Are your contracts mostly set up on an hourly basis? It has been my experience that when your income is linked to the hours worked at an hourly rate your only choice for growth and increased profit is to do more work. This means hiring people, getting more jobs doing more. Which works really well right now.  This is how most architects operate and is similar to many professional services. However you then must contract with the market as work dries up. In my experience adding people doesn't help things get done faster or better. You can just do more.

Alternatively trying to move towards more High flat fee projects means more risk but a greater opportunity to increase your profit margin without increasing your hours worked. You can charge more for the same amount of time because the market will support it right now. ultimately it probably has to be some mix. but I wonder if you would get what you are after by charging more and doing less by excepting more risk. 

I'm always curious about how other high-end firms run their contracts I suspect there are quite a few who don't do this hourly services bullshit. At least the ones who manage to stay small but increase their profits continually. Think of it as an artist, they would never set the value of a painting at the number of hours it took to paint. my experience is most  Architects are really risk adverse and the hourly game is the safer bet so that's what they go with. 

Price on value( high fixed fee), manage internally on cost (hours) 

Right now IMHO is not the time to play it safe.  Sorry that didn't answer your question at all :) 

What are RIBA and AIA's guidelines for fee income per fee earner?

I know what the Design Council's rates were circa 2005 here in the UK for design consultancy and advertising etc but it would be interesting to understand what the guidance is from professional architectural organisations.

Exactly right.

We are probably 80% hourly, with 20% or so fixed fee based on revenue. Probably half or more of the hourly work is production/graphic oriented just as much if not moreso than design, pm, administrative, etc. 

Lately, we have been in a position where we are worried if our clients will walk if we take much longer turning things around. We work with a lot of aarchitects who actually rely on us for site design, but also graphics, illustrations, etc. Most of that work is hourly and comes with quick turnarounds (under three weeks). We're pushing those margins now, but also slowly picking up more fixed fee contracts which are actually great for us, but we're spread thin. I'd suspect a pretty good entry level with decent graphic/production capability could help us increase productivity 25% or so. We probably dont have the room in our fees/rates to make a lot off their time, but we might make it up by turning work around faster. 

In simple terms, it seems worth it to pay them $3k a month or so to help us get $4-5k billed in that same timeframe, rather than us doing all of the work over two months and billing after 6 weeks for the same amount. In short, we don't bill enough, our rates are relatively low, but we have had a steady stream of work. It seems worthwhile to get help so we can focus on growing rather than doing the work so much.

Not even sure where to begin with taxes, insurance all that stuff though...

To put it in context the Design Council here in the UK, in 2005, suggested that £100,000 per fee earner was in accordance with living costs for the employee and sustainable business expenditure, this was equivalent to $200,000 per fee earner at the time.

Obivously taxes here in the UK are slightly higher but health care is provided by the state through employers and employees NI contributions, without profit margins.

Sam

Am I understanding this correctly? So, a firm of three should be doing $600,000/year? If thats the case we have a ways to go...

Those figures were guidance provided by the Design Council, if I remember correctly there were very few companies at the time earning those rates, Imagination were top https://imagination.com/ and earned above those rates, which were based on fee income per fee earner with also enough to pay for additional delivery and administration staff who may or may not also bring in fee income. Taxes, overheads, NI and enough profit margin to grow the business based on the marketplace at the time were also taken into account.

Any production staff you hire you are going to need to spend time on support - the question is do you hire someone who you can delegate this task to or do you have the bandwidth to do this yourself?  If you don't have someone who focuses primarily on operations it means you've made a decision (conscious or not) to stay small.

Gruen is spot on about hiring someone who "gets it"    Recent grads are so totally unskilled these days that it takes a major investment on the employer's part to train them to do anything remotely useful.  Be sure the person you invest in has the attitude and work ethic to make your investment in them pay off.

Good advice, thanks. Seems like we're on the right path. Keep it coming...

Aw, thanks gruen!! I'm always available when you need me too.

