Negotiate your fee with a business hat on
Clients beating down practices on fees is a perennial complaint, but RIBA Client Liaison Group chair and delivery director at Hawkins\Brown, Nigel Ostime, thinks architects can do better if they take a more business-like approach and learn how to negotiate.
One of the main findings coming out of the group’s research, including the Working with Architects survey of almost 1,000 clients, is that while clients value the profession’s design skills, they are looking for their architects to be more business-like.
‘Make it clear exactly what you will be doing for the fee and set it out in as much detail as you think the client can bear. Explain how you will manage the process and give a timetable if you possibly can. If you can successfully communicate all of this, you will have far less difficulty in justifying the fee,’ says Ostime.
However, before architects get to this stage, there is some groundwork to be done.
Ostime suggests it is essential for architects to show any prospective client that they understand their business. If the client is a commercial developer, for instance, it is no good being fazed by talk of ‘yield’ or ‘IRR’ – that’s Internal Rate of Return on capital investment. They must demonstrate that they understand the client’s businesses drivers and what makes a project stack up for them.
The flip side is that architects must have a good understanding of their own business when pitching for work. This means knowing the practice’s own costs in relation to a project, and not just relying on one’s design skills for the ‘sell’.
‘A lot of architects go into meetings not having worked out in advance what their costs are. It is only when this has been done that you have a position to negotiate from. It then becomes a matter of profitability and what margin you are willing to accept,’ explains Ostime.
This does not mean dwelling on your own costs in the presentation, he stresses, it is more about negotiating from a position of strength and confidence.
The emphasis should still be on how the practice can add value to the project. If possible, talk the client through achievements on a previous project.
Many architects may be prepared to accept a smaller profit margin if the project offers other benefits, such as exposure for the practice or the prospect of a possible award winner. Nevertheless, it is important to make sure that practice costs have been analysed all the same.
Ostime sees a place for fee arrangements based on planning approval – a cost-based design fee followed by a bonus when planning permission is granted. However, the guiding principal here must be risk analysis.
Ostime also warns that any fee arrangement must be set out clearly in the contract terms, including exactly what ‘planning permission’ means. Be wary of the client interpreting it as including the S106 agreement being signed for example, which may take weeks or even months.
The same strategy of providing a detailed breakdown of the service can apply to domestic clients as well as larger commercial clients, says Ostime, author of A Domestic Client’s Guide to Engaging an Architect, as many householder clients have little understanding of all that is involved in an architect’s service.
Again, once the client understands what the practice will be doing for them and how this will add value to their project, they will understand what they are paying for.
‘Negotiation is a two-way street, it should not be a battle. If you are having a meeting, the client is already demonstrating an interest in you, so use the opportunity to explain exactly what you will do for them to make their project a success,’ advises Ostime.
Thanks to Nigel Ostime, delivery director, Hawkins\Brown.
Text by Neal Morris. This is a Professional Feature edited by the RIBA Practice team. Send us your feedback and ideas
RIBA Core Curriculum Topic: Business, clients and services.
As part of the flexible RIBA CPD programme, Professional Features count as microlearning. See further information on the updated RIBA CPD Core Curriculum and on fulfilling your CPD requirements as an RIBA Chartered Member.
Posted on 8 March 2018.