivided attention, I would recommend hiring me. Cheers.

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