How to Set Your Hourly Rate (Architects + Interior Designers)
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- Опубліковано 27 бер 2019
- Calculating your hourly rate isn't difficult, but it's not something they teach you how to do in design school. I'll walk you through two methods you can use to determine yours. The first is a simplified version for freelancers just getting started and the second is a more detailed calculation designed for young professionals and those who want more control over the financial health of their business (don't worry, I've done all the math for you).
*Download the spreadsheet (now included) in the Architect + Entrepreneur Startup Toolkit here: thirtybyforty.com/SPL
Or, the stand-alone document: thirtybyforty.com/hourly-rate-...
You'll learn how to calculate:
*Utilization rate
*Your salary
*Office expenses
*Overhead Rate
*Profit margin
*Break Even Cost (+ Rate)
*Net Multiplier
And, you'll understand how each contributes to a sensible hourly billing rate designed to support you and your business. So, rather than choosing a billing rate randomly (like I did by asking friends) or by guessing, you'll have the confidence to speak about your financials with your clients and the ability to track your profits throughout the fiscal year.
They don't teach us these things in design school, but they're a crucial part of ensuring our architecture will be constructed in the world. Without a sustainable (profitable) business model, you can't continue to design your best work.
// GEAR I USE //
CAD DRAWING TEMPLATE:
* Download here: thirtybyforty.com/autocad-temp...
ARCHITECT'S TOOLKIT:
* Architect + Entrepreneur Startup Toolkit: thirtybyforty.com/SPL
ARCHITECTURE ESSENTIAL TOOLS:
* thirtybyforty.com/archi-gear
PHOTOGRAPHY GEAR:
*thirtybyforty.com/my-photo-gear
MUSIC I USE:
* thirtybyforty.com/music
#architecture #businessofarchitecture #interiordesignbusiness
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Please watch: "Making a Site Model - The Outpost Project"
• Making a Site Model - ...
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Hey all, if you don't want to create your own, the spreadsheet is bundled along with tons of other resources in the toolkit here: thirtybyforty.com/spl
Is the spreadsheet no longer offered standalone? I don't have need for the full course, but could really use the help on these hourly rate calculations.
4:50 "Architects dont work overtime"
Great sense of humor
I just wanted to pop in and say that although I'm not an architect, I'm a licensed contractor... I have been wanting to raise my standards to provide services and close more bids FAST, efficient thus professional and a step above the rest. I've been self-learning how to sketch drawings from another video and I come here for the majority of the planning and other aspects. This man helped me go from $8,000 bids to $14,000 bids literally in 20 videos. I'm on amazon about to order some pencils, trace paper, sketch book and some other essential tools. God brings you to people in many ways, I clicked on your video by accident with no intention of drawing or anything, but now if I'm not waking up in the morning to pick through your videos, I'm not raising my standards so now it's business policy to watch all these training videos. Thank you so much for taking all the time you do to make these documentaries and share steps aimed for archs in training and pros. My clients have believe I an arch and contractor but I tell them I'm not but they are amazed at the results i bring because of you! THANK YOU. I'm off to amazon to place my orders now.
Appreciate you taking the time to share your story...and congratulations! Much success to you...Eric
Great stuff! You can either lower your rate and work a lot of hours - or raise your rate to work less hours. Go with a low HR and you'll receive a lot of work, but work yourself to death to make any money. Raise your rate, you will lose some clients, but work comfortably and make enough to survive. I started out with a lower HR and worked a lot. Over the past year I have slowly increased my HR so my clients don't feel an initial shock, and decreased the days/hours I work to actually have more free time. In order to do that, I keep my email and phone off (screen calls) and get as many billable work hours in as possible (return emails and phone calls later). I always tell people, if I'm not sitting at my desk drawing/designing, I'm not making money. So I try to keep meetings, phone calls and other interruptions to an absolute minimum.
Hey, Rob - glad to hear you've raised your rates, I know how busy you've been...!
It takes real discipline to turn off the notifications, but I'm always amazed at how much more productive I can be without all that noise...much success to you...
