60% of architects have no business plan

Three fifths of chartered architect practices do not have any sort of business plan, a report from the RIBA has found.

This year’s RIBA Business Benchmarking report - a survey of the management accounts of about 2,500 chartered practices with a combined income of £1.9bn - described business planning in the profession as an “anathema” and called this state of affairs a “real indictment on the profession”.

The survey said that just 16% of firms are planning beyond one year and that just 4% of income comes from projects outside the UK, a figure described as “worrying” by the Federation of Small Businesses.

It is vital firms plan for income and expenditure over the next few years

John Walker, FSB

Adrian Dobson, RIBA director of practice, said the survey - which was mandatory for RIBA chartered practices with a headcount of two or more - was a good starting point for improving architects’ businesses but agreed more needs to be done.

He added that the RIBA’s international committee has already discussed the low level of foreign work.

“It is a concern because there is a view that exports will lead us into growth” he said. “The figures are better in London and for large practices but they are not as high as they probably need to be at this point in the economic cycle.”

John Walker, chairman of the Federation of Small Businesses, said: “In the current business environment it is vital that firms plan for income and expenditure over the next few years and that architect practices start getting footholds in emerging nations to broaden their revenue base.

“Architect practices are very different from one another, much like the broader small business community, but in a tough economic climate business planning and adding revenue streams are important.”

The report also suggested that large firms are less profitable, in proportion to turnover, than small ones with optimum profitability achieved by practices employing 5-20 staff.

Those with fewer than 20 people averaged 23% profit the report said with “large-medium” practices (20-50 staff) averaging 20% profit and large practices (50+ staff) averaging no more than 16%.

The survey was carried out on the RIBA’s behalf by consultant Colander.

“This suggests that as a practice grows, and invests in systems and backroom activities to sustain that growth, it becomes harder to maintain profit percentages, even when the fee earners themselves are generating higher profit,” the report said.