Larchinect, I'm not an employer in architecture or landscape Arch either for that matter but I help run a small practice that has enough similarities. My advice is to get someone who can do the work and pay them well, don't drag yourself down with liabilities. In other words, don't be cheap or you get what you pay for. If you do good work, the rewards and money will follow. I think too many employers want to underpay, thinking they are being savvy and saving money but let's say the difference between a $20 an hour employee and a $25 an hour employee is that the $25 an hour person can do the job and the $20 an hour employee just makes errors and causes problems, who's cheaper? I'm not saying pay top dollar, just above average will do and make up for not paying top dollar with other perks like a flexible schedule and some autonomy over the work. Instrad if thinking of their wage as a cost, think if it as a value. I pay above average wages and look for above average candidates to match. Don't shop at the dollar store for your employees! Price is not the most important factor. Let's take the $20 an hour vs $25 an hour employees, is paying $5 an hour worth the difference between an ok job vs a great one? You bet it is, best way to spend $5 in my opinion. You can message me if you want specific advice on doing hiring paperwork and procedures, how to handle payroll and taxes and other stuff. I've hired both on payroll and 1099 contract workers and I believe I am  in the same state as you too. Good luck!

I hired my first employee 3 years ago. I was determined to do it right and not low-ball him. I put him on salary at $42,000 plus health insurance and SEP-IRA. Salary plus bennies costs me about $60,000/year/employee. (Thanks to Obama's new overtime rules, I can no longer pay him salary; however, it's pretty rare that he works over 40 hours/week.) I have connections in the academic world and am able to find top grads just coming out of school. I will say that "doing it right" and putting employees on payroll is incredibly painful from an administrative/accounting standpoint. You will start having to pay monthly payroll taxes to feds, state, and in my case, local. It takes up a lot of time as I do it myself rather than paying an accountant. It would be much, much easier to just hand them a 1099 at the end of the year, but the truth is they are not true 1099 contractors, running their own businesses; they are employees and should be treated as such. It's just a shame the government makes it so damn painful to hire real employees; it makes it too tempting to hire people as 1099 when it is usually a misclassification, ethically dubious, and puts you at risk of action under FSLA and the Department of Justice. 

Try a payroll service to help take care of taxes and paperwork. I use intuit. It is affordable and they have good customer service which is something to think about. It takes 5-10 minutes a month and maybe 2-3 hours at the end of the year. My business is a little simpler, so maybe double or triple the time but it is still not that bad. 

I had good luck with working moms (or dads) looking for flexibility.  Basically, daycare runs about $15-25k per kid and they face a choice.  By being flexible and hiring on a 3/4 time and allowing telecommuting, you can pick up eager young parents who have hours more like 8:30 to 2:00 with optional after hours telecommuting. 

Most of these are around 30, so they’ve got 7-9 years of experience and don’t need handholding.  Works well for both parties so they don’t have employment gaps (biggy for acquiring loans) and mentally get to be around adults/professionals, as well as feel they are raising their kids versus daycare and they have money coming in.  For you, salaries are lower for this flexibility and they are in the office enough that you can oversee their work directly and you get a experienced person.

I work as a freelance drafter on top of a full time job. I have several years of experience working in the field as a framing carpenter, estimating, drafting and construction management. I have 4 clients I do work for on and off. I think they feel pretty lucky to have found someone with my background. My starting rate with all of them was $25 hourly and many of them were hesitant. Since then I have increased my fees to $40 hourly and none of them turned it down. I guess what I am trying to say is that you should be willing to pay someone with good experience a decent wage and you will be relieved you did. 

Its often a good move to hire entry level people in pairs.  We always try to have two summer interns because we find that they tend to help one another out with questions and issues and reduce the burden on the supervisors.  A little bit of friendly competition between them to work quickly and do things correctly is good as well.

- Look for experience in something related (construction, surveying, craft, nursery) and job experience (with good references - do they come in early and stay late? ask the right questions? handle stress well? team worker?)

- if you're flexible with hours, etc, you might be able to get more experienced help

- many early positions can have 3 month 'trial periods' at hourly 1099; allows flexibility in letting someone go but also give a firm review date.  salary switch can be done then, as well as any adjustments to pay.  typically hourly rate was higher than salary to offset risk.