@@30by40 The only thing left distraction wise, is to STOP watching UA-cam videos but dangit there's soooo much to learn!!!
Eric, you just keep improving myself with your knowledge. I do think, that the best way to learn, is to teach, and you are a FANTASTIC teacher. Thx again. Cheers
I've been struggling with this for the past few years, so thank you so much for sending this out into the world Eric! Well presented!
Hey Eric, been watching your videos for a little while, and really really appreciate the thoughtfulness, quality, and insight you bring on all of them. Thank you for sharing!
Bought this tool kit last year and just got the email update a few days ago. I’m excited to get into this and see where it can go. Thanks again for producing all these products and videos, you’ve been a huge help for young architects and entrepreneurs.
All the videos you made are awesome. I am a civil engineer in Brazil.
This video in particular is the best one.
One major issue is billing our client, our real price for the job we take.
This spreadsheet, in particular every meaning you gave us will be the oportunity to make lots of considerations e so on.
Again, thank you so much for this video!
One of the most helpful videos on youtube, hands down! Thank you so much for this information Eric. As an emerging professional who does a lot of freelance work to gain experience this is invaluable information.
Thank you for being so open and honest about this topic!! I've been looking for an example like this for ages....
I have been looking for clear visibility about how to allocate hourly costs for a long time....thank you thank you, Eric, for such a helpful view of the various way to approach the visibility of doing this ..... you are so helpful and this is GOLD.
Hello Eric, thank you for sharing as usual very informative. About 20 years ago, I did a simpler and similar spreadsheet. I run the numbers for a sole-practitioner, 1 principal and two employees, 2 principals and 4 employees and so on, I was overwhelmed at the amounts of billables that it would require to sustain the different scenarios. It helped me to better appreciate my employer at that time, as well as to decide how I wanted the rest of my career to continue.
Again, thank you for your sharing.
your videos are the perfect start to a working day.
Hey Eric. Your videos are pretty awesome. I watched a few of them and they took me back to basics. I’ve been running my firm for almost 30 years, read many business books and took many business classes at the local university and this is the best I’ve seen. Thanks! Keep up the great work!!!
I am a Professional Quantity Surveyor watching from Zimbabwe.
Calculating costs is a piece of cake for me, but I'm impressed with your presentation!
Hey Eric. Your content is top notch, keep up the great work. Cheers, Tim.
Thanks Tim...appreciate that! Sorry to have missed meeting you IRL two weeks back...be well!
\m/
it was very helpful Eric for me and for the starting studio that i have, you give me lots of inspiration
Very good and I like that you put it in a workable format. I may have to pick this up.
Thoroughly helpful and clearly explained introduction to the business of architecture. More like this please!
Your time management skills are inspiring. I use the pragmatic approach, but I have not including some items. Thanks for sharing your insight.
This is a great introduction to a critical skill. Not only is it not taught in school, but the things you learn in the design studio- exploring lots of options, working endless crazy hours, getting halfway into something then changing course- are exactly the things which will sink a real business. Overtime is not free, even if it is your own.
While hourly billing is a basic thing to know for planning, most clients will want a cap on fees, either a lump sum or hourly billing to a max, few will pay open ended hourly fees or % of construction. You need to track the hours that go into your work so you can estimate fees. That’s why tracking overtime is important. Even if you find a rare client who will pay a 20% fee on a $1 million home, you need to use this spreadsheet info to budget how many hours you have to do the work. As Eric notes in another video, schematic design- cresting the idea you will document and build- is only about 30% of the total time, so if you have the $200,000 fee on this home, you have about $60,000 for design, less engineering and consulting costs, so maybe $40,000 for architecture / $150 per hour thus say 266 hours for all those site visits, client meetings, building and zoning meetings, model making, thinking, sketching, presentations and all the emails. You will need to work quickly and efficiently and not reinvent everything each time. Your mileage will vary, but planning and managing budgets is a critical skill if you are selling consulting and design services.
And by the way, real world fees for projects other than custom homes are often 3%-8% of construction cost.
just happy that you exist, thankssss
These videos are really valuable. I'm an architecture student in Istanbul. Thanks to you, I am raising my awareness of architecture. Thanks.
thanks for checking in my friend...would love to make it to your part of the world one day...
sir you are great. You're fan and subscriber from India who is currently in the last year of architecture.
