Any PM's out there know how much profit you make your office per year? This figure should exclude all overhead and direct salary expenses. I know this will vary greatly with project type, level of experience, office size, etc.
Or if anyone has a percentage they can offer that would be good too. Say, Salary x 1.5% per year?
outthere - i don't mean to sound crass, but how can you exclude those costs and not factor it into the 'profit' for a project? or are you simply trying to peg down how much your project is contributing beyond the direct costs associated solely with the work itself?
thats a really weird number to ask for... like a personal profit margin? what do you consider profit? gross? net? retained earnings? gotta be careful with ranking people's performance based on numbers, because you could totally crank out a piece of crap with a high margin but it could ruin your firm's reputation over time and decrease future earnings.
i think the only value worth measuring would be that you've brought in work worth X amount, not necessarily managing work that your firm already has.
"how much profit you make your office" - to me, this is a rather strange spin on the realities of professional practice. IMHO, architecture is (or should be) the ultimate team endeavor. To take personal credit for profit -- especially when a) you don't do all the work yourself, and b) you probably didn't bring the project to the office in the first place -- seems a bit misguided.
Now, having said that, PMs are responsible for supervising and directing their team of employees and consultants. That responsibility does anticipate achieving a certain level of profit. But, as others above had suggested, profit is the result of a number of factors, not just how well the PM manages the team.
Actually, measuring an employees performance by profit on a job is erroneous. Some projects are simply more profitable than others. For example, if I want to maximize profit on a job, I would just print blank sheets, ask for the pay and book a huge profit. Until the office is sued for negligence for trying to permit blank sheets...but hey, good profit, right?
Most firms have a net multiplier around 2.8 to 3.0. That's based on operating revenue not profit, but since median profit for architecture firms is about 13 percent (give or take), you can then assume your firm is making about a third to two-fifths of your salary in profit annually on your work. That's an average figure. It will vary a LOT depending on what you do for the firm.
I am an accountant at a small-medium size architecture firm. Instead of net multiplier, I calculate ROI on projects, which is (revenue - direct costs) / direct costs. Translating between the two, a net multiplier of 2.8-3.0 is a bit higher than we experience, but our overhead is fairly low.
I may occasionally look at how billable each designer has been over a period of time, but it generally doesn't yield any useful information due to things beyond their control, namely the negotiated fee and remaining billable amounts.
so gwharton and others... if my firms bills $X annually and we average 13% profit for the year. You are saying that the 13% should be the same as EBIT? That 13% represents the owners equity in the firm for that year? not including what they may owe on taxes and interest?
In my experience, industry surveys that report design firm profitability generally ask for profit before year-end distributions and taxes, but after all other expenses, including interest, depreciation and amortization.
This is because most design firms (especially those that practice as corporations) will distribute all, or most, profits to their partners and employees as year-end bonuses so no income tax will be payable at the firm level.
My net multiplier is 2.7 my hourly pay. Only problem is that I make 26 dollars an hour and they bill me out at 100 dollars an hour. What happens to the remainder. Well I get to see the new Corvette everytime I go to work. In the past year, I brought in 155k of billing. Nothing matters to these owners.
if they bill you at 100 and pay you 26, you're multiplier is 3.8, right?
that extra 100k or whatever goes towards paying their portion of payroll taxes, their taxes, rent for the office, office equipment, marketing, any sort of overhead staff like secretaries and bookeepers, payroll people, maybe some lawyers, and corvettes. that stuff costs a lot and it adds up.
Jan 13, 14 10:13 pm ·
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How much profit do you make your firm?
Any PM's out there know how much profit you make your office per year? This figure should exclude all overhead and direct salary expenses. I know this will vary greatly with project type, level of experience, office size, etc.
Or if anyone has a percentage they can offer that would be good too. Say, Salary x 1.5% per year?
Enough.
^ A couple of my cars and one of my boats.
I operate our Shanghai office, making mad mao stacks.
outthere - i don't mean to sound crass, but how can you exclude those costs and not factor it into the 'profit' for a project? or are you simply trying to peg down how much your project is contributing beyond the direct costs associated solely with the work itself?
thats a really weird number to ask for... like a personal profit margin? what do you consider profit? gross? net? retained earnings? gotta be careful with ranking people's performance based on numbers, because you could totally crank out a piece of crap with a high margin but it could ruin your firm's reputation over time and decrease future earnings.
i think the only value worth measuring would be that you've brought in work worth X amount, not necessarily managing work that your firm already has.
700 million +
"how much profit you make your office" - to me, this is a rather strange spin on the realities of professional practice. IMHO, architecture is (or should be) the ultimate team endeavor. To take personal credit for profit -- especially when a) you don't do all the work yourself, and b) you probably didn't bring the project to the office in the first place -- seems a bit misguided.
Now, having said that, PMs are responsible for supervising and directing their team of employees and consultants. That responsibility does anticipate achieving a certain level of profit. But, as others above had suggested, profit is the result of a number of factors, not just how well the PM manages the team.
Then there's the whole "free" office coffee consumption....that can't be ignored.
100%
Actually, measuring an employees performance by profit on a job is erroneous. Some projects are simply more profitable than others. For example, if I want to maximize profit on a job, I would just print blank sheets, ask for the pay and book a huge profit. Until the office is sued for negligence for trying to permit blank sheets...but hey, good profit, right?
Is it bad when I make more ("profit") on a $3 million project than a $90 million project?
Most firms have a net multiplier around 2.8 to 3.0. That's based on operating revenue not profit, but since median profit for architecture firms is about 13 percent (give or take), you can then assume your firm is making about a third to two-fifths of your salary in profit annually on your work. That's an average figure. It will vary a LOT depending on what you do for the firm.
I am an accountant at a small-medium size architecture firm. Instead of net multiplier, I calculate ROI on projects, which is (revenue - direct costs) / direct costs. Translating between the two, a net multiplier of 2.8-3.0 is a bit higher than we experience, but our overhead is fairly low.
I may occasionally look at how billable each designer has been over a period of time, but it generally doesn't yield any useful information due to things beyond their control, namely the negotiated fee and remaining billable amounts.
so gwharton and others... if my firms bills $X annually and we average 13% profit for the year. You are saying that the 13% should be the same as EBIT? That 13% represents the owners equity in the firm for that year? not including what they may owe on taxes and interest?
I got that 13% median profit number from PSMJ. I don't know if it's EBITDA or not. If it is, it seems low.
In my experience, industry surveys that report design firm profitability generally ask for profit before year-end distributions and taxes, but after all other expenses, including interest, depreciation and amortization.
This is because most design firms (especially those that practice as corporations) will distribute all, or most, profits to their partners and employees as year-end bonuses so no income tax will be payable at the firm level.
My net multiplier is 2.7 my hourly pay. Only problem is that I make 26 dollars an hour and they bill me out at 100 dollars an hour. What happens to the remainder. Well I get to see the new Corvette everytime I go to work. In the past year, I brought in 155k of billing. Nothing matters to these owners.
Anotherway to look at it. I completed 5 jobs this past year with a total billing of 587k. They paid me 55. That's pretty good I guess.
if they bill you at 100 and pay you 26, you're multiplier is 3.8, right?
that extra 100k or whatever goes towards paying their portion of payroll taxes, their taxes, rent for the office, office equipment, marketing, any sort of overhead staff like secretaries and bookeepers, payroll people, maybe some lawyers, and corvettes. that stuff costs a lot and it adds up.
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