How the RIBA Fee Calculator can help you achieve business success
The RIBA Fee Calculator is an online tool that has been developed by the RIBA in partnership with RIBA Chartered Practices. It aims to help architects properly understand their business costs and apply appropriate project mark ups and profits based on the business and commercial requirements of their practice.
What does the Fee Calculator do?
As its' name suggests, the Fee Calculator enables users to create fee calculation that they can use as part of their fee proposal. It does so based on the financial information that you enter at set up stage, including overheads and staff salaries.
The main principles are cost recovery, overheads, cost per staff hour, job costing, negotiating with clients, and cost control.
The term cost recovery means that the fees you charge for all of your projects per year, add up to the total cost of running your business, plus allowing for whatever profile margin you wish to make. This includes all salaries, office rent (if you have one), PI premiums, printing, travel, etc.
At the start of the fee calculation process, you must input all of the basic financial data for your business, including the number of staff, all salaries, hours worked plus company overheads.
Overheads are the costs of running your business that exist whether or not you are working on a project. Typical overheads are rent, PI premiums, rates, IT costs, accountancy charges, payroll burdens (pension, NI). These may vary in the scale depending on the number of projects you are working on but they exist outside of your projects themselves.
Non-overhead costs, i.e. project-related costs, are costs that would only happen if you are working on a project and are specific to that project i.e. trips to site, subconsultant expenses and planning application fees. These are added when you are calculating the fee on a project by project basis.
When completing the base information in the Fee Calculator you should forecast the likely overheads for the next year based on the years previous and the work you expect to have coming in.
You need to include the salaries for all of your staff. Non-billable members of staff, such as a reception or an admin assistant, are treated as overheads as they support the overall running of the business. Billable members of staff are charged to the projects that they are working on. Some billable members of staff can also have a percentage of their salary treated as general 'overheads', if they also undertake general office tasks and duties.
Costs per staff hour
Once you have completed the base information, the calculator will assign a cost rate for each billable member of staff. This cost rate will apply to any time that person works on a project and allows you to recover their salary plus their share of the overheads on projects.
One big factor that plays into the calculation of cost rates is how much time each individual works on projects against how much time they do not.
This can vary from person to person depending on their job.
For example, a project architect may have 260 working days per year, but they don’t actually spend 260 days on projects – they have annual leave, public holidays, sick leave, training, CPDs, meetings, etc. This varies a lot based on individual roles in the business. Directors usually have much lower project working percentages than say a project architect, as they spend time running the business.
When inputting your staff information you will need to estimate this billable percentage. This information can be calculated from staff timesheets.
Job costing and fee calculation
When creating a fee calculation you will need to estimate the resource required for the different tasks on the project, i.e., which staff will work on it, and how many hours they will spend undertaking the task.
At this stage, you can also insert any specific project costs: subconsultants, planning fees, travel expenses etc.
Once you have inserted all of the tasks and allocated staff time to undertake these tasks, all of costs are added and, the tool calculates the total projected cost for delivering the services. You can then decide how much to charge the client with a clear understanding of the financial cost to the business. The calculator also allows you to add some risk contingency and inflation as well as profit.
The RIBA Fee Calculator has been developed to help architects understand what their bottom line is, to become more aware of the real costs of running their business and delivering their services. When using the Fee Calculator, no architect need ever sell themselves short again.