Wunderbar! Very informative, yet put into Lehmans terms without all the usual accountancy jargon that you get from most people. Thanks Eric, keep up with the fantastic content.
cheers my friend...glad you found it helpful...TBH I find wading too deep in the accounting stuff kind of daunting myself! thanks for watching...
Nice! I have a similar spreadsheet and works in a fantastic way to set goals for the year and keep track of the lifeline of my firm.
Love it! I wish it was around when I started out 10 years ago.
Thanks Eric ! Thanks for sharing wonderful knowledge.
Lol, glad to see you pointed out the difference between a margin and a markup, most people don't understand the difference or why they can be of different values/percentages.
I've noticed when people new in self employment who farm out the work to subs and/or employees quote a price to a customer tend to fail in including their own personal time managing the work as an overhead admin cost to their experiences, but unwittingly use the profit margin to cover that expense.
cheers my friend...that kind of mistake adds up quickly, right? thanks for adding to the conversation, it's an excellent point you raise re: properly accounting for overhead...I wish I had mentioned that...!
Thanks Eric! I love your videos more and more everyday. Such an inspiration of doing videos. I want in. :)
really appreciate that my friend...go make things!
Thank you...it is very Insightful...
They don’t teach any of this at the Enginering school either. Great stuff. Thanks for sharing.
Eric, Another cracking Video, which has actually got me thinking i should review my rates as i haven't in 5 years! purchased your spread sheet so lets see what the outcome is! $500'000 i liked that at the end! THE DREAM for a sole practitioner.
Thanks so much for this video. It is beyond helpful
right
Thanks for the kick in the pant seat at around 7:30 !
Thank you for your helpful videos Eric.
of course my friend, thanks for watching...
some powerful financial tools!
I’m a youtube youngster here but since I also do Photography and Videography for weddings for my cousins privately. and that I am needed to getting ready on what carreer is the best I am trying to focus 2 things at once but great work for fitting the 2 or 3 things that I may do or like in a video.
Wow Eric! Where were you 20 years ago?! I could have had you tune up my accountant! Seriously, this is such great info for people starting out or those that may be struggling in their businesses. Would it be okay if I shared this with my Students? I am doing a little CAD instruction at the local college in the Interior Design program. Thanks for all you do.
Great vid as always :)
Hi Eric, a good tipp to layout your Excel Spreadsheet consistent with your Coporate Design and make it Printable ist to use the American Standard Format of Paper and then Hide the other columns and rows. Build the Title Block on the Bottom of the Paper because it gives all the Adminstrative Information of the Sheet like a Technical Drawing. On the head of the Paper you can make also a header. The rest of the area is for content like Diagramm or Calculation Information whatever you want to put in there. Save the Spreadsheet as Template in The titleblock you can do your logo or your clients logo. Another good Method what i use is the rS1.Method from Rheinhold Scheck its a perfect Method to Organize Excel Spreadsheet and make it sustainaible. + Still love you. great Job
Now this is great, Thank you
cheers mate...all the best...
Hi, really like your videos, and wish if you could make a video about architectural draughtsman job and your experience with their role in architecture. I'm really interested by this job and would like to start college next year.
Thanks.
i think i need to learn more ...
thanks for the video... great information
the important things that me and my friend always forgot.... "ARCHITECTS DON`T WORK OVERTIME" its a nice word for me to read..
Not an architect - but actually found this really useful (would have been even more useful when I used to be freelance!)
Great! Thank you.
Your videos continue to inspire me. Very useful tool, I've done something similar a few years ago, its great to get anther perspective.
Please check the tool and correct me if i'm interpreting it incorrectly. I've spotted what seems to be an error on cell G2. Hope this helps.
Thank you a lot!!!
Great video and super helpful, something I wish they would teach in school. I'm probably going to watch this like 10 more times. You may have mentioned this in other videos and I may not have seen it yet, but if this is your billable rate and hours and the architecture fees are about 10% of a project budget do you estimate hours/cost for a proposal through some extrapolation of this?
