Peter Eerlings is creator of Archisnapper, an intelligent site management app that helps architects create field reports. HE also hosts a series of informative articles about technology and business for architects on the Archisnapper Blog.
(Up-front warning: For simplicity, we only talk about hourly rates in this article, but the same is true for fixed-per-project pricing.)
Defining your hourly rate is a difficult thing. Many architects, contractors, project managers and construction engineers are afraid to set their hourly rates too high, especially when they are just starting their businesses and clients are not yet queueing up. Here are the two main reasons (or rather assumptions) for a low hourly rate. This is what you might think:
1. Setting a lower rate will attract more clients.
2. With a lower rate, clients will not expect too much, they will complain less and expect less from you.
I have shocking news: Both are not true. In fact, the opposite is true! Here is why:
Assumption 1: A lower rate attracts more clients.
A lower rate does not attract MORE clients. A lower rate attracts DIFFERENT clients. In the eye of the client, your “hourly rate” is a direct representation of your value. Here is how a client thinks:
“Architect A is twice as expensive as Architect B (per hour)? OK, then Architect A is probably twice as good as Architect B. His work is probably better, he works faster and more efficiently. He must have more experience to justify this higher rate. Architect B is probably not that good. He is ‘cheap,’ so his quality must be cheap, as well.”
Not convinced yet?
Think about how you would judge a web developer needed for your new website. The first web developer tells you that he has plenty of time. In fact, he can start tomorrow, and he asks $15 per hour. The second one tells you that he is fully booked for the next three weeks, but after that he could pick up your project. His rate would be $50 per hour. Let’s assume you know nothing about web development, and you need to judge which you should hire for your new site.
If budget is really tight, you might take the first one. But if budget is secondary (your architecture business is doing quite well) and quality goes first (the nephew of your sister’s boyfriend who made your first website for $50 really left a bad taste in your mouth), then you will definitely hire the second one. A higher rate? Totally booked for the next three weeks? This guy must be good at what he does.
When it comes to architecture, there are ALWAYS clients with budget constraints, as well as there are ALWAYS clients where quality is more important. With your rate, you just define from which pool you will get clients. A low rate will attract more “low-budget”clients, while a high rate will attract more “quality” clients. In other words: You will NOT get more clients if you set a cheaper rate. You will have a different kind of client. With a rate below the market average, you will attract clients that focus on the price and prioritize cost cutting.
Imagine a wealthy project developer. They make plenty of profit each year transforming old buildings into retirement homes and then renting out the buildings (resulting in a big monthly recurring revenue stream). They just spotted a new potential project, and because all of their in-house architects are occupied with other projects, they are urgently looking for a freelance architect that is available to start as soon as possible.
By raising your rate to a “premium rate” level, you will start attracting higher-end clients.
Do you think they will go for the cheapest architect? No. They will it play safe and are willing to pay more in exchange for quality, a fast project kickoff and avoiding any project risk or failure. They have strong and predictable revenue streams and cannot afford to hire a cheap stranger who lacks competency and risk screwing up this business opportunity.
Assumption 2: Given a lower rate, clients will not expect too much; they will complain less and expect less.
As said before, with a lower rate, you do not attract more clients, you attract a different clientele. Clients who go for the architect with the lowest hourly rate see you as a “cost.” They focus on how much you will cost them, rather than on the value you provide.They are more stingy, and their goal is to minimize costs and not to maximize output value.
Often they also try to get more from you. They call you on Sundays. They pay their invoices late. They are not seeking a long-term collaboration, but rather the cheapest service provider in town. If tomorrow, someone else is cheaper, they’ll ask you to lower your rate. They want more done for less money. They try to extend the scope of the project for free. With a low rate, you attract cost-obsessed clients. Cost-obsessed clients are often also very demanding clients.
Clients that focus on value creation are less obsessed with cutting costs. They focus on the bigger picture and understand that in order to create additional value, they’ll have to hire quality input. I’m sure that if you have been in business a few years, you already experienced the client that always asks for more, changes their mind constantly, tries to negotiate lower fees all the time, tries to get things outside of the original scope for free, pays their invoices late, comes up with unrealistic expectations and deadlines and so on. Their focus is on receiving stuff from others and not on collaborating on a long-term project.
Setting a low fee attracts this type of clientele.
Double your hourly rate.
