Architects, Contractors, Engineers: double your hourly rate. NOW.
(Upfront 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 rate too high, especially when they are just starting their business and clients are not yet queueing up. Here are the 2 main reasons (or rather assumptions) for a low hourly rate. This is what you might think:
- Setting a lower rate will attract more clients.
- 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 3 weeks, but after that he could pick up your project. His rate would be $50 per hour.
Let’s assume you know nothing about web development, and you need to judge which you should hire for your new site.
If budget is really tight, you might take the first one. But if budget is secondary (your architecture business is doing quite well) and quality goes first (the nephew of your sisters boyfriend who made your first website for 50$ really left a bad taste in your mouth), then you will definitely hire the second one.
“A higher rate? Totally booked for the next 3 weeks?”: This guy must be good in what he does. Otherwise he would not be booked and his rate would not be that high.
Now, let me tell you a little secret.
On the market, there are ALWAYS clients with budget constraints, as well as there are ALWAYS clients where quality is more important (and budget is secondary).
With your rate, you just define from which pool you will get clients. A low rate will attract more “low budget” clients, 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 prioritise cost cutting. You will attract…
Imagine a wealthy project developer. They make plenty of profit per 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 since all of their in house architects are occupied with their other projects, they are urgently looking for a freelance architect that is available to start asap.
Honestly, do you think they will go for the cheapest architect? No. They will play safe, and are willing to pay more in exchange for quality, a fast project kick-off, and to avoid any project risk or failure. They can not afford hiring a cheap stranger who lacks competancy, and risk screwing up this million dollar business opportunity. They won’t go with the cheapest. They will play safe and will take the best, as money is less of an issue for them. They have strong and predictable revenue streams.
By raising your rate to a “premium rate” level, you will start attracting…
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/contractor/project manager/construction engineer 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.
Strangely enough, people that want to pay the least for a given service or product, also often expect the most from it. They are more stingy, and their goal is to minimise costs, and not to maximise output value (even if that would require additional costs). Often they also try go get more done from you (for less money). They call you on Sundays. They pay their invoices late. They are not seeking for long term collaboration, but for 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 (very) low rate, you attract cost obsessed clients. Cost obsessed clients are often also very demanding clients. You’ll end up with…
Clients that focus on value creation (aka “transform an ugly building into a new hospital that is worth 20 times more”), 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 asks always 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 mindset is on “receiving stuff (for free) from others” and not on “collaborating on a long term project”.
Well, setting a (very) low fee attracts this type of clientele.
Double your hourly rate
Before launching ArchiSnapper, I had been working in (software) freelance business for many years, and have 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 realise 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 out of the original scope, or if they change their minds. Clients that understand that a good long term relationship between client and supplier (contractor/freelancer) 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 need to secure additional projects. I earned more per month without working longer.
- I had more 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.
- Since 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, more referrals (from their network of good clients), increasing my client base.
- The clients I attracted were more serious, less “eating” of my time and causing stress.
- It gave me confidence to raise my rate even a little more.
The bottom line is that I highly recommend any architect/contractor/engineer that made it this far in the blogpost, to just raise their rates by 20% or even 50% TODAY. Or for the brave of 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 cost 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(but I’m sure you won’t).
BTW, 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 to charge an honest rate for the value you deliver. Most of the architects / contractors / engineers are not business minded and are definitely not charging enough.
What are typical (architectural) fees or hourly (construction) rates?
Of course it is difficult to define a formula or rule that anyone should follow in order to end up with a perfect answer on what you should charge per hour. This depends on so many things, like if you are just getting started and seeking to find your very first client, if you are based in the centre of San Fransisco or in a little town in the mountains, if you are working for big investors or working for friends, if you have established a “brand” or if you don’t really put any effort into differentiation.
In general, the following applies (to architects, engineers, and contractors):
- The closer you are based to big city centres, the higher your rate can be.
- The more specialised you are in a single domain or area of expertise, the higher the hourly fee you can ask.
- 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 natural and public references and 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 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 (since people see you as a guru or expert). Karma, you know.
- The more you put yourself and your business into question and re-evaluate 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. Lets pin some numbers on it.
From the great Architectural Fees website:
“If your architect is charging between $100 to $250/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. 6 to 8 years of experience, they handle the daily design or technical developments on a project.
– Intern Architect I: $65. 3 to 5 years experience, they handle specific parts of the project according to parameters set by others.”
The following articles (from the great http://www.lifeofanarchitect.com/) also give you a great idea on typical rates for architects:
Handyman jobs would pay the following per hour according to https://www.angieslist.com/articles/how-much-does-it-cost-hire-handyman.htm:
“…reported paying an average of $83 per hour with a general range of $50 to $100, not including discounts many service providers offer to Angie’s List members. Costhelper.com gives a similar range of $60 to $125 per hour.”
Similar rates can be found on homeadvisor:
“Jobs that should be priced hourly and will usually cost an average of $77 per hour include:
- Replacing small electrical components, such as thermostats, light switches, and outlets (1-2 hours or less)
- Repairing drywall (2-3 hours)
- Fixing leaks (1-2 hours)
- Hanging shelving (2-3 hours depending on size of shelving system)
- Hanging doors (3-4 hours depending on fit, sanding needed, interior or exterior door, etc.)
- Repairing woodwork (3-4 hours depending on damage)
- Replacing window glass (3-4 hours depending on size and type of window)
- Wiring home theater components (4 hours or more depending on features, speakers, etc.)”
Again, it is very difficult to come up with a formula or rule that will tell you exactly what your hourly rate should be.
To wrap up
As I like results, I would consider my blogpost 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.
Peter from ArchiSnapper