Great videos! How many projects do you take on at a time, and what's the project cycle like? I work for a structural engineer, and it's chaos with like 40 projects going all over the place. I'd love to see how you manage your clients and projects.
Please!!! Make a video for making modern and old type of roof,dome shape..roof etc
Thank you for giving out this information. Why don’t they teach this in school? Better late than never...
Thanks Erick! ... This video has invaluable and enriching information for our small firm of architects, in the Dominican Republic. After seeing how convenient it is to adjust everything to a rate per hour, we have a question: How do you calculate the time it takes you to design a particular architectural typology, say for example one of your houses? Regards.
Hello! I write you from Spain, first of all congratulate For your UA-cam channel I think it is very inspiring and has helped me with my own studio. I was wondering if you could give us some tips to organize projects. Thank you very much!
Interesting that the same issues affect architects on either side of the Atlantic. I had almost the same conversations with myself before setting up my business. When it came to hourly rate I discovered that the more ‘realistic’ (I.e. higher) the rate was, the more clients were willing to accept it. Clients (IMHO) feel reassured by a professional level hourly rate. They expect hourly rates from other professionals (lawyers, consultants etc) and architects are no different.
Hi Eric! How are vacation time and holidays accounted for in your break-even analysis spreadsheet? Are they baked into the indirect labor number? Great stuff, I bought your book and have been studying it.
It would be great to hear something about alternatives to time as a basis for billing. Obviously, you need to think about time for your own internal purposes. But it seems as if there might be circumstances in which both you and the client might benefit from a billing system that focused on outputs rather than inputs. No worries, of course, if this isn't something you care to focus on.
Thanks for the email and update, much appreciated!
cheers Victor...really appreciate your support!
Hey Eric, are you using the numbers including TAX or should we always put TAX on top of the final numbers (hourly rate). If TAX is on top, are you counting software, utilities and other without the TAX as well?
It’s really interesting the similarities and differences between pricing design work and what I do in custom cabinets. Calculating the hourly rate is more or less the same, but coming up with proposals and such is very different. I’m actually looking into charging for my design work and am curious your thoughts on that. Architects get paid for designing stuff, why shouldn’t the cabinetmaker. How would you suggest I go about charging for my design work?
hey eric, I was wondering what constitutes 'indirect labour costs'. would you be able to give me an idea of what this includes?
Coincidently I was watching one of ur model making material video wen my notification popped up.
nice...bonus points for you...
\m/
@@30by40 yeah, u don't know how much u really help/ inspire me. Its the little things that make big differences 👏.
Great...
Is there any way to get this, without going for the full toolkit, as I won't require it all?
Great video Eric! I have a question regarding passive income. What is your suggestion if I, a young architect, wanted to dive into developing a product. Thanks for all your effort into these videos they are an immense help!
Thank you my friend...re: passive products, a good starting place is my book Architect + Entrepreneur Vol. 2: thirtybyforty.com/ae-passive
I also have a video coming up soon showing the behind-the-scenes process for a product I've been developing...it's set to be released soon (more here: thirtybyforty.com/now ) ...stay tuned!
This is amazing. As someone who wants to create my own buisness eventually this helps me With that. You have been so helpful. I wish I had met you when I was in high school, or hell even now in person, there is so much I could learn from talking with you
Funny you put this video up today. I last week I was asked by a family member for a quote on a 3,750 Sq ft 2 story that she designed herself. Long story short she needed formal plan sets for submitting to the building department to start construction. I charge by total Sq ft of the project, and in my area the going rate is about $2.75 per Sq ft. I gave her my terms of service and my total price. Basically I charged her $2.60, which came out to around $9,750 for everything. In the end She chose to go with another firm. I don't think I'll ever get used to not getting a project.
Also, can you make videos on architecture contracts and architecture quotes, like how to write them, what to include in them, how they should be worded, etc?
Oh boy. How much less did that other firm ask for the permit plans?
Thanks for the lecture Erick. Ps;The background music at the end was missing.y?😉
hi sir are u there
@@archinews2951 Yes, I'm.
yo Eric this is an old video but I was wondering. I watched alot of Chris Do (The Futur) who is a designer (not an architect). He always says to charge value not hours, I have problems implementing this as an architect tough, could you elaborate on that?
at 12.13 the utilization rate increase to 65% increases the direct labor figure as well as the indirect labor figure in the excel. is this right?
Awesome content.. can we have videos for architecture students ?
His whole channel has great tips for students! Make sure to scroll and see his video library. Cheers!
For sure, check the back catalogue for lots of student related content...I try to spread the topics around to reach all corners of the profession...
Riky Song Su thanks for your reply .. I’m watching the channel for two years Until now ..and I learnt alot so i asked for more videos for students like a special type of videos separate from other types .. thanks
is it possible to find the excel that you are using? i coudn't find it.
Hey Eric, can you try to make more European-open spreadsheet? For example - to make it easy to change VAT or other costs (for example GREEN cells).
I don't know what a "European-open" spreadsheet refers to...
@@30by40 Sorry Eric, I did not correctly write last comment. What I meant is:
1. Is this template ready for any other country? Or was it made specifically for US?
2. What about the taxes? Does this template take into consideration them (if yes, then what is the tax rate here?) or not? For example, in your spreadsheet, cell A9 is assuming 25 of tax. In this case I just wonder if, in case of software, should I count netto or brutto value? (normally I would go with netto, so before the tax)
3. If I would like to work as a 1-person office - I still don't quite get the difference between "Principal" and "Prefessional Staff Member 1". Can you explain it a bit more?
Thanks again for the informative video. Do you need Excel for the spreadsheet or can it be used with Google?
Hi David...absolutely, you can open it with Google Sheets...
@@30by40 I downloaded the Excel spreadsheet but how do I open it in Google Sheets? Thanks.
@@DavidFerguson62 If the file is already in Google Drive: right-click on the file, choose Open with and then choose Google Sheets.
Never mind I figured it out.
thats always an interesting question. how much should I take. thanks for the video
cheers...thanks for watching...
You should honor the HOAI :)
Eric, I am curious what your thoughts are on the line of thinking about charging based on the value you bring/add rather than based on time? It seems our industry is very resistant to this and very much married to billing per hour, a % of construction, or some combo of the two... Since starting my own studio I have billed every project at a fixed rate. Granted it is based on how much time I expect to spend multiplied by my desired hourly rate, but I have found my clients prefer this because they know exactly how much they will pay for my design services. The only time I didn't do this was on the second round of design changes to a "completed" design I charged an hourly rate. (That put an end to the change requests!)
I agree value based should be the goal, it's something I'm working toward too. If you're familiar with my A+E books, I discuss how my passive products accomplish this while limiting risk at the same time. In general, I think value-based pricing lends itself better toward larger scale work rather than the kind of work I do, or the typical freelancer might do. Corporate clients inherently understand the ROI of their investments, so architects may have better luck becoming equity partners to capture the true value of their work. RE: fixed fees. As a sole practitioner fixed fees really scare me because the risk is assigned unequally to the design professional. I've worked for firms where fixed fees went sideways and did a lot of damage to the P&L and office morale. The problem is any change in scope or time (things take longer, a client needs more options, there are construction delays), with a fixed fee requires you to either: negotiate new terms or it comes out of your margin. I think it's possible to fix your fee for work of known scope (CDs for example), but much of the design process involves unknowns (PD, SD, DD, CO). With an hourly fee it adjusts according to the time it takes to do the work, and it still pays your margin. I didn't get into it in this video, but this spreadsheet could easily be tweaked to create a value-based fee whilst ensuring you maintain a baseline profit margin. Hope that helps!
@@30by40 Can you open this abbreviates please Eric, I could not understand the CD, PD SD DD CO, ı would appreciate it, thanks.
What kind of reasons that dissuaded you from adopting a billable per sq ft rate with clients?
