What is the average salary for an Architect?
In my I made the strong case as to why your small firm needs to think like a business and not just like an architect. Your financial health starts with creating an Operating Budget – also known as a Profit Plan. Why a profit plan? Because you’re in business to make money, that is profit. Remember; no profit equals no business.
I’m going to share with you how to develop the simplest, most bare-boned version of a Profit Plan that is helpful to any small or emerging firm. So grab a pencil, a piece of paper and a cup of coffee. Turn off your email and silence your phone. This is dry material for an architect but important information you need to know.
There are three steps you need to do when creating a profit plan:
Step 1: Estimate your expenses. Don’t include any of those that are reimbursed by your client (e.g., printing, travel, pass-through consultant fees, etc.).
Step 2: Set a Profit Goal. This is generally thought of as your return on investment (ROI). It’s a percentage of your total expenses. All the effort, and money, you put into the business should return you a profit. This is what you would expect if you invested the money in something else like stocks, bonds or real estate. What’s the return you want to see? I recommend 20%. Otherwise, take the money and invest it in the stock market. You’re also pouring your life into these projects so the return should be commensurate with the effort.
Step 3: Add your expenses with your Profit Goal to get the Net Revenue Goal. This is called Net because it doesn’t include those reimbursable expenses I mentioned earlier. Your Net Revenue Goal is what you plan to invoice your clients for your services. In the sample profit plan shown below, the Net Revenue Goal is $500, 000.
|SAMPLE PROFIT PLAN|
|5 Person Firm|
|Principal||(1 @ $100, 000)||
|Project Architect||(1 @ $70, 000)||
|Intern Architect||(2 @ 35, 000)||
|Office Administrator||(1 @ 25, 000)||
|PAYROLL TAXES AND BENEFITS||
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