The Special Challenges of Architectural Practice

It has always seemed to me that the practice of architecture demands a far wider and more diverse set of skills than is generally required by most other professions.

Successful lawyers will have developed sharp analytical skills that allow them to follow principle and precedent in the logical pursuit of the argument in the case. The law touches every aspect of our lives, but the application of legal skills is much the same no matter which area of the law an individual may choose to practise in. The successful accountant will obviously have a facility with figures and an ability to ‘think with the numbers’. Hopefully this will be coupled with an ability to communicate the significance of the figures to colleagues in other disciplines. Again, the potential numbers of fields of application are many, but the core skills remain much the same.

By contrast, successful architects need the skills to be equally at home with blue sky conceptual design and the production of detailed drawings in which tolerances can be as small as a couple of millimetres. They need to be able to visualise a building or whole scheme that could affect the quality of the lives of thousands of people over many years to come. Furthermore, they need to be able to communicate this vision to their potential clients. This communication has to be sufficiently dynamic and exciting to persuade those clients to invest very large sums of money in their vision. They may well have performed this minor miracle initially with little more than an outline sketch drawn freehand on a blank piece of paper.

In addition, architects need to combine all these talents with an ability to perform repetitive tasks with great accuracy. For example, they may have to produce door schedules that fit in with the overall design, but which also fit in to the openings provided for them when they are delivered to the site. They need to have an understanding of the nature and quality of the materials they are specifying and an appreciation of the environmental impact and implications of the choices they are making. These are all quite distinct skills, yet the successful architect will be required to have a command of them all. This is especially true for architects in small practices where the limited number of staff means that functional specialisation is a luxury that cannot normally be afforded.

Architects also need to be able to get on with a wide range of people and situations. As design team leaders they have to reconcile many conflicting agendas and demands to achieve a balance that leads to a practical solution. The architect stands alone on the conductor’s podium with baton in hand and attempts to bring the orchestra of clients, planners, contractors, engineers, surveyors and their own staff together to produce a coherent symphony. All this despite the fact that each of these groups appears to have different versions of the music in front of them and never all seem to be playing at the same time!

These conflicts must be constantly managed and this is reflected in the financial management practice too. As in any other business the aim is to steer towards the desired financial destination and to keep progress towards it as steady as possible.

However, there are many potential traps and surprises that lie in wait during the construction of a building to drive even the best laid plans off course at any time.

Apparently an aeroplane making a transatlantic flight is technically off course about 80 per cent of the time. It’s the pilot’s job to keep making constant corrections so that everyone arrives as intended in New York rather than in Miami. Financial managers too have to be constantly vigilant, and be prepared to make the necessary corrections along the financial journey. Their job is to develop a set of tools and indicators that will quickly show whether the practice is going off course, and where to look to find a solution to the problem.

As a finance professional, I live in an analytical world. The world of money is inextricably linked with the passage of time. Costs are measured and accumulated on a time-driven basis; staff and rent or mortgage commitments need to be met each month; utility bills must be paid quarterly and professional indemnity insurance and professional subscriptions are due annually. Every cost that is incurred has its own timetable and there are unpleasant consequences for not sticking to the schedule.

I prepare a five-year financial plan from which I derive the annual budget for our practice. From the budget I can extract monthly forecasts of income and expenditure and consequent cash flow. This may lead in turn to weekly plans showing which projects will be occupying the staff that week. In short: I am constantly aware of the relationship between time and money.

But this is where tension arises. As an architectural practice we expect and, for a while, we want our architect colleagues to ‘lose track of time’ and to get carried away with the excitement of the creative process. It is in this mode that they are the most likely to produce their best work.

Yet we are also acutely aware that our financial obligations accrue relentlessly on a daily basis and that it is our responsibility to ensure that we will have the funds available to meet them when they become due.

So I see a major part of my financial management role as the creation and management of a healthy tension. Without damaging or distracting from the creative process, I need to be constantly reminding the team that there are time and budget constraints that we all have to live with. Ultimately, we will have failed if we end up with the most magnificent design that we cannot realise because we have bankrupted the practice before we got the chance to bring it into being.

We need an atmosphere in which innovative design can flourish. But we also need it to be understood that there is usually simply not enough time or budget to go through that process two or three times before settling on a design solution. We also need to guard against a failure to complete the design process at the appropriate stage of the project. I have seen the dire consequences of designing ‘on the hoof’ at the working drawings stage. This is bound to result in change and confusion which will lead to delay and additional cost.

All architects will, at some point, need to grapple with financial spreadsheets and take tough business decisions, whether they work in large practices or are sole traders. This book aims to present an overview of basic business finance, as applicable to the architecture profession, and I set out the ground rules for establishing a practice on firm foundations and driving it forward into a prosperous future. Along the way, I address the thorny question of ‘how much to charge clients’, give pointers on credit control and even invite you to consider the ultimate future of the business and your role within it.

I hope that you find the book a useful resource and keep dipping in and out of its pages over the years. However, most of the examples are versions of the way I work in practice at Shepheard Epstein Hunter (SEH), and fit together in a logical progression, so I highly recommend that you first read it from beginning to end, so that you have a thorough grounding in the basics.

I wrote the original version of this book, then titled Painless Financial Management, in 2008 and it was published just before the world-wide recession changed the financial landscape for us all. Although we all know that the construction industry is cyclical and that there will be ups and downs, nothing could have prepared us for the way the world changed. Since then, the pace of change has escalated considerably, and there has been an increase in business uncertainty coupled with a growth in self-employment, flexible working and many start-up companies. There has rarely been a more urgent need for creative professionals to get a firm grip on their finances, and this book aims to set you on the right path – with the tools to help you adjust course whichever way the financial future turns.