Before launching ArchiSnapper, I had been working in the freelance software business for many years and made serious mistakes — one of which was being very cheap. I attracted cost-obsessed clients with very big expectations, willing to pay peanuts. Sometimes I felt like I was the “necessary evil” for the client to get their software project done.
One day, I decided that I needed better clients. Clients who see the real value of my work. Clients who see the big picture and realize that by working with serious software developers (even if they cost more) will benefit everyone in the long term. Clients that are fair enough to pay for more hours when they ask things outside of the original scope or if they change their minds. Clients that understand that a good long-term relationship between client and supplier is best for everyone in the end.
So, that same day, I decided to increase my rate to attract a better clientele. I didn’t double it in one day (maybe I should have, in fact … ), but I slightly increased it for new clients. I increased it a bit more for later clients and did so a couple more times. The results?
- I was not getting less work or demand AT ALL. The pipeline of new work was never empty.
- I was paid more for the same hours of work, so there was less of a need to secure additional projects. I earned more per month without working longer.
- I had more of a profit margin and more spare time, so I could invest time in a better website (see our software agencies website, which we left online), invest in nicer business cards and do more prospecting to get even better clients.
- Because I earned more per hour, I would allow clients to stretch the scope a bit and give them some things “for free.” That resulted in happy clients and more referrals from their network, increasing my client base.
- The clients I attracted were more serious, eating up less of my time and causing less stress.
- It gave me confidence to raise my rate even a little more.
The bottom line is that I highly recommend any architect that made it this far in the blog post to just raise their rates by 20 percent or even 50 percent TODAY. Or, for the brave among you: Just double it right now.
Is it difficult? Well, no. Your next new potential client coming in asking for your rate will just get a higher rate. It actually costs you NO time and effort at all. You just have to do it. See what happens from there on. You can always go back to your lower rate if needed, but I’m sure you won’t.
Let me be clear here: The goal is NOT to rip off and fool your clients with crazy rates and steal their money. The goal is tocharge an honest ratefor thevalue you deliver. Many architects are not business-minded and are definitely not charging enough.
What are typical architectural fees or hourly rates?
Of course it is difficult to define a formula or rule that anyone can follow on what you should charge per hour. This depends on so many things: You might be just getting started and seeking your very first client, you might be based in the center of San Fransisco or in a little town in the mountains, you might be working for big investors or working for friends, you may have an established “brand,” or you might not really put any effort into differentiation.
In general, the following applies:
- The closer you are based to big city centers, the higher your rate can be.
- The more specialized you are in a single area of expertise, the higher the hourly fee you can have.
- The more experience you have, the higher the hourly rate.
- The more maintained and up-to-date your website, business cards and general first impression are, the more you can ask per hour.
- The more recommendations you have (think: a well-maintained and up-to-date portfolio on your website, public reviews on Google, many people telling their friends about you), the more money you can ask for without shocking your client.
- The more you give (free advice, public and useful information on your blog, a free seminar … ), the more you will get, because people see you as a guru or expert. Karma, you know!
- The more you put yourself and your business into question and reevaluate and fine-tune how you work and why you work, the more you can ask per hour. Work ON your business, not IN your business.
Now, enough context. Let’s pin some numbers on it.From the great Architectural Fees website:
“If your architect is charging between $100 to $250 an hour, that’s in the normal fee range for Architectural fees.”
“If you hire an architect on a hourly basis, they might charge you between $60 and $125 per hour for their services, though it can vary. Charging by the hour is beneficial to the architect as some homeowners can find themselves constantly making changes to the design. Typical hourly fees can depend on who in the firm is handling the work. There may be other levels within a firm, but these four are the most common:
- Principal: $135 – $175: The Principal is the overseer of the entire architectural firm.
- Project Manager: $95: They usually have more than 10 years of experience and are usually responsible for a number of projects or teams, including client contact, budgeting and scheduling.
- Intern Architect II: $80: With 6 to 8 years of experience, they handle the daily design or technical developments on a project.
- Intern Architect I: $65: With 3 to 5 years experience, they handle specific parts of the project according to parameters set by others.”
The following articles from the great Life of an Architect also give you a great idea of typical rates for architects:
To wrap up:
As I like results, I would consider my blog post a success if at least one reader were to increase their hourly rate. Please get in touch if you did (or are going to) upon reading this article. I’d like to hear real stories from real people and look forward to your comments below.
Enjoy this article? Check out more of our Young Architect Guides:
5 Specifying Tips for First-Time Architects