- emotional maturity and self-teaching attitude are huge difference makers - make sure to follow up on references and ask hard questions

- I was taught as an employee your revenue to the firm is 3x salary.  Seems to work out after taxes/insurance/computer hard&software/marketing/mentoring/etc.

My only big advice is be personable but maintain employer/employee boundaries - there may come a time when business decisions will need to be made (raise/pay cut/layoff).  I have been a first employee and been laid off - it was so difficult for my then boss that he kept me on far longer than was prudent.

many early positions can have 3 month 'trial periods' at hourly 1099; allows flexibility in letting someone go but also give a firm review date.  salary switch can be done then, as well as any adjustments to pay.  typically hourly rate was higher than salary to offset risk.

This is illegal.

Internal Revenue Service 20 point Checklist for Independent Contractor

Mistakenly classifying an employee as an independent contractor can result in significant fines and penalties. There are 20 factors used by the IRS to determine whether you have enough control over a worker to be an employer. Though these rules are intended only as a guide-the IRS says the importance of each factor depends on the individual circumstances-they should be helpful in determining whether you wield enough control to show an employer-employee relationship. If you answer "Yes" to all of the first four questions, you’re probably dealing with an independent contractor; "Yes" to any of questions 5 through 20 means your worker is probably an employee.

1. Profit or loss. Can the worker make a profit or suffer a loss as a result of the work, aside from the money earned from the project? (This should involve real economic risk-not just the risk of not getting paid.)

2. Investment. Does the worker have an investment in the equipment and facilities used to do the work? (The greater the investment, the more likely independent contractor status.)

3. Works for more than one firm. Does the person work for more than one company at a time? (This tends to indicate independent contractor status, but isn’t conclusive since employees can also work for more than one employer.)

4. Services offered to the general public. Does the worker offer services to the general public?

5. Instructions. Do you have the right to give the worker instructions about when, where, and how to work? (This shows control over the worker.)

6. Training. Do you train the worker to do the job in a particular way? (Independent contractors are already trained.)

7. Integration. Are the worker’s services so important to your business that they have become a necessary part of the business? (This may show that the worker is subject to your control.)

8. Services rendered personally. Must the worker provide the services personally, as opposed to delegating tasks to someone else? (This indicates that you are interested in the methods employed, and not just the results.)

9. Hiring assistants. Do you hire, supervise, and pay the worker’s assistants? (Independent contractors hire and pay their own staff.)

10. Continuing relationship. Is there an ongoing relationship between the worker and yourself? (A relationship can be considered ongoing if services are performed frequently, but irregularly.)

11. Work hours. Do you set the worker’s hours? (Independent contractors are masters of their own time.)

12. Full-time work. Must the worker spend all of his or her time on your job? (Independent contractors choose when and where they will work.)

13. Work done on premises. Must the individual work on your premises, or do you control the route or location where the work must be performed? (Answering no doesn’t by itself mean independent contractor status.)

14. Sequence. Do you have the right to determine the order in which services are performed? (This shows control over the worker)

15. Reports. Must the worker give you reports accounting for his or her actions? (This may show lack of independence)

16. Pay Schedules. Do you pay the worker by hour, week, or month? (Independent contractors are generally paid by the job or commission, although by industry practice, some are paid by the hour.)

17. Expenses. Do you pay the worker’s business or travel costs? (This tends to show control.)

18. Tools and materials. Do you provide the worker with equipment, tools, or materials? (Independent contractors generally supply the materials for the job and use their own tools and equipment.)

19. Right to fire. Can you fire the worker? (An independent contractor can’t be fired without subjecting you to the risk of breach of contract lawsuit.)

20. Worker’s right to quit. Can the worker quit at any time, without incurring liability? (An independent contractor has a legal obligation to complete the contract.)

any employee pay will be less than their billable rate. the multiple will vary depending on your overhead & profit.

you should be making money every single hour an employee works

this alone should encourage you to pursue this, even if hourly