Compensation Survey For 2011

Design Intelligence published their annual compensation survey last month, and wrote an article about it. The article’s main theme was that the prevailing belief that architects earn disproportionately low salaries is a myth.

Their survey shows that the average CEO/President of architecture firms (of all sizes) will earn $318,700 in 2011.

That’s a fairly high spread between the top and the middle, considering that the average projected gross revenue per employee is projected to be $204,279 this year.

Let’s examine that number a bit. If the average architect is able to bring in $204,279 per year in gross revenue, that means he/she is making somewhere between $63,141 and $69,455 salary. Here’s how I got that number:

Average overhead rates for U.S. arch firms are 1.5-1.75
Average break-even rates are, therefore, 2.5-2.75
Assume an average profit level of 15% on these billings
.85($204,279) = 2.5x [firm with low overhead]
.85($204,279) = 2.75x [firm with higher overhead]
x=$69,455 [low overhead firms]
x=$63,141 [higher overhead firms]

Out of curiosity, let’s also extract an average billing rate out of that data:

The work year has 2080 hours in it
Assume 10 vacation days, 5 sick days, and 8 holidays when the employee isn’t billable
Assume a utilization rate of 85% for architectural staff (the rest of the time he/she is in training, working on a committee, etc)
.85[2080 hrs - (23 days off * 8hrs)] = 1611 hrs
$204,279 / 1611 hrs = $127/hr billable rate
We know that principals bill at a higher rate and lowly architects bill at a lower rate, with the average spread being about $40
Therefore, it’s likely that the average principal billing rate is roughly $147 and the average regular architectural staff billing at about $107.

The article makes the crucial point that there is a big difference in profitability between firms that are well managed and firms that aren’t.

The four disciplines involved in running a firm are marketing, operations, finance, and professional services.

Here’s how each of these areas help you make $$:

Professional Services: Do your docs really well and you’ll have fewer headaches that cost real time in C.A. and make your client angry. Make the design pretty so people like your portfolio and want to hire you.

Operations: Don’t take forever to get the design pretty and the docs thorough. Figure out how to get your team to work really well together and use technology to be super efficient. The lower you get your overhead, the more profit you make.

Marketing: Capitalize upon your good work by getting clients to recommend you to other clients. Get clients to like you before they even have projects. Make yourself seem more competent than your competitors so you get the work.

Finance: Once you make some money, use it wisely. Find the right mix between paying out bonuses, saving for emergencies, and investing in growth. Work the tax code intelligently (but legally).

Here’s that great article one more time.