Many reasons, but mostly because it would be different for every project and would change along the way. For example, the smaller projects share all the same complicated spaces + systems (kitchen, baths, mechs) they're just packed into a smaller footprint, so for those projects I'd have to charge a higher /SF rate. Then, if the client decides to remove SF from the project, my fee would have to be adjusted accordingly and would go down even though it would require more work. The same is true if the fee is tied to the cost of construction. Hourly billing allows me to embed profit into every hour I work and fairly assigns the risk between client and architect.
How to verify to client what worked your project works this much time spend. Because some people thinks we charging for higher than what we worked hours actually
Stay till the end !
@30x40 Design Workshop i didn't understand why multiplying Break even amount by 0.2 and then adding it leads to only 0.17 profit. can you explain please?
Google: margin vs. markup. Le's say your revenue = $10, if you mark it up 20% that = $12. However, to get a 20% margin, you need to divide $10 by 80% and you'll get $12.50...if you run that through using the numbers in the video, you'll see what a large difference this makes...
@@30by40 For Example: A 100% Markup = 50% Margin. Gotta Love Percentages!
Excuse me sir, I'm a newbie and I have some ploblems about Tool and Method in design process.I hope that you can help me,Thx.
check out the playlists on the channel, tons of content to help you there...
Now the million dollar question i struggle as professional architectural designer and sole proprietor. Do you quote your potential client more and have the possibility to loose the project or do you quote them less and win the project but end up spending way more time on it because you under quoted and wanted the project. I struggle with this on a daily basis not knowing what to quote. Usually to end up getting the projects you don't want and which you quoted high for. When i started i took on every single project busting my ass off day and night (still doing) just because word of mouth is my main advertisement. I want every project and want every project to be perfect but actually the right way is just to choose your projects wisely.
Agree completely with your last statement. And, I think we all start by taking on everything that comes our way, then we learn what to say no to. Difficult lessons, but invaluable. RE: quoting. I always quote on the higher end and this is especially true if you're receiving most of your work via referrals. If you're referred to the next potential client as the 'inexpensive guy' that can be a difficult reputation to shake. I'd much prefer to be known as the 'expensive' one. Good luck out there!
I am in the same boat, only that over here in Germany we have to stick to an official table of salary, depending on the overall building costs for a project. There of course is some wiggle room, but to it has never been a good thing to "undercalculate" a project and work for less than the minimum rate calculated in those tables. Again and again I kick myself when a project takes longer than expected and I have to put in more work hours, resulting in lesser and lesser hourly rates. I actually do what I do when calculating project costs, namely see whether the salary calculated via the tables is somewhat near a calculation based on estimated project time and an hourly or daily rate. Smaller projects turned out to take way more hours but naturally are lower in building costs, hence resulting in way too less salary when calculated with the official tables.
So I talk to clients upfront about this, and if a client with a smaller project thinks he can manage the build partly by himself I usually give him a quote for helping him upon request, salary based on an hourly rate.
Sir How much rupees to drawing a ward droobe .
J’adore son voix mais je comprends rien dommage, dommage aussi qu’il y a pas de sous titres
My girlfriend says that your excel style is amazing
12by80 feete plate ka map kesa hoga
I just want to be like you
Sure these numbers are important and all...... but are you happy with the aesthetics of the spread sheet??
4 weeks of un-billable time is an amazing efficiency ratio in this industry - I usually hear that if you are hitting 70% billable that's very good. Mine is much less.
Then I watched further. never mind. (Utilization rate)
Plus this is a great video - mind if I share on the EA facebook page?
thanx for sharing video
but it seems advanced level to me , :(
OMG !!!
I have to push back a little against your comment at 1:57. I don't believe your own internal overhead costs should EVER be a concern of your potential clients. If you can show past work, explain your process clearly, and get your client invested in the outcome and successful results as much, if not more than you, then your fees should all be based on VALUE. If you're good enough, you should be designing a custom home for the equivalent of $500/hour on a laptop in a coffee shop... also, very interesting to see the proportion of revenue in the 'courses' cell of your passive income...do tell! :)
busted...you didn't watch the whole thing...
Where is part 3 to model making? Where is it?
I would appreciate it if you could add Japanese translation function.
I’ll do 10000000$